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Labour proposes clampdown on umbrellas
by Susie Hughes at 15:20 16/05/17 (Political News)
Some freelancer groups reacted with concern that Labour's proposed clampdown on more suspect aspects of the contractor business model could punish genuine self-employed workers. And there were calls for the political party to reconsider its proposed blanket ban on umbrella companies if elected.
Labour's manifesto shows that it will clamp down on bogus self-employment by shifting the burden of proof of worker status so that the law assumes a worker is an employee unless the employer can prove otherwise and that is was also planning to ban umbrella companies if it wins the General Election on June 8.

There was immediate concern from pressure groups that genuine self-employed professionals will be unfairly targeted and that Labour does not understand how umbrellas work.

Worker status

On shifting the burden of proof of worker status onto the employer to stamp out false self-employment Julia Kermode, chief executive of trade group, the Freelancer and Contractor Services Association (FCSA) said: “The recommendation that employed status should be assumed as the default with the hiring business needing to prove the case for self-employment would have a devastating impact on UK businesses and ultimately the economy.

"Whilst I appreciate the rationale in cases where there might otherwise be exploitation, if rolled out across the whole workforce it would create an unnecessary barrier to self-employment, removing people’s right to choose how they are engaged, and removing the flexibility enjoyed by the majority.

"What’s more, there are 84 statutory rights and benefits that go with employee status and I would challenge any employer to be prepared to offer those benefits to genuine self-employed workers. It’s ludicrous to expect that someone engaging a gardener would have to prove the case for that person being self-employed! The end result could see no contingent workforce at all, which unfairly penalises the 4.8m people choosing to work in this way.”

The Labour Party manifesto proposes: "Banning payroll companies, sometimes known as umbrella companies, which create a false structure to limit employers’ tax liabilities and limit workers’ rights."

Julia Kermode of FCSA, which represents the umbrella companies said: “Corbyn and others clearly don’t understand how umbrellas work. Umbrellas allow contractors to be able to work independently for a number of end-hirers and provide contractors with full employment rights, all statutory benefits including holiday pay, maternity pay, paternity pay, sickness pay, pensions, redundancy pay and adoption pay.

"It would be foolhardy to ban umbrellas unilaterally considering that this sector is worth more than £3bn in tax and national insurance contributions to the Exchequer annually. We have a good track record of successfully changing views about umbrellas; the evidence of the positives is irrefutable and when we talk to MPs, trade unions and others they always see our perspective. In an unregulated industry, we acknowledge that there is poor practice within the sector which is why FCSA is committed to raising standards. Rather than a blanket ban, which only demonstrates a lack of thought, consideration and understanding on their part we would look to work together with Labour policymakers on initiatives that promote compliance and truly support workers that choose to work through umbrellas. A blanket ban on umbrellas is not the way forward.”


Philip Ross, a 'veteran' campaigner for freelancers and Labour Party activist, could still see a role for umbrella companies, but recognised that action was needed to prevent umbrellas being used to exploit the more vulnerable workers.

Philip said: "I know Labour is concerned about forced and bogus self employment and hence the crack down on umbrella and payroll companies. In contrast, we have the Tories are forcing many public sectors contractors to use umbrella firms. So I would welcome this approach to counter that on its own.

"However while personally I can see a role for umbrella firms for people to use in the short term, I think the problem has been with the industrial type scale that they have been used, and not always in the best interest of workers, as it has been suggested that they are sometimes used to save the employers' tax and as a vehicle to stop lower paid workers getting employment rights.

"My own suggestion, which I made at Labour's self employment commission in March would be to also force agencies to be transparent about their margins to both the end client and the contractor. As well as anything received from any such umbrella firms.

"How can it be when I buy a pension or mortgage I can see that commission but not from an agency? Labour commission on self employment is planned and I will be putting that on the agenda.

"Such changes are needed, because fundamentally we need a market that works for freelancers and their clients not one that enriches agencies and umbrella companies.""

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Susie Hughes © Shout99 2017

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