In April 2014 as part of the Government’s Finance Bill, changes were introduced governing how employment agencies and payroll companies could employ construction workers.
Under these changes any worker considered to be engaged by an agency or a contractor could no longer be classified as self-employed.
It was hoped that this would result in construction workers being paid on a normal PAYE basis.
This did not occur; instead overnight thousands of construction workers were given no option other than to operate via an umbrella company.
Problems with Umbrella Companies
Under an umbrella company the worker is required to pay both the employers’ and employees national insurance contributions. This is 25% of eligible earnings.
Despite pay rates being advertised at a much higher level the worker is only actually paid the national minimum wage. Earnings are then boosted by mechanisms such as expenses and performance related pay.
In many cases holiday pay is “rolled up” into the rate and paid weekly. This means that when annual leave is taken the worker is not paid, this results in the worker often not taking all the leave they are entitled to.
As pay is only paid at the national minimum wage rate, holiday pay (rolled up or not) is only paid at this rate.
Many umbrella companies issue zero hours contracts, which mean that the worker is not guaranteed work and does not have set hours. Therefore when and for how long they are required to work can differ markedly from week to week. In some cases there is an exclusivity clause which means that the worker is not entitled to work for anyone else.
Payslips are made so complex that it is difficult if not impossible to understand all the deductions being made from the pay the worker receives.
The umbrella company charges the worker directly for their services and fees can be up to £30 a week.
Being Paid Via an Umbrella Company
If you are being paid via an umbrella company contact your local shop steward or your UCATT regional office for further advice.
It is very important that you keep a copy of any contract that you sign and also keep copies of your pay slip. A copy of any advertisement or recruitment information would also be helpful.
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