The Treasury response to its umbrella market evidence-call is imminent, thankfully

Buried deep within the Red Book that accompanied the chancellor's recent Spring Budget 2023, there was a reference that provided the smallest glimmer of hope to those of us working in compliance and standards across the labour market supply chain, writes Kate Shoesmith, deputy CEO of the Recruitment & Employment Confederation (REC).

You had to get to page 85 to find it. There, the government committed to "tackling the promoters of tax avoidance". They intend to do this firstly by consulting with the sector.  Yes, another consultation.

Finally almost here, HM Treasury’s reply

Behind the scenes, we have also been told that we can expect government's response and follow up to last year's call for evidence on the umbrella company market imminently. The more cynical amongst us would say this is well overdue: the Treasury call for evidence closed 13 months ago.

Of course, that's only half the story. Umbrella company regulation, via a Single Enforcement Body that would coalesce the remits of the National Minimum Wage unit in HMRC, the GLAA and the Employment Agency Standards inspectorate, was a commitment from government back in July 2019.

And if you were so minded, you can find calls for umbrella company regulation way before that.  (Here's the REC submission to a Parliamentary select committee in 2016 for instance - and it certainly wasn't the first time I'd written such a recommendation!)

DLME, EAS and HMRC are more active than you may think

So here we are, one quarter through 2023 and still waiting for action. This is not to dismiss the tireless efforts of our colleagues, especially within the Director of Labour Market Enforcement office and the Employment Agency Standards Inspectorate. I'd go as far as to say they've been heroic in continuing to champion the agenda alongside us and other voices.

I'm also very aware that where there is evidence of wrongdoing by umbrellas, HMRC really does want to know. In every conversation we have, they stress that no one should put themselves in danger in doing this -- but you can confidentially and anonymously provide evidence of non-compliance online at any time.

A genuine appetite...

We're also doing what we can to raise umbrella company regulation up the agenda of other political parties and in both chambers in parliament. To give you a snapshot, we've had three conversations with very senior spokespeople over the last few weeks. They are interested in knowing more and are listening.

Meanwhile, most are getting on with the job in hand. The vast majority of companies that arrange, supply and indeed employ contractors, freelancers and temporary agency workers comply not just with the spirit of the law but also within a higher ethical framework, like that set by us for our recruitment agencies.

What REC is doing to not let the few spoil it for the majority

For our part, we are clear on what REC members must do. We stress that the onus for ‘due diligence’ on any umbrellas they engage is on their shoulders, as recruiters. We help them with this by providing checklists, FAQs, model terms and template documents. Just last week, 86 corporate members took and passed the REC compliance assessment. This covers a broader range of issues than payroll, but it is another way of giving members confidence that they are doing the right things, as required by the law and by our confederation’s code. By the end of June 2023, every REC member must have passed our compliance assessment in this biannual cycle.

But it is deeply frustrating that all this good work is undercut by the few. And that's why regulation -- alongside proper enforcement -- matters. Some may argue that all regulation does is allow for other ‘creative’ workarounds to flourish. There is perhaps something in that. But it isn't a good enough argument for doing nothing and so far, new compliance badges haven't been enough. This is a sector that affects the working lives of over 1million temps and contractors, out on assignment via recruiters on any given day.

Strength in numbers

So we will keep pushing government and policymakers for a Single Enforcement Body that comprehensively defines and then regulates umbrella companies. Meanwhile, we're also looking at what else we can do around our own guidance and standards for members. This is a conversation already underway with our board and advisory council, and with other external parties. It's collective action that will win this war.

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Written by Kate Shoesmith

Kate has been with the Recruitment & Employment Confederation (REC), the UK professional body for recruitment, since March 2013. The REC sets standards for UK recruiters and provides research insights and thought leadership on the labour market.

At the REC, Kate is responsible for campaigns & our work with government, plus our marketing, digital, comms and research teams.

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