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Dispatches’ investigation into umbrella companies – IOR Partners Respond

Recruiters looking for the easy out, and end clients pushing charge rates down need to be aware that full employment carries a cost.

One Click Umbrella’s response

An episode of the Channel 4 documentary series “Dispatches” broadcast on Monday 19th January 2015 featured what was described as an investigation into umbrella companies. Unfortunately, the documentary did not show how the vast majority of compliant umbrella companies work for the benefit of many thousands of highly skilled workers across the UK – instead it showed how some companies can take advantage of complicated mechanisms to avoid certain parts of employment law and minimum wage legislation.

One Click Umbrella is the first and only British umbrella company to carry the Safe Umbrella badge, a new audit scheme launched by the Institute of Recruiters and international law firm Eversheds in July 2014. They set out a strict industry best practice criteria for umbrella companies, protecting both agencies and contractors alike.

Compliant umbrella companies, like One Click, adhere to all minimum wage legislation and do not use workers’ expenses to make rates up to National Minimum Wage. We also provide all of the benefits of being an employee of a large organisation, on a true contract of employment – Statutory Sick Pay, Statutory Maternity Pay, health and safety back up and access to workplace pensions and Childcare Voucher arrangements.

We hope that the recent discussion paper, launched by HMRC in December last year will go a long way towards levelling the playing field for compliant umbrella providers and enable the authorities to clamp down on businesses that break the law.

Mike Keeling
Operations Director | One Click Umbrella

Forest Group’s Response

In every industry you’ll encounter a range of players, from professionals to cowboys. Recruiters need to be careful about who they partner with, and with debt transfer in place, HMRC are ensuring that end clients drive that compliance need from the top of the supply chain.

One of the more disturbing and recent developments in the contractor payment industry is the rise of the EDM (Elective Disbursement Model). These are not umbrella companies. They operate by blurring the line between employment and self employment, and as the documentary uncovered, are removing all the basic employment rights of the worker, as well as magically making tax and NI contributions disappear. HMRC already have this model firmly on their radar.

Recruiters looking for the easy out, and end clients pushing charge rates down need to be aware that full employment carries a cost. National minimum wage and ERNI and holiday pay and SSP… The list goes on. These are the responsibilities (and costs) that a true umbrella carries, and they are statutory, and can’t be circumvented.

At forest we invest a lot of time working with our recruiter clients, and their end clients to educate the whole supply chain on these costs – protecting the candidate, and helping our agency clients is in everyone’s best interests. In short – if it sounds too good to be true, it is. Find a reputable expert partner, and beware the EDM masquerading as umbrella if you don’t want to end up starring in a documentary yourself.

Jovan Pavlicevic
Managing Director | Forest Group

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