We have noticed a disturbing trend among recruiters who are forcing contractors to use umbrella companies as a condition of providing working finding services.
All too often, recruiters are making the provision of work-finding services conditional on the use of an umbrella or choice of umbrella companies.
Other than allegations regarding the Bribery Act 2010, it is understood that clients engaging contractors have bought into the fallacy that umbrella companies insulate them from employment tribunal claims.
Why is this wrong?
This practice amounts to charging for work-finding services. This is a criminal offence and is a matter for the Crown Prosecution Service. The Employment Agencies Act 1973 prohibits any direct or indirect charge for work-finding services.
The Conduct of Employment Agencies and Employment Businesses Regulations 2003 prohibits this practice and creates a right to claim damages in the county court for all fees and consequential losses including underpaid holiday pay, unlawful deduction of employer's National Insurance contributions and the Apprenticeship Levy. There is no reason to be forced to pay an umbrella company £20 - £40 per timesheet.
There are also allegations that certain umbrella companies may have questions to answer about the Bribery Act 2010 given that being on a 'preferred supplier list' is a virtually guaranteed source of income.
What should work-seekers do?
Contact The Law Place on 07788 773871 or firstname.lastname@example.org. We are considering various options for contractors to share costs.
DO NOT OPT-OUT OF THE CONDUCT OF EMPLOYMENT AGENCIES AND EMPLOYMENT BUSINESSES REGULATIONS 2003 UNLESS YOU CAN OPERATE OUTSIDE IR35 AND HAVE RECEIVED INDEPENDENT LEGAL ADVICE.
Unless you want to pay an umbrella company £20 - £40 per timesheet when payroll must be provided without charge by the recruiter you should either decline the offer of an engagement made under such circumstances or insist on your rights.
A recruiter is not liable if it provides a work-seeker with the choice of processing the payroll internally or a choice of umbrella companies as required by s.44(2) Income Tax (Earnings and Pensions) Act 2003.
Contact us if you have been forced to use an umbrella company.