New 'Workers’ Watchdog' placates umbrella company regulation backers

A new commitment by the government to set up and unleash a Workers’ Watchdog, albeit at an unspecified time, is being heralded as the first step to regulate umbrella companies.

Effectively the previously mooted Single Enforcement Body, the watchdog will itself be an umbrella organisation, by taking three existing agencies under its “one roof,” officials said.

The Gangmasters & Labour Abuse Authority, EAS, and HMRC’s NMW Enforcement will all merge under the watchdog, so it can bite slavery, NMW flouters and agency work abuses.

'Blow the whistle'

The latter remit is placating umbrella company regulation supporters, as are operational vows like “a new ability” to get workers their holiday pay and a “blow the whistle” on abuse portal.

Targeting brollies explicitly, the government says in a new response to the SEB consultation that the watchdog will deliver on prior commitments to “regulate umbrella companies.”

No other detail is provided on the response’s p8, although a second mention of umbrellas serves to confirm that it is not an oversight but merely still on the government’s ‘to-do’ list.

'Frustratingly little detail'

“Umbrella companies…[are] not currently enforced [against],” the business department admits on p15. “But government has committed to legislate to give the state a role.”

Joanne Harris of Parasol told ContractorUK: “Confirmation that this new body’s remit will include regulation of umbrella companies [is welcome] but it will require new legislation.

“However this Workers’ Watchdog is the right body to regulate umbrellas and despite frustratingly little detail…this could be the first small step towards umbrella regulation.”

'Long-awaited'

Lucy Smith of Clarity Umbrella welcomed the announcement too. “Any kind of regulation within this [unregulated] industry has to be a good thing,” she says.

“Umbrellas are complex in their operations due to the crossover between tax and employment law, so a SEB is going to need to work [hard to achieve the]…long-awaited transformation”.

Not everybody is satisfied however, despite an official decision about the SEB being top of a widely-endorsed policy wishlist on umbrellas, submitted to HM Treasury only last month,

'Dilute enforcement activity'

“I am concerned that a single enforcement body will not provide the answer,” says Crawford Temple of Professional Passport, which caveated that the SEB’s aims do sound “good”.

“Such a set-up could significantly dilute enforcement activity as each department works together to navigate their way through the issues.  

“HMRC is already not acting on information it has quickly enough, and involving the likes of EASI and The Gangmasters and Labour Abuse Authority could serve to slow down enforcement even more, as these departments get up to speed.”

'Won't target rogue umbrellas'

But a chartered accountant in charge of an umbrella company, and who used to work at the Revenue, says the watchdog’s proposed set-up could work perfectly well.

“While the new authority won’t specifically target rogue umbrella companies, when government officers with training in different areas work together, they will be able to better tackle all kinds of non-compliance,” says the ex-inspector, Carolyn Walsh.

Now boss of CWC Solutions, Ms Walsh explained: “For example, an officer may find that a breach of National Minimum Wage is due to a worker’s employment income via an umbrella company, being offset by some kind of exemption.

“This could then be referred to a colleague with expertise in PAYE regulations, who may recognise that an abusive tax arrangement is being used.”

'Real enforcement has been the missing piece'

As long as the watchdog is given teeth, believes Orange Genie’s Damon Cochrane, then it could indeed make a real difference in the marketplace.

“The missing piece over the years has been real enforcement and penalties, leaving providers able to continue operating non-compliant schemes and processes,” Mr Cochrane said last night.

“Increasing the standards and minimum levels of compliance, coupled with this real enforcement, will go a long way to removing the rogue operators from our sector and giving workers the protection they deserve.”

'No timetable is a problem'

But it is time which concerns Rebecca Seeley Harris, the joint-author of the policy draft which last month asked government to decide if a SEB (like the watchdog) is right to regulate brollies.

“The problem is that there is no timetable,” she said in a statement to ContractorUK. “[It] just [says] ‘when parliamentary time allows,’ so we will continue to push for legislation.”

At Parasol, its technical commercial manager Ms Harris enforced: “Unfortunately, we still do not have a timescale for the introduction of this new watchdog.

'Vague'

“Only saying, ‘The new enforcement body will be established through primary legislation when parliamentary time allows’….is frustratingly vague. I hope the next steps include confirmation of timescales.”

Agency body the Recruitment & Employment Confederation, which last month called for a ‘report a bad brolly phoneline,’ believe a Workers’ Watchdog is long overdue to protect umbrella users.

“We hope government press on with this quickly,” says REC’s deputy CEO Kate Shoesmith.

“Merging the current enforcement bodies will be complex, and the new body will need to be properly resourced to work effectively.”

'Crack down'

It will also benefit from industry support – but adviser Louise Rayner doesn’t believe that support will be in short supply. Or at least, it won’t be from most quarters.

“We welcome umbrella regulation. If you are compliant and[/or] accredited, why wouldn’t you?” the NumberMill boss asked, addressing umbrellas in a post. “We [all] need to be supporting anything that cracks down on uncompliant payroll because it damages the reputation of the industry as a whole.”

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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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