Blogs

2022 was undoubtedly a traumatic year for umbrella companies, with scandals, on/off reform proposals and technological difficulties at the highest levels. Here we take a look at what the coming year might bring for umbrella providers and the people who use them.

 

To regulate or not to regulate?

After the previous Chancellor of the Exchequer announced IR35 reforms last year and the next Chancellor reversed that decision only weeks later, the industry is in stalemate. Many accept that reform is needed but who will implement it and what form should it take?

There is no requirement for regulation at the moment – compliant umbrella companies advertise themselves as such by highlighting their membership of The Freelancer and Contractor Services Association (FCSA) which acts on behalf of freelancers, recruiters and end hirers. However, membership is voluntary (albeit bringing reassurance and protection to members and those who interact with them) and the FCSA has no regulatory powers. Nevertheless, the FSCA has long called for an independent body to regulate the industry in order to offer minimum guarantees of compliance as well as sanctions when members breach the law. 

Last year, Grant Shapps, the Secretary of State for Business, Energy and Industrial Strategy told his fellow MPs that regulation wasn’t being considered, and that its former plans for a single enforcement body (SEB) were being dismissed, with the government preferring to concentrate on making the current regulations operate more effectively. 

This is disappointing news for umbrella companies who operate to the highest standards of compliance and strive to offer a cost-effective and streamlined service for the contractors, recruiters and end-clients that they represent, and leaves the door ajar for rogue firms to continue to flout the regulations, rip their clients off and bring the industry’s reputation into disrepute.

 

If not regulated, then what?

It may be left up to umbrella companies themselves to demonstrate that they are compliant and that they do not indulge in practices which leave their contractors out of pocket and at risk of action from HMRC. 

Some have partnered with payslip-checking software companies to ensure that they can prove their compliance credentials. Others, like Payme, work closely with some of the UK’s leading tax and employment law advisory bodies to ensure that the products they offer and the processes they utilise comply with the most stringent supervision, as well as cooperating with HMRC audits. 

A voluntary ‘code’, backed by organisations such as the FCSA, may well be the way forward for umbrella companies. In this way, umbrella companies can continue to offer contractors a choice of products, depending on their assignment, safe in the knowledge that contractors are safeguarded against rogue operators and are the recipients of best practice, such as we at Payme offer. 

However, it may be that contractor power has the final say in such matters. Online contractors’ forums are full of chatter about which companies abide by high compliance standards and which should be avoided, and word of mouth may eventually eliminate the issue more effectively than legislation would be able to, especially when well-publicised concerns arise.

Contractors should be able to choose from an umbrella which is transparent, and offers advice should they need it. Payme’s FAQ page

has a comprehensive list of relevant questions which enables contractors to navigate their way through which product is suitable for them, as well as a contact service (0333 200 0845) which is staffed by our knowledgeable and experienced team who can assist with most queries. If you’d prefer to email you can do so atinfo@payme.co.uk or you can fill in the contact form at the bottom of our website pages.