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The Umbrella Company Con-Trick

Construction union UCATT have launched a new report by Jamie Elliott into how thousands of construction workers are seeing cuts in their pay as a result of being forced to operate via umbrella companies.

The report details how workers operating via an umbrella company are disadvantaged in many different ways:

  • They have to pay both employer’s and employees’ national insurance contributions (25% of eligible earnings).
  • They are officially paid just the minimum wage despite jobs being advertised at well in excess of £10 an hour. Wages are then bulked out with expenses, “performance related pay” and other highly confusing terms.
  • Holiday pay is rolled up into the rate, denying workers’ pay when they actually take annual leave.
  • Most contracts are for zero hours, so workers do not know when or for how long they will work.
  • Wage slips are made so vague and confusing that workers struggle to understand how their pay is calculated
  • A fee of up to £30 a week is taken from their pay every week to pay for the umbrella company’s services.

The scourge of umbrella companies has become endemic in the construction industry since April this year. This followed a Government decision to prevent employment agencies and payroll companies classifying construction workers who were under “direction or control” as being self-employed. Rather than pay workers in a standard PAYE manner there has been a mass move to pay workers via umbrella companies.

The report found that a worker being paid via umbrella company Crest Plus Exchange earning £600 a week was paid just £410.14. If the same worker had been under a standard PAYE they would have received £464.76 and if the value of holiday pay is included the pay rate would increase to £531.68.

The report also found that the Government is substantially losing out on tax and NI revenues through the use of umbrella companies. For a worker earning £500 a week via an umbrella company the annual loss to the Treasury is £3,800 per worker.

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