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Union's call to outlaw umbrella companies in the NHS
by Susie Hughes at 12:28 30/08/17 (News on Business)
Unite the UK’s largest union, has called on the NHS to outlaw umbrella companies operating throughout the organisation.
In April the Government introduced new rules which effectively outlawed agency workers operating in the public sector from being paid on a non-PAYE basis. The changes affect all grades in the NHS including: paramedics, porters, nurses and doctors.

The controversial public sector IR35 rules are continuing to attract criticism for their vagueness and the decision to place the responsibility for determining status of the contractors on the end-user.

There have also been reports that blanket decisions based on caution rather than the individual facts have led to incorrect determinations.

As is often the case, these rules cover a wide range of workers from the highly paid limited company owners who sell their knowledge and expertise by choice on a contractual basis to the lower-paid workers who are forced 'off-the-payroll' often to save their 'employers' tax or benefit liability. And, of course, everything in between.

Umbrellas
According to Unite, some agencies operating within the NHS have begun to force workers to be paid via umbrella company contracts. If a worker is employed via an umbrella company, the union says that they lose 46 pence in the pound of eligible earnings, through national insurance (workers have to pay employer’s national insurance contributions) and income tax.

After being contacted by several members working in the NHS, Unite contacted the NHS and urged them to stamp out the use of umbrella companies. However NHS Improvement, the body responsible for overseeing foundation and NHS trusts, refused to do so.

It said: “NHS Improvement has for some time been concerned about the fees staff working through agencies have to pay if they are not employed under PAYE terms and conditions. NHS Improvement has stated through the agency programme that we do not encourage the use of personal service companies or umbrella payment methods within trusts and have encouraged the use of PAYE mechanisms.

“We are also aware of some umbrella organisations that are working outside of tax rules and are creating a risk to staff and have been working with HMRC to get a clear message on these unlawful practices.”

Exploited
Unite's Colenzo Jarrett-Thorpe said: “Despite the warm words from the NHS their response is entirely inadequate, workers are being ripped off and exploited and their message is essentially that it is down to individual trusts if they allow umbrella companies or not.

“It is especially alarming that the NHS is aware that there are illegal umbrella companies operating in its environs and they are still not prepared to ban them.”

Unite explained their position on the use of umbrellas:

  • "Under an umbrella company contract the worker does not receive the pay agreed with an agency. Instead, from the workers’ earnings the employer’s national insurance contributions are deducted as well as the standard employee’s national insurance contributions and income tax.
  • On top of this workers often have their holiday pay rolled up into the rate, which means they have a weekly amount of holiday pay allocated as part of their pay and when they actually take annual leave they receive nothing.
  • If the worker agrees to pay into an auto-enrolment pension scheme, they again have to pay both the employer’s and the employee’s contributions. To add insult to injury the umbrella company then takes a further slice of the worker’s pay, usually around £20 a week, for the privilege of being paid in this way.
  • The reason that agencies, force workers to be paid via umbrella companies, is to avoid paying employer’s national insurance contributions, holiday pay and pension contributions and effectively boosting their profits.

Parasites
Umbrella companies are legal and are used by many workers in many circumstances. However, Unite has taken cases on behalf of members depending on the worker’s individual circumstances, and used emotive language like 'parasites' and 'immoral' to describe umbrellas.

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Colenzo Jarrett Thorpe said: “Umbrella companies are simply parasites feasting off workers wages. Although they are not technically illegal they are certainly immoral.

"Unite will be now targeting individual NHS trusts that allow umbrella companies to be used, not only will we ensure they ban their use in future but we will also demand they pay back the money our members have lost, in being paid in this way.”

Disappointed
The union's position of tarring all umbrella companies with the same brush was called into question by the Freelancer and Contractor Services Association (FCSA), trade association for umbrella companies.

Its CEO Julia Kermode, said: “Like Unite, FCSA is committed to protecting the workforce from exploitation so I am disappointed to hear Unite’s national officer for health Colenzo Jarrett-Thorpe tarring all umbrella companies with the same brush and calling for the NHS to ban the use of umbrella firms. I have been talking to NHS Improvement about the important role of compliant umbrella firms in the supply chain, and I am meeting up with their agency team in the next two weeks to discuss how we can work together in the best interest of contractors and freelancers.

“As a result of the IR35 reforms which took effect in the public sector in April we are indeed seeing many newcomers entering the umbrella market with no track record so due diligence is essential to minimise risk.

"We are particularly concerned about the increasing proliferation of offshore loans and disguised remuneration schemes that seek to reduce contractors’ taxable pay via contrived means. These schemes put individuals at significant personal financial risk as HMRC will pursue them for the unpaid tax and NICs, plus penalties and interest.

"The new Criminal Finance Act coming into force on September 30 will also pose an additional risk for agencies to manage as they could be accused of not preventing tax evasion if they put contractors in touch with such dubious schemes. It is important that agencies and contractors choose compliant umbrella firms to partner with and I will also be raising this with NHS Improvement.

“FCSA accredited members adhere to a strict code of compliance and we are committed to ridding the industry of its cowboys as well as promoting umbrella employment as a positive choice for the hirer and the worker.”

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Susie Hughes © Shout99 2017

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Union's call to outlaw umbrell... Susie Hughes - 30/08
    Re: Union's call to outlaw umb... gfisher - 31/08
       Re: Union's call to outlaw umb... MichaelR - 5/09

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