Campaigns propose new rules to protect contractors from rogue umbrella companies Campaigners and MPs are urging UK government to introduce legislation to stop umbrella companies siphoning off contractor pay through a range of sharp practices. With the introduction of new IR35 rules, the UK has seen an upsurge in umbrella companies as employers and temp agencies seek to avoid directly employing contractors …
This is an unintended consequence of ridiculous legislation and the cowardice of most Companies shying away from their legal responsibility of providing an accurate IR35 determination. Instead they use HMRCs non-legally compliant tool which places everyone (surprisingly) inside.
Eg, I had an appeal discussion with, er, ABC Systems regarding an inside determination, pointing out the actual legal position. Their response? Tough - we say you're in as its no comeback on us. The result? I move on, they still haven't filled the post 6 months on. Everyone loses but spineless upper management are happy as they perceive they have no risk.
They just ignore them to scoop as much tax as possible from those deemed unlikely to bite back, or buy them nice meals to discuss.
For bloody example - mutuality of obligation. No MOO, no inside IR35. Does the HMRC tool ask about MOO? No. HMRCs response? We've built in MOO consideration to the tool, but we're not telling how we've done that.
When the Lords Select Committee requested HMRC attend to discuss IR35, HMRC refused. They know EXACTLY what they're upto and are operating in a way that would Putin proud.
When I had to go ir35 for my current contract, I was told they would take a portion of the money I earned to account for holiday pay.
I told them to not do it and then if I took a holiday I would just not earn as much that week. As I have 6 months remaining and am planning on taking 3 week holiday (at least) I would end up owing them money.
I am quite capable of budgeting to account for this, and anyone who has been contracting for a while knows that they need to do the same.
Just my thoughts…
I have recently started with a big umbrella company and by default the holiday pay option on my profile was set to 'rolled up', with it being paid as it accrues as a separate item on your payslip. That means you won't get paid when you do take time off as it has already been paid out. You can opt for it being held and paid out when you take holiday if you so wish.
A better experience than the previous lotshower - never mind the holiday pay, they still owe me straight salary. I just went with what the agency recommended (big mistake) - took the path of least resistance as client was wanting me to convert over to IR35 with immediate effect - agency went under, and UC is saying it is not their problem that the funds didn't arrive.
Indeed, and, if that is the case, I would get debt collectors on them. I used one in the past (though that was for a direct client as outside of IR35) and it cost £2 for them to send a letter that got my money to me in a day (after three months of me fighting for it).
Interesting point is what exactly does an UC have to legally pay out each month to be classed as being solvent.
I ask as an Ltd. can delay paying NI, PAYE, VAT, Pension contributions etc. and so can go bust having not paid any of these for the best part of a year. Naturally, in these circumstances you tend to find that some third-party had their invoice/loan paid in full just before the shutters went down.
The UC would be a creditor of the now defunct agency as far as the insolvency practitioner is concerned. The would probably get pennies on the pound once the wind up of the agency has been completed (a process that takes many months).
The problem is that we want the UCs to run on thin margins, exactly as this article is calling out.
It seems to me that if you want to have the UC to take out insurance for non-payment of a debt like the payment of invoices from an agent to cover your pay, you will have to be prepared for them to charge higher fees, as they don't get any income other than the fees they charge. There ain't no such thing as a free lunch.
I have some experience of this. I had some doubts about the financial state of one of the agents involved in my current assignment a while back, as they manipulated the payment terms to delay payment by a couple of weeks, which the UC agreed to (without asking me), and then for a couple of months missed their own payment deadline by as much as two weeks. One month, this resulted in me paying my mortgage late.
I considered this, and read up about it, and decided that if the money had left the primary agent, and had not left the secondary agent (try to avoid multiple agents, it always causes problems), then there was not a lot I could do about it, and precious little the UC could, either.
The umbrella was committed only to paying the money when they received it, which may strictly be against employment law, but was not against the Ts&Cs of my engagement (I know, statuary law trumps contract law, but you would have to argue the case). When I looked into it further, I found that I was actually being paid just above minimum wage, with the remainder being classed as commission, a rather dodgy (IMHO) practice which actually affects holiday pay, and the amount I would be legally entitled to if there ever was a dispute. And this is one of the big umbrellas.
Yes, this is my predicament - I fear the insolvency practitioner (flashy HQ building) will drain whatever is in the agency's account and I'll be lucky to get pennies in the pound. The last reply I had from the insolvency practitioner was an update will be sent in the Annual Statement - yep, Annual.
Yes, this is indeed the case.
I was involved in a company being wound up that had nearly, but not quite, enough money to satisfy all the creditors (although one of the larger debts was an assessed corporate tax bill which could have been challenged). The directors (whom I knew a little) just got tired of juggling, and opted to accept the promises of an insolvency practitioner who said that they would take it on, and get it sorted as a voluntary insolvency.
When the final report came out, not only had the IP not challenged the tax bill, but they had taken about 80% of the money in the bank as a 'preferred creditor', and after other deductions, ended up paying 10 pence in the pound to the small number of people who were real creditors (mainly HMRC). I ended up getting a couple of hundred pounds on the thousands I was owed.
This is textbook capitalism. Never mind that the law is imperfect, this is the demonstration that capitalism does not, in fact, regulate itself. It operates at the very limit of what is legal, forget about moral.
Capitalism requires regulation. In this case, a company that purposefully waits until the employee can no longer easily go before a judge should be automatically fined the amount of money withheld, forced to pay said employee and pay the bill for treating the whole affair.
It is incredible that there are people who actually dream up these kinds of schemes, but the only reason they succeed is because the law is not clear enough about penalites.
Clear that up and the hustlers will have to comply. You need to nail them to the wall first, though.
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