Treasury response to umbrella company call for evidence ‘will be brutal for the FCSA’

The Treasury’s incoming response to its umbrella market call for evidence will make “brutal reading” for the Freelancer & Contractor Services Association, a payroll firm boss predicts.

Due to the nature of details likely sent to officials by contractors who use brollies accredited by the FCSA, there will also be a “lot, lot more” for the compliance group to address.

Speaking to ContractorUK, the boss was referring to the association last month having to address umbrella contractor holiday pay, after a member allegedly pocketed the pay for itself.

'Codes in place at the time weren't breached'

But last night, the FCSA clarified that the member -- JSA (now operating as Workwell) and which is actually a founder-member of the association, didn’t do anything wrong.

“We are satisfied JSA Group did not breach ​the FCSA membership compliance codes that were in place at the time the complaint relates to,” FCSA’s Chris Bryce told ContractorUK.

Bryce declined to be drawn on specifics of the FCSA’s investigation into JSA but seemingly as a result of being cleared, the firm’s FCSA membership has been renewed until March 2023.

'Proactive in encouraging holiday pay usage'

The association’s CEO, Mr Bryce also said that its member codes have been “strengthened” since the complaint against JSA (relating to activity in December 2020).

And further to a revision in Oct 2021, he said that code strengthening has been done to “make clear” that FCSA umbrellas should be “proactive in encouraging” staff to use their holiday pay.

But the adjustments to the member codes, made to reflect Smith V Pimlico Plumbers, is too little too late for the payroll boss, who says the FCSA has ‘form’ on holiday pay.

“I might own one myself, but umbrella companies have been wrongly able to profit at the expense of umbrella employees…in a systematic capacity [with holiday pay].

“And with the FCSA, a founder firm of theirs was exposed on holiday pay last year on Radio 4’s MoneyBox. So perhaps this is a common tactic by FCSA founder firms?” the boss asked.

'No consequences for abusers'

Since the BBC programme which specified the exposed brolly as FCSA-accredited, and in light of FCSA extending now-cleared JSA/Workwell’s membership, an NHS worker is disappointed.

“The FCSA clearly aren’t going to hold these companies to account. And it obviously doesn’t have the contractors’ best interests at the heart of their organisation.”

An operating department practitioner, the worker continued: “What is the point in having a code of compliance if there are no consequences for those abusing it?!”

'Holiday pay a great concern'

In its own submission to the umbrella market evidence-call (the same call which the payroll boss declining to be named predicts will be “brutal” for FCSA when it replies), the association says exploitation of holiday pay is a “great concern.”

“The FCSA would encourage government to explore how these standards [derived from FCSA member codes] can be further enshrined in law”, the association’s submission adds.

“[This should be done] to fully protect the worker and to be explicit in terms of responsibility, as to who is tasked with enforcing current and future holiday pay legislation.”

'Excellent standards'

Kevin Austin, managing director of Access Financial, believes that making today's FCSA codes mandatory for the UK's umbrella companies would be wise.

“The standards that FCSA claims to impose are excellent, but it must impose them,” Mr Austin wrote on LinkedIn, at the time of the JSA/Workwell holiday pay allegations.

Referring to concerns about the robustness of the FCSA’s then-promised investigation, Mr Austin said: “It's no good casting a blind eye to the misdeeds of its members irrespective of whether or not they are founder members.

“The FCSA should discipline and rebuke miscreants and, at the last resort, expel them. Equally, they should have a code for clients that should be robust”.

'Not fit for purpose'

In his statement yesterday to ContractorUK, the association’s CEO Mr Bryce said he ‘expects all FCSA members to adhere to the practice’ of proactively encouraging workers to use their holiday pay entitlement.

Yet no matter how well-intentioned, it appears that tough talk and expectation aren’t enough to convince a healthcare contractor, Robert Wakeford.

Online in a thread about JSA/Workwell, Mr Wakeford blasted: “The blatant disregard of a supposed ‘investigation’ into the fraudulent withholding of contractors’ holiday pay demonstrates the arrogance of these organisations. The FCSA is clearly not fit-for-purpose.”

'Investigation into contractor holiday pay abuse needed'

Meanwhile, sounding as if he’d like a more evidence-based set of actions on umbrella company holiday pay, before making his mind up, is Orca Pay Group’s Robert Sharp.

In fact, having closed on February 22nd 2022, the Treasury’s call for evidence should respond with a recommendation to investigate the extent of “how bad holiday pay abuse really is in the umbrella contractor sector,” Mr Sharp says.

Separately, in its submission to HMT’s umbrella market evidence call, agency body the REC said: “Umbrellas should be subject to some of the obligations that employment businesses have under the current recruitment industry legislation.

“Regulation should create transparency around fees / payments taken by umbrellas companies.”

'Misunderstandings'

In its contribution to Treasury officials, workplace advisory ACAS wrote: “There can be misunderstandings over holiday pay and entitlement which can result in workers not being able to take the leave they are due.

“Some of the arrangements we have come across involving umbrella companies also appear to involve [the unlawful practice of] rolled up holiday pay.”

From the FCSA last night, Mr Bryce said he “very much welcomed” that a “resolution” had now been reached between JSA/Workwell and the individual contractor who accused the umbrella company of withholding £2,865 in holiday pay.

He described the resolution as being to the “full satisfaction” of both parties.

'Going to be brutal'

But speaking on condition of anonymity for fear of reprisals, the payroll boss believes having to address charges of holiday pay pocketing could be just the tip of the iceberg for the association.

“When the call for evidence is reviewed and published, it will reveal a lot, lot more,” the boss warned, “and from what I’ve been told by those who submitted, it really is going to be brutal reading for the FCSA.”

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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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