The government should ban the use of umbrella companies to employ workers, the TUC has said, amid fears that their use could increase as organisations scramble to plug vacancies with agency staff.
The trade union body estimated that half of agency workers in the UK are employed through umbrella companies – firms that sit between workers and the recruitment agencies that supply staff to organisations.
It has called for a legal obligation for employment agencies to directly employ staff they place with other companies, as well as making all organisations in supply chains responsible for upholding workers’ rights.
TUC general secretary Frances O’Grady said the government should seek to ban umbrella companies without delay.
“These scandalous workplace practices have no place in modern Britain. But our inadequate regulations let dodgy umbrella companies off the hook – allowing them to act with impunity,” she said.
The use of umbrella companies has come under intense government and public scrutiny in recent years. However, earlier this year, MPs voted against amendments to the Finance Bill that supporters hoped would “curb or kill” umbrella companies.
The decision was described as a “missed opportunity to tame the ‘Wild West’ of the unregulated umbrella market” by ContractorCalculator CEO Dave Chaplin, who is among those campaigning for a change in law.
The TUC claimed that some umbrella companies withhold holiday pay from workers, while others have created fraudulent “mini umbrella” firms that act as a fake supplier in order to benefit from tax breaks.
A BBC investigation earlier this year found that about 48,000 mini umbrella companies had been created in the past five years to reduce recruitment agencies’ tax and national insurance liabilities. It discovered that such companies would be set up with a director in the UK, who was then replaced by a director in the Philippines who would “front” the company after a short time.