Most ‘umbrella’ companies (i.e. companies that employ workers on behalf of a recruitment agency, which then provides those workers to an end-client) comply with their employment law and tax obligations. Unfortunately, some (often offshore), do not. Following an earlier call for evidence, the Government is now consulting on how it can best regulate umbrella companies to protect workers, level the playing field in the contingent labour market, and protect public revenues. Specific proposals to tackle tax non-compliance include: (i) a statutory requirement for end-clients or recruitment agencies to carry out due diligence on umbrella companies; (ii) the transfer of payroll tax debt from non-compliant umbrella companies to the recruitment agency or end-client; and (iii) imposing PAYE and NIC obligations on recruitment agencies that supply workers who are employed by umbrella companies. This article summarises key aspects of the consultation and what action end-clients and recruitment agencies in the contingent labour supply chain should now take.
Currently, there is no state enforcement of employment rights against umbrella companies (unless their activities bring them within the regulatory regimes that apply to recruitment agencies), and it can be
Director, Employer Reward Services
KPMG in the UK
impractical and costly for individual employees to seek enforcement of their individual employment rights.This can result in...
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