With the Single Enforcement Body now on ice, it’s up to umbrella companies to step up

A reported announcement to MPs just before the Christmas holidays, by the business secretary Grant Shapps, revealing that the government has shelved plans for a Single Enforcement Body (SEB), illustrates the complexity of trying to find a solution to the umbrella company market and its problems, writes Russell Upton, director of key accounts at Parasol.

Government has kicked the can down the road

Unfortunately, kicking the can down the road does nothing to help the situation right now -- when the flexible workforce has so much to offer businesses that need fast access to skills and expertise.

All the signs are that the UK economy is heading into a downturn, which usually sees the usage of temporary workers increase. Most of the feedback from our recruitment agency partners is that new projects are pushing ahead in 2023 and that there will be a higher volume of workers being placed via an umbrella solution.

Yet it seems clear (based on Mr Shapps’ reported announcement) that the government has no appetite to regulate or introduce any kind of body to oversee the umbrella company industry.

A Single Enforcement Body on ice puts the onus on the likes of us

Personally, I think it would be good to see a crackdown on non-compliant umbrella companies, and their schemes, so that there can be more transparency in the sector.

But putting the SEB on ice does not suggest we will see any real step change. That means enforcement and compliance is an area we’ll all have to watch – ourselves -- in 2023.

It should be noted that umbrella workers offer an important resource for companies to make use of. Yet umbrella working is definitely not the only option, and we have always said that we would welcome regulation and tighter rules within the contractor sector as a whole.

Those unhelpful off-payroll u-turns...

But one existing rule -- IR35 --  was subject to multiple U-turns in 2022 relating to its reforms, in 2017 and 2021. This U-turn followed by U-turn has definitely not helped the contractor market. Actually, I would go as far as to say that it’s undermined confidence -- just as it felt like the dust had started to settle.

Right now, as 2023 breaks, we believe that many people and organisations across the supply chain still need to be educated on what the IR35 reforms mean, practically.

So that’s why we're working hard with contractors and our agency partners to make sure that compliance with the off-payroll rules, and other frameworks, is at the top of the agenda this year.

Based on those discussions, we believe that all professionals want to be confident that the umbrella they chose to partner with is compliant, and ethical, in their approach to processing contractor pay.

Transparency? It's what we all need this New Year

Of course with the SEB now on ice, it’s hard to see any government agency stepping in to regulate such processes anytime soon. While that is disappointing, it means that ensuring compliance across the contractor supply chain will be crucial -- particularly for agencies.

My view is that if there is one thing that would give our industry more credibility this year, it would have to be TRANSPARENCY.

The more transparent we are as a sector, the more non-compliant and unethical practices are highlighted, which will help to clean up the sector. There are some good umbrella companies providing crucial services in the UK. Unfortunately their reputation is often tarnished by the actions of others that do not always adopt an ethical approach.

Angst since autumn, and a busy time to come especially with no SEB

This self-initiated clean-up is all the more important because it’s clear since Autumn Statement 2022, many contractors are re-evaluating their company setup in light of the chancellor’s announcements.

With contractors unquestionably paying more attention to the potential tax consequences that will affect them in 2023, we believe having the freedom to select the best alternative company structure is key, so we’re providing assistance to highlight the various options available. All workers will be impacted by the recent tax reforms, regardless of their contracting structure, so we're gearing up for a busy 2023, when the need for qualified contractors, and independent PSC contractors, will only increase.

We know this increase will happen because although it has been widely reported that unemployment rates are still at historical lows, many firms are reluctant to increase headcount by employing permanent employees. The flexible workforce is a vital lifeline for the UK economy – in times of boom or bust – so there’s no doubt it will once more be needed to ‘fill the gap’ and provide knowledge across all key sectors, even if there will be no Single Enforcement Body to support them more and better enforce our labour laws.