Single Enforcement Body back on the agenda in time for Spring Budget 2023

The Single Enforcement Body to regulate umbrella companies has once again become a prospect for Spring Budget 2023, on the back of reported comments by a Conservative MP.

Kevin Hollinrake reportedly told a Whitehall meeting that the government “wants to have more control over what some of these organisations” -- umbrella companies -- “are doing.”

Speaking late last month, the Tory MP who is the parliamentary undersecretary for enterprise, markets and small business, apparently added that government would respond “very shortly”.

'No replacement plan for Single Enforcement Body'

At the least, it seems to mean HM Treasury’s 2021 call for evidence on the umbrella market is ready to report, and at the most, Spring Budget could contain the SEB or other regulation.

Either way, it is “very possible” that “further details” will be released at or around Wednesday’s statement, says Osborne Clarke, which cited Mr Hollinrake’s comments.

No "replacement plan" for the Single Enforcement Body has been formally unveiled however, since Grant Shapps MP seemingly ruled it out, ReLegal Consulting told ContractorUK.

'Government commitment to the SEB hasn't waivered'

But decoding the business secretary’s December statement, a third law firm -- Chartergates – last week said it didn’t imply that the ‘government’s commitment to the SEB has waivered.’

“The pandemic threw a spanner in the works which, as far as we can tell, has slowed progress [with the SEB] down,” Chartergates said in an update to subscribers.

“It is [still] very likely that we will see one overall governing body which combines the enforcement powers [of HMRC NMW enforcement unit; the Employment Agency Standards Inspectorate and the GLAA]”.

'System has been a mess for too long'

Former tax inspector Carolyn Walsh is hopeful Spring Budget does contain the SEB; some other form of umbrella regulation, or at least the Treasury’s response to its umbrella market call, which closed in Feb 2022 (and has said “We are analysing your feedback” ever since).

“The system has been a mess for too long,” Ms Walsh, who used to own and run her own umbrella company told ContractorUK.

“Even the latest apparently improved guidance on umbrella companies from HMRC is still too convoluted for people to understand.

“[Where] a law is being broken, umbrella contractors could go to an employment tribunal to seek compensation. But they'd lose their job in the process, and possibly be blacklisted. And that's what protects the status quo.”

'Great news'

One quick-fix for chancellor Jeremy Hunt on Wednesday could be to drop umbrella company regulation into the Agency Conduct Regs, says ReLegal’s boss Rebecca Seeley Harris.

“[Then the government would just use] the Employment Agencies Standards Inspectorate to police it,” she added. “Either way if Hollinrake’s reported comments are accurate] then this is great news.”

Walsh agrees and similarly backs regulation, but she wonders if the contractor and recruitment sectors could have headed off the need for a thicker statute book.

“There would be no issue with umbrella companies issuing complex payslips or making various deductions from wages if the Recruitment & Employment Confederation and the like, instructed their members to stop offering pay rates to workers that include an uplift for holiday pay, employer costs and the umbrella company fee.”

'Beyond me'

Now an adviser on tax and payroll, Walsh continued: “Unions could similarly do better by their members if they also stopped buying into the charade, explaining that the higher rate offered via an umbrella company is not the worker’s true pay rate, which is often equal to the agency rate anyway.

“Why recruitment bodies and unions are not encouraging agency workers to ignore the umbrella rate and accept work as an agency worker, which provides more or less the same take-home pay, along with genuine and enforceable employment rights, is beyond me.”

The Freelancer & Contractor Services Association told ContractorUK that it “has been working closely” with the business department, since its submission to HMT’s evidence-call “a year ago.”

'Well thought-out regulation for umbrella companies'

“We will be pleased to see movement on the Single Enforcement Body and towards regulation of the industry,” the association said, sounding uncertain which will emerge (if any) on Wednesday, but clearly hoping that the government’s inaction is over.

In a statement, the FCSA’s chief executive Chris Bryce last night continued: “We look forward to working closely with the minister responsible, Kevin Hollinrake, and his officials to develop meaningful and well thought-out regulation, which will allow umbrella companies to continue to provide the agility and flexibility for the UK economy which the government’s growth agenda so clearly requires.”