Umbrella companies have been around for many years. They basically combine the job insecurity of the self-employed with the high taxes of an employee under PAYE – but they have been ‘popular’ because they allow the worker to be paid by a hirer in a way that helps them to avoid the responsibility of being an employer.
Since April 2020, a huge number of people have been forced to use Umbrella companies by hirers of contractors (particularly the big banks) as a reaction to the ‘IR35 in the Private Sector’ rules that were expected to become law in April 2020 (but which will become law in April 2021).
It seems to me that if an employee under PAYE was told he was going to still be paid under deduction of income tax and National Insurance but would lose all of his redundancy rights, pension contributions, holiday pay and sick pay above SSP (i.e. like an Umbrella worker), there would be an outcry about the position he was being forced into. Yet thousands of freelance contractors have been forced into that very position by their hirers – particularly the big banks – because those hirers aren’t interested in working out what might help the people they are hiring (even though it would be legal to do so). Instead, because it is less work to apply one simple, catch-all policy, and thus avoid taking any risk or responsibility, the hirers are forcing those contractors to stop using their own companies and to become Umbrella company workers.
It seems very easy for the banks to virtue signal about being pro-environment or anti-racist but when it comes to looking after thousands of people who work for them, they are more than happy to force them into paying taxes like an employee whilst denying them any employment rights.
This rise in the use of Umbrella companies is a direct consequence of Government policy, and I think that creating a situation where thousands of workers are told they are neither self-employed nor genuine employees is a major step backwards for the rights of British workers – yet no political party seems to care.
One would have thought that in a post-Brexit, post-Covid economy, having a highly-skilled, mobile workforce that undertakes short-term contracts, often far from home, would be vital – but there is now little incentive for a worker to leave a secure job with employment rights and benefits if they will end up being paid via an Umbrella company. I believe that the consequences and the morality of what is happening as a result of the new IR35 rules needs to be reviewed by the Government and the Opposition – and the sooner the better.