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Dispatches: Low Pay Britain went undercover to a meeting with an umbrella group, MAC Professional Solutions. Posing as the owner of a recruitment agency,the reporter was told how he could lawfully save money in PAYE and NI by employing workers through an umbrella firm.
Viewers heard how General Manager Patrick Shaw explained the scheme saying, “There's tax evasion - illegal; tax avoidance which is perfectly legal. It’s, you know, helping the contractors avoid paying tax legally and we do that by use of contractor’s expenses. You're saving money and you're saving a good chunk of money - if I'm lucky enough to have a lot of contracts with your agency I'm making a lot of money.....
"They’re not classified as an employee or worker, so technically the National Minimum Wage is £6.50 doesn’t exist… To be perfectly frank, they've got no holiday pay rights, they've got no employee rights…they've got no worker rights."
Mac Professional Solutions said:“In December 2014 we underwent a review by HM Revenue and Customs and were found to be fully compliant with no issues about our operations raised… The vast majority of those that we engage with are better off as a result and none of them are compelled to do so in the first place…
However, compliant umbrellas are concerned that the reputation of the sector could be damaged by the rogue element.
Legitimate
Umbrellas are already the subject of a Government consultation into travel and subsistence expenses, and there is fear in the sector that a tough clampdown could catch all umbrellas.
Parasol founder and chief executive Rob Crossland said: “Any umbrella company that flouts minimum wage legislation cannot call itself compliant.
“Failure to pay workers the minimum wage is illegal and unethical. Such behaviour deserves to be exposed and punished. However, I am concerned that this investigation could tarnish the reputation of our industry in the eyes of the business community and general public.
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“They also offer workers guaranteed hours of work, holiday pay, sick pay, paternity/maternity pay and access to a workplace pension.
“As HMRC itself recognised in its recent discussion paper on travel expenses, employment via an umbrella company is an attractive option for many skilled, professional, high-earning contractors.
“It’s frustrating that the programme did not make this clear.”
Parasol also felt that there are existing powers to deal with companies who flout the laws.
Derek Kelly, Parasol’s managing director, said: “The Government has sufficient powers to immediately put out of business those umbrella businesses that break the law. What is needed is significant enforcement action to once and for all clean up the industry by eliminating rogue traders.
“This should include going after the personal assets of the owners of these businesses, and those so-called professional advisers who profit by constructing artificial schemes to target the most vulnerable workers in society.”
Tarnished
Matthew Brown, Managing Director of giant group shared the concerns that the compliant majority should not suffer because of the unethical minority.
He said: “The reputation of all umbrella companies should not, in my opinion, be tarnished by those minorities that are willing to use loopholes to their benefit. It’s important to remember that while there are some cases of poor practice in the UK, there are also an extensive number of compliant umbrella businesses as well.
“It is clear that economic growth depends on the continued flexibility of the UK labour market, and it is also clear that umbrella employment supports this flexible workforce. Unethical practices such as those identified in the Channel 4 programme should certainly be stopped and we welcome the work of professional bodies such as the Freelancer and Contractor Services Association (FCSA) in addressing these issues.
"As a member of the FCSA, giant abides by a rigorous code of conduct that does not tolerate such immoral activity. While the crackdown on such attitudes continues, contractors, recruiters and businesses should remain highly vigilant as to any such behaviour and ensure they are working only with an umbrella business that is committed to remaining compliant.”
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Susie Hughes © Shout99 2015
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