One of the UK’s largest umbrella companies has responded to an episode of Dispatches, which featured an investigation into rogue elements of the industry.
Dispatches went undercover to a meeting with an umbrella group, MAC Professional Solutions. Posing as the owner of a recruitment agency, a reporter was told how he could lawfully save money in PAYE and NI by employing workers through an umbrella firm. General Manager, Patrick Shaw, explained the avoidance scheme saying, “There’s tax evasion – illegal; tax avoidance which is perfectly legal. It’s, you know, helping the contractors avoid paying tax legally and we do that by use of contractor’s expenses.
“You’re saving money and you’re saving a good chunk of money – if I’m lucky enough to have a lot of contracts with your agency I’m making a lot of money. Shaw also explained how workers on one of his avoidance schemes could be employed below the national minimum wage and would not be entitled to key rights; “They’re not classified as an employee or worker, so technically the National Minimum Wage is £6.50 doesn’t exist…to be perfectly frank, they’ve got no holiday pay rights, they’ve got no employee rights…they’ve got no worker rights.”
Responding to the broadcast, Parasol founder and chief executive Rob Crossland said: “Any umbrella company that flouts minimum wage legislation cannot call itself compliant. Failure to pay workers the minimum wage is illegal and unethical. Such behaviour deserves to be exposed and punished. However, I am concerned that this investigation could tarnish the reputation of our industry in the eyes of the business community and general public.”
“Legitimate umbrellas, such as Parasol, always adhere to employment law – including minimum wage legislation – and do not use complex mechanisms involving expenses or salary sacrifice schemes in order to do so. They also offer workers guaranteed hours of work, holiday pay, sick pay, paternity/maternity pay and access to a workplace pension. As HMRC itself recognised in its recent discussion paper on travel expenses, employment via an umbrella company is an attractive option for many skilled, professional, high-earning contractors. It’s frustrating that last night’s broadcast did not make this clear.”
Derek Kelly, Parasol’s Managing Director, added: “The Government has sufficient powers to immediately put out of business those umbrella businesses that break the law. What is needed is significant enforcement action to once and for all clean up the industry by eliminating rogue traders. This should include going after the personal assets of the owners of these businesses, and those so-called professional advisers who profit by constructing artificial schemes to target the most vulnerable workers in society.”
