Umbrella company Orange Genie accused of skimming £4million from contractor salaries
Orange Genie has been accused of secretly skimming more than £4million from the salaries of contractors who have used the umbrella company since 2017.
Skimming occurs when amounts of between £1 and £6 are covertly deducted as “employment costs” in umbrella contractor payslips, in the hope that the small sums will be missed.
Contractor Voice alleged on Monday that Orange Genie, an umbrella with roots going back 18 years, has skimmed £2 a payslip from 8,000 contractors a week, for the past five years.
'Lack of clear detail on contractor payslips'
Orange Genie disputes the allegations, and also says they may stem from a GDPR breach, but accreditation body the FCSA last night confirmed that a member has now been expelled.
FCSA said the member is an umbrella, and the breach of code relates to “a lack of clear detail contained in illustration documents, payslips and accompanying reconciliation statements.”
But speaking to ContractorUK, a source with intimate knowledge of FCSA and who once detected skimming at a bigger brolly, believes the FCSA’s code leaves skimming wide open.
'FCSA umbrellas can choose their auditor'
The source says that auditors of the Freelancer & Contractor Services Association (FCSA), are contracted to carry out an audit of a member company’s contractor payslips every year.
“But the FCSA’s rules permit that very same auditor to form a client-relationship with the FCSA member company.
“Worse still, perhaps,” continued the source to ContractorUK, “the FCSA member can even choose which auditor companies they would like to carry out their annual review.
“It’s not surprising that pretty much all FCSA members choose the firm that they already employ as their private adviser. Clearly, impartiality doesn’t really apply in this scenario.”
'FCSA members won't have a say on their auditor from 2023'
ContractorUK put these apparent shortcomings in his body’s code to Chris Bryce, FCSA’s chief executive -- and he has now vowed to change the code irrevocably.
“From January 1st 2023, FCSA members will not have a say on which professional services firm assesses their compliance with FCSA’s codes,” began My Bryce, adding:
“[Also] from 01.01.23, new applicants will have professional services firms assigned at FCSA’s sole choice, to carry out assessments as part of the accreditation process for a period of no more than three years.
“In addition from January 1st 2023, all members and assessors will be required to declare whether a financial assessor is also the member’s auditor or provides other services to the member.
“This will not necessarily preclude that firm from being assigned to carry out the assessment on behalf of FCSA should FCSA be satisfied that no conflict of interest exists, and that the assessment will be carried out in a wholly independent and impartial manner.”
'Orange Genie contractors got agencies involved'
According to Contractor Voice’s claims against Orange Genie (which it disputes), the alleged skimming emerged after its contractors’ payslips were probed by an independent assessor.
A contractor who was involved in that assessment process, which was run by a tech firm that automates compliance for agencies, spoke on condition of anonymity to ContractorUK.
The contractor said a few Orange Genie contractors got their payslips audited themselves; “got their agency involved,” and when issues were detected, the agency told other agencies.
'FCSA members rang agencies to try to move Orange Genie off PSLs'
“I'm guessing they complained to the FCSA and I think it spiralled from there,” surmised the contractor.
“Everyone seemed to know it [the alleged skimming] was going on behind the scenes. Even FCSA members apparently rang unknowing agencies to try to trump Orange Genie on PSLs.”
But forensically familiar with skimming, ContractorUK’s other source revealed that with costly effects for contractors, it’s not the only tactic that umbrellas can sneakily employ.
'Two little tricks that keep HMRC happy'
“The one area that is never touched by the clever umbrella company [which wants to skim] is any part of the wages that attract legislative charges such as tax, NI, or Student Loan.
“This ensures that the RTI submissions to HMRC are always correct.”
The source also said: “Similarly, skimming -- under the auspices of ‘employment costs’ -- can legitimately be put through the books, thus attracting corporation tax. Two little tricks that keep HMRC happy.”
'Defamatory, misleading, inaccurate'
Orange Genie (OG) appears to deny any wrongdoing.
An Orange Genie spokesperson said: “We can confirm that we have provided legal communication regarding defamatory, misleading and inaccurate statements.
“We have also informed Contractor Voice of a potential breach of the UK GDPR directly related to the source of their information, of which we are seeking specific legal advice.
“We are in extensive dialogue with the FCSA and will comment further in due course.”
'OG did not instigate required remedies'
ContractorUK asked Orange Genie why, according to an FCSA statement alluding to Orange Genie’s expulsion following the skimming allegations, OG did not quickly implement a fix.
In response, Orange Genie provided the above statement.
But OG’s statement doesn’t appear to correlate to what ContractorUK asked – why, as FCSA says, OG “did not instigate the required remedies [to the alleged skimming] timeously.”
It is not known what those ‘required remedies’ were, nor on what grounds OG is appealing the FCSA’s termination decision – although OG has been asked by ContractorUK to specify.
Online, and in the event that OG did skim contractor salaries, one agency boss said the ‘remedy’ should be to hand to the nation’s grafters the allegedly siphoned £4million.
“I know that there are education agencies who have used OG in the past and some who are still using them today.
“If this report is true, I dread to think how many hard-working supply teachers and support staff have had, and continue to have, their income skimmed”.
An education sector recruitment director himself, the boss went onto say that – if the allegations of OG skimming £4m are not false, it will be hard for him not to blame “corporate greed.”
The ContractorUK skimming-source with intimate knowledge of FCSA used the same phrase.
“Most umbrella companies don’t skim but the anecdotal evidence is that some larger brollies do….[because] corporate greed gets in the way."
The source went on: "When you consider that FCSA companies generally deal with higher paid contractors, then it’s unlikely that a contractor will miss a few pounds per week.
“Remember, skimming brollies only skim between £2 and £6 per week from a contractor’s pay, and then hide this within the ‘employment costs’ part of the remuneration statement.”
'No other deductions'
Professional Passport, a payment intermediary compliance group, sounds disappointed.
“Reports of inappropriate and non-compliant behaviour, this time in the form of skimming…serve to give the whole [umbrella] industry a bad name,” the group said.
Required to confirm their “transparency of margin charges”, Professional Passport-approved providers can add “no other deductions” to salary, save the standard statutory requirements.
The group’s CEO Crawford Temple (speaking without knowing of FCSA’s new January 2023 changes), suggested FCSA should “revise its code as a matter of urgency to prevent” skimming “from being seen as acceptable.”
'Umbrella company contractor salary skimming is NEVER accidental'
And in lieu of legislation, it does fall to morals and ethics, as the skimming-source explained:
“While skimming is NEVER accidental because payroll is entirely software-led meaning any skimming is always programmed into the algorithm, unless the employment contract clearly states and itemises what all employment costs are -- including the umbrella’s margin, then skimming becomes a moral and ethical issue, not necessarily a legal one.”
Julia Kermode, founder of IWORK -- and a former CEO of FCSA, agrees.
Ms Kermode said: “It’s now absolutely essential to demand robust third-party financial checks which verify that both the umbrella's own financial processes and their payroll software are operating properly.
“All too often any malpractice with contractors' income takes place within the umbrella before the money reaches their payroll system. This can easily go undetected if the net pay seems in the right ballpark.”
'Transparent, robust, compliant'
Qualified solicitor Fred Dures says the answer is indeed for umbrellas to use ways that “demonstrate” they run processes which are “transparent, robust and ultimately, compliant.”
Now the boss of PayePass, Mr Dures said: “In the absence of the government regulating the umbrella industry, which we could well be waiting years for, umbrella companies must take it upon themselves to raise standards, show their compliance and offer clarity. This should start with a rigorous payroll audit that leaves no stone unturned.”
On LinkedIn yesterday, an entrepreneur hoped that rigour is applied to finding out if Orange Genie skimmed or did not skim.
'OG is innocent until proven guilty'
“Orange Genie has been [accused of] carrying on this [skimming] process for years….[but] they are innocent until proven guilty,” the entrepreneur’s post states.
“[In addition] the FCSA should be able to step in and put the world right due to the audit process, and so prove the innocence [or not] of Orange Genie.”
In a statement, the association’s Mr Bryce responded: “As members approach accreditation renewal, [from January 1st 2023] the assessor assigned by FCSA will change -- if the current assessor has carried out assessments for that member for two or more years.”
Asked about any further practical steps to guard against the risk of skimming at his association's umbrellas, the FCSA’s CEO added: “While we believe that a full and proper assessment cannot be carried out solely by digital means, we have been in talks for several months with a variety of suppliers of digital verification tools to evaluate how their use can provide an even greater level of reassurance.”