Umbrella companies face UK-wide regulation

A call issued to ContractorUK some six years ago for contractor umbrella companies to face regulation has finally been answered by the government.

In its reply to the Taylor Review, the business department says that umbrellas will be regulated by the Employment Agency Standards Inspectorate, akin to what one brolly boss urged back in 2013.

This is one of 19 recommendations explicitly accepted by the government from the review (which made 35 in total), but for contracting at large, it appears to be the headline one.

'Fit for purpose'

“[It’s] a really positive development assuming that it will be fit for purpose,” says sector body the FCSA, referring to legislation that will need to be introduced to expand the EASI’s remit.

The expansion will allow the inspectorate to investigate complaints “involving an umbrella company”, presumably by the company’s prospective, new or existing users, or its partners.

The business department also said that the EASI’s “action” would “focus” on situations where umbrella users working via recruitment agencies had not received “adequate” pay.


So the suggestion is that high-end sectors, such as the professional IT contracting sector, will not be the driving force of the inspectorate’s brolly division. In fact, business officials say:

“The Taylor Review concluded that, while higher skilled, higher paid sectors are well served by umbrella companies, their role is more questionable for lower skilled, lower paid roles.”

But the EASI will cover all umbrellas -- not just those which employ workers whose roles are defined as less-skilled, so as to “protect decent employers from unfair competition.”


In their reply to the Taylor Review, officials at the department for Business, Energy and Industrial Strategy (BEIS) added: “We will continue to monitor the role of umbrella companies.

“[We will do this] by ensuring the EASI work closely with HMRC and the Gangmasters and Labour Abuse Authority to identify any further enforcement or regulation required to tackle any detrimental aspects of the arrangement.”

The Freelancer & Contractor Services Association (FCSA) says it is advising BEIS on the regulating of brollies, and will continue to, mindful perhaps that what officials might deem ‘detrimental’ may not always be accepted as harmful by those affected, or easy to eradicate.


For example, the government is to repeal the Swedish Derogation model (recommendation 18 that BEIS accepts), but this removal will be “controversial”, cautioned FCSA’s Julia Kermode.

“There needs to be a sufficient timeframe for implementation to enable end-clients to properly plan their workforce requirements, taking into account this change,” she said.

The proposed end to what is a bypass to the Agency Workers Regulations is not the only veto that the government uses its response to the Taylor Review to make.


The review’s showpiece -- an entirely new employment status category to have described those who are neither ‘employees’ nor ‘workers’, the ‘Dependent Contractor’, is to be snuffed out.

So despite inspiring five of Matthew Taylor's recommendations (none of which will now go forward), officials say the recommendations of both BEIS and DWP Select Committees have persuaded them not to add an extra status, chiming with the belief of contractor body IPSE which warned ‘DC status’ would have simply ‘added to the confusion in the gig economy.

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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