Contractors have described a UK union's call to ban umbrella companies as unworkable, leading to a greater void in the under-regulated market and making outsourced workers vulnerable.
The Trade Union Congress (TUC), a powerful association of British unions, said yesterday UK government should abolish umbrella companies to employ agency workers in light of what it sees as abuse of workers' rights and financial fraud.
Frances O’Grady, the TUC’s general secretary, said: "These scandalous workplace practices have no place in modern Britain. But our inadequate regulations let dodgy umbrella companies off the hook – allowing them to act with impunity."
"Enough is enough. It’s time for ministers to ban umbrella companies, without delay," she added.
While umbrella companies have come under fire from lawyers and employment campaigners who want to see better regulation of the market, they criticised the call for an outright ban, arguing it could lead to more bad practices and exploitation of workers.
Campaigners say umbrella companies have mushroomed as firms and temp agencies avoid directly hiring contractors judged to fall within the IR35 "off-payroll working" tax law. They take the untaxed income from an employer or agency and run the payroll, hand over the taxes and national insurance to the UK's tax collection agency, HMRC, and pass the net pay to the contractor. Among the alleged dubious practices used by some umbrella companies are attempts to impede holiday pay or entitlement and adding hidden fees to payslips.
But the Freelancer and Contractor Services Association (FCSA) said an outright ban could be harmful.
It said the TUC's mo ..
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