Horrific ‘umbrella’ contracts exploit people and avoid tax

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A Hucknall councillor has blasted the growing numbers of “horrific” umbrella companies which he claims exploit workers and dodge tax.

Keir Morrison said his research into the third party companies which employ agency workers showed they denied people paid holidays, forced them to pay fees of up to £30 a week and prevented them from working elsewhere, even if no work could be provided.

His findings emerged while the Hucknall South councillor was researching a final paper for an employment law diploma.

“Working on these contracts mean you don’t know when you will get a day’s work from one day to the next. It makes it impossible to budget,” he said.

“It’s a whole world of uncertainty and you don’t know where you stand.”

His research revealed workers have to pay the company’s national insurance contributions as well as their own.

Umbrella contracts also often contain ‘rolled up’ holiday pay which means take home pay is topped up via accumulated holiday pay, so people are not paid for genuine annual leave.

“Administration” fees of £30 a week are deducted from the worker’s salary to pay the agency for their role in finding the worker suitable work.

The contracts often contain an “exclusivity” clause, so when work isn’t offered people are legally bound not to work for another employer or agency.

He said workers were fearful of losing their jobs or being blacklisted if they raised legitimate concerns about health and safety risks or challenged sub-standard workplace practices.

Teachers’ union the NASUWT says almost a third of supply teachers have been forced to join an umbrella company in order to get work from an agency.

UCATT, the union which represents construction workers, has described these companies as a “con-trick”. A report by the union found that the Government is “substantially losing out on tax and NI revenues through the use of umbrella companies” and calculated that for a £700-per-week construction worker, HMRC picks up more than £200 in tax when they are directly employed, but less than £150 when they go through an umbrella company.

Cllr Morrison said that “only 15 per cent of people I surveyed said it gave them greater flexibility to suit their lifestyles” and 85 per cent would prefer to be full time employees.

He said: “Many workers feel trapped in agency work due to a lack of sustainable full time jobs in the UK.”

Cllr Morrison, 28, a painter and decorator by trade, left school at 16 “with hardly any GCSEs”, and joined UCATT when he was an apprentice. He said: “I am not an academic as such, but the fact that it was something I was interested in helped. It was brought to life by my experiences at work.”

He was awarded the TUC Regional award for TUC Education student of the year on Saturday.

He said trade unions faced the “challenge” of recruiting and organising casualised labour, but this was a necessity, “otherwise hundreds of thousands of workers employed on casualised contracts will never receive protection or be aware of working rights potentially throughout their whole career.”

Sherwood MP Mark Spencer declined to comment on the issues raised.