The umbrella sector does not exist to exploit workers, says FCSA

(3 minutes to read)

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The Freelancer & Contractor Services Association (FCSA) have defended the umbrella sector after recent remarks made by Scottish Labour party leader Richard Leonard MSP.

After his comments in The Scotsman, where he discussed the need to halt exploitative working practices in the construction sector, Julia Kermode, FCSA Chief Executive responded.

She said, “The umbrella sector does not exist to exploit workers but to provide a valued service enabling workers to be employed, with all the 84 statutory rights and benefits that come with employment, whilst also having the flexibility of working on a number of short-term for various end-hirers. As well as providing stability, the continuity of employment enables workers to access financial products such as mortgages and loans which could otherwise be precluded from someone not in permanent work.  Furthermore, if they work simultaneously for multiple hirers, the umbrella employee receives one consolidated pay packet with the appropriate tax and NICs paid to HMRC.”

She explained, “To clear up the confusion of pay that Richard Leonard refers to, the umbrella margin and employers NICs contributions are overheads, costs that should be factored into the overall assignment rate, i.e. in addition to the rate of pay that worker is told they will receive.  Our position on this is very clear; people should not be charged for receiving their wages, nor should they be paying employers NICs.  Confusion can sometimes occur when umbrella companies provide their employees with a reconciliation statement showing the margin and employment costs deducted from the assignment rate, so it can seem as though they are being charged inappropriately, particularly if the pay rate was not communicated properly at the outset.  We have long campaigned for recruitment agencies and umbrellas to work together on ensuring that the correct rate is given to workers, and we fully support the government’s intentions around improving transparency of pay for such workers, which Matthew Taylor referred to in his Review.

“We fully support Richard Leonard’s call for all government contractors to sign the business pledge which aims to guarantee workers are paid the living wage, that there is no use of zero-hour contracts and commit to supporting young people towards and into employment.  No respectable umbrella company would have an issue with that.  As the professional body for the umbrella sector, we are keen to work with all political parties and unions to ensure good practice is the norm and stamp out bad practice where it exists.  I would appreciate the opportunity to meet with MPs in Scotland to discuss the use of umbrella firms north of the border.

“FCSA plays an essential role in raising standards, but we would like to see greater enforcement from government to target non-compliance.  Anecdotal evidence suggests that some unscrupulous firms are undercutting compliant businesses because they do not believe that enforcement will reach them.  Such practice should be stamped out.”

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