In his recent Autumn Statement, Chancellor George Osborne vowed to investigate umbrella companies that class their employees as self-employed, when they are not. If you’re a contractor employed by an umbrella company, Osborne’s crackdown on ‘disguised employment’ might affect you.
To the HMRC, misrepresentation of umbrella employees is an abusive practice that needs to be addressed. In some cases, less-scrupulous umbrella companies have treated their clients as self-employed sole traders, refusing to deduct PAYE and National Insurance Contributions (NICs) altogether.
This is especially true when it comes to companies that categorise low-paid temps as self-employed workers in an attempt to pocket their NIC savings.
Sam Hurley of the Association of Professional Staffing Companies (APSCo) is, however, more critical of Osborne’s proposal.
“The proposal is to remove the obligation for ‘personal service’, which is currently required for a contract to be considered an agency contract.” However, Hurley continued, “Our members have been concerned for some time about the lack of clarity regarding whether personal services companies will be caught in this proposed legislation. Clearly, there is a time issue and members are going to need time to put in place the necessary processes to protect their businesses.”
The problem, Hurley believes, is that the HMRC is mistakenly assuming that people are being treated as self-employed when in fact they are gainfully employed, albeit by an umbrella company.
Given the government’s desire to introduce the legislative changes by April 2014, it’s no wonder that some umbrella companies are concerned that the consultation period is too brief.
Meanwhile, Pieter Carstens, Manager at 1st Contact Umbrella, believes that the removal of NICs for under 21s can only assist SMEs, which make up 60% of private sector jobs in the UK, to bulk up their workforces.