Umbrella companies under timely attack, following BBC unused holiday pay exposé
Umbrella companies are under a sudden, sustained yet possibly staged attack, from some of them still underhandedly pocketing the holiday pay of contractors who don’t use it in time.
Starting the segment on a Q&A with an IR35 reform lobbyist who had tried to stop the off-payroll rules (they are still incoming on April 6), the BBC then quizzed contractor ‘Steve.’
'Tactic to profit'
By not reminding him to take his holiday pay, and by not clarifying that it cannot be carried forward, his brolly and others are onto a “tactic to profit”, he said, as they simply pocket it.
Although it was for some reason not named, despite previous Radio 4 probes explicitly identifying rogue providers, Steve’s umbrella was said to be a member firm of the FCSA.
Founded in 2008 to ‘raise standards and promote supply chain compliance,’ the Freelancer & Contractor Services Association’s chairman is yet to respond to a request for comment.
'Suspension and expulsion risk'
An FCSA spokesman also reportedly declined to speak to the BBC on-air, but, coming before a statement from FCSA CEO Phil Pluck to ContractorUK yesterday, still told the programme:
“If any of our members are in breach of their code which includes protections for holiday pay, then they risk suspension and expulsion.”
'Eaten up into a umbrella's profits'
Sounding far from satisfied is off-payroll.org. In an open-letter to the FCSA, the site said:
“We’ve taken the time to read your code of conduct and it would appear there is nothing that clearly and unequivocally prevents retaining of accrued, unused and expired holiday pay.”
But the voluntary code aside, there is no legal obligation on umbrellas to ensure holiday pay is repaid to the contractor unless the contract says otherwise, says Clarity Umbrella.
The firm’s Lucy Smith, who personally does not believe there is “ever” a point where unused holiday pay should be “eaten up into a umbrella’s profits,” explained last night:
“If there ever was to be a scenario whereby a company made the decision that holiday pay was to be lost if not taken, then it should be made clear to the contractor this will be the case.
“This ought to be done via clear communication at the correct time, preferably before they agree to sign the contract, but definitely with a reminder to take it prior to holiday year-end.”
But holiday pay must be repaid if the contract of employment or the employee handbook says it must, Smith said, adding: “If not, it’s left to a moral duty on the umbrella to their workers.”
Having listened to the BBC segment, tax lawyer Rebecca Seeley Harris told ContractorUK: “It seems that various umbrella companies have not been doing their moral duty.
“It’s a pity, because this muddies the waters for those umbrella companies that are trying to do the right thing.
“[What’s indisputable though is that] it shouldn’t be up to the worker to have to take the umbrella company to an employment tribunal to get what is rightfully theirs.”
'Monies will be repaid'
The lawyer was part referring to Steve -- who explained the mere threat of tribunal scarred his umbrella into returning holiday money his client paid him but which his brolly took.
But the lawyer was also referring to a tribunal judgment from June 2019, ordering JSA Services (a member of the FCSA) to pay £2,627 in unpaid holiday pay, to a Miss S Islam.
“Mr Pluck has promised to expel any members he finds guilty of wrongdoing and I have absolute faith that…[any wrongly taken] monies [will also be] paid back to the affected”, says Robert Sharp of non-FCSA umbrella company Orca Pay Group.
Mr Sharp also told ContractorUK: “There are about 1,000 umbrellas in the market and the FCSA group only has 60 or so…it would [therefore] be unfair to tarnish the umbrella industry as a whole. But clearly there has been wrongdoing”.
'Neither party has supplied evidence'
Yet it is the scale of that wrongdoing which is fuzzy.
Published yesterday afternoon, Mr Pluck’s statement said: “The individuals involved in these attacks [on umbrella companies] are claiming to have evidence of members breaching the FCSA codes and are choosing to put edited documents on social media that does not allow me to identify any member company, if indeed they are one.
“I have contacted the individual in question…[‘Steve’].and also the BBC, asking for both the member name and any evidence they have, so that I can properly and thoroughly investigate any accusations of wrongdoing. Neither party has supplied me any evidence.”
Since taking over the association last year, its CEO also said that he has expelled companies which he could prove, with “evidence,” had breached its codes and charter.
He claimed these actions prove that a “robust” complaints procedure is in place at the industry body.
'Restore the trust and transparency for contractors'
Similarly in search of the ‘Moneybox umbrella,’ Kingsbridge Group’s Ryan Dawson posted: “It's crucial now that the FCSA takes quick action and publicly holds this particular umbrella provider accountable, in order to restore the trust and transparency for contractors who are ultimately the customer.”
But a single ‘naming and shaming’ of one umbrella isn’t going to cut it for contractor accountant James Poyser, of inniAccounts.
“Many [umbrellas] will follow the letter of the law when it suits them,” he says, “such as retaining unused holiday pay, but then they avoid best-practices at all costs should it run against their business model.
“Pick the wrong umbrella and the odds are stacked against the contractor. Self-policing isn't working. We need reform, regulation, and a rethink of how our legislation applies to these service providers.”
Such calls for reform on the eve of already major reform aren’t going unnoticed by a suspicious FCSA.
“The timing of these attacks is occurring just before the IR35 reforms come into force,” Mr Pluck observed.
“Is this been done in the interests of the contractor? Or to cause other elements of unsettlement in the sector, at a time when…agencies, end-hirers and umbrella companies are trying to ensure a smooth transition to the new world of IR35 in the private sector”?
'Attempt to disrupt'
The FCSA boss is not alone is sensing something appears to be off.
And not just because the BBC finally reported on a years-old issue (as underhand and repugnant as it is), supposedly completely out of the blue.
“I’m sorry but this is, at best, unfortunate timing,” said a legal and compliance expert who declined to be named. “Perhaps it’s an attempt to disrupt the market for someone’s or some party’s commercial benefit."