Why this is not the end for umbrella companies but clarity on compliance.

There has been a rather hysterical press release this week predicting doom and gloom for the umbrella industry. Roger Mason of Back Office umbrella company has decided to bow out of the industry as he feels that we have no future.

Lisa Keeble, managing director of ContractorUmbrella Ltd and co-founder of All Umbrella Companies are Equal is convinced that his decision is premature and that an umbrella company which understands the employment law surrounding this industry will view this case as confirmation of what they already knew. This rather pessimistic approach appears to have come from a ruling from a Birmingham Employment Tribunal which ruled that workers who used Mr Mason’s previous company, Paymaster Ltd, which offered a pay day by pay day model, were found not to be employees of the company.

This is rather an odd assertion considering that the pay day by pay day model had some time ago been accepted as not compliant. Over and above that, it was clear from the Judge’s comments that Paymaster had not acted as a proper employer which means that the judgement should have come as no surprise. · Workers who operated through Paymaster were not provided with an assignment schedule and therefore their instructions regarding duties, place of work and assignment rates always came from the recruitment agencies. · The recruitment agencies that worked with Paymaster had input into the way that holiday pay was processed · The recruitment agencies told workers that they would be working with a ‘payment agency’ (umbrella company) rather than allowing the worker to decide if they wanted to work in this way. In the opinion of the Judge all the above pointers indicated that the umbrella company had no control over the worker which is ‘a prerequisite to a contract of employment’.

Umbrella companies that work under an effective overarching contract ensure that all their employees are provided with assignment details, do not offer a number of business models dependent only on the whims of recruitment agencies and maintain continuity of employment by ensuring mutuality of obligation for the duration of the contract. A recruitment agency which insists on a particular payment solution for workers is exerting control over that worker and, based on this judgement, could be considered to be the employer rather than the umbrella company. It should be stressed that the judgement from this tribunal is open to appeal and the Judge’s decision could be over-turned should that happen. However, it is an indication to both umbrella companies and recruitment agencies that control is an important element in an overarching contract of employment.

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