The UK government has dismissed calls from construction trades unions to clamp down on umbrella payroll companies that take excessive and opaque cuts from workers’ pay packets. The Welsh government has already moved to ban the use of umbrella firms on its construction projects, but the UK government has no plans to follow its lead.
“Umbrella companies have been a part of the UK labour market for many years and, when operated responsibly, provide a useful conduit through which payments, including tax, can be made,” said financial secretary to the Treasury David Gauke. “As such, Her Majesty’s Revenue & Customs (HMRC) are not taking steps to stop agencies using umbrella companies to manage the payroll function of companies within the construction industry.” Mr Gauke was responding to a written question posed by Guto Bebb, Conservative MP for Aberconwy, who asked: “what steps his department is taking to stop agencies using umbrella companies to manage the payroll function of companies within the construction industry.”
Trades unions have been campaigning strongly against umbrella companies, which have proliferated since April 2014 when HMRC banned employment agencies claiming that construction workers were self-employed. Rather than pay workers in a standard directly-employed PAYE manner there has been a mass move to pay workers via umbrella companies. There have been many allegations of ordinary hard-working constrcution workers ending up signficantly out of pocket as a result.