Should Umbrella Companies be Regulated?

In a week where there is clearly a dire need for umbrellas (of any colour) outside, we thought we’d turn our attention away from the never-ending will they/won’t they saga of IR35 and instead, turn our attention back to the matter of whether or not umbrella companies should be regulated.

There’s been so much back and forth on the matter, but of late, things seem to be a little quiet.

Regulation is a move that many are asking for, including various sectors of the government, recruiters and those freelance workers who use them. Many are in favour of regulation, having had negative experiences with umbrella companies, or feel that there are too many loopholes in current legislation that enables them to get away with less-than-rigorous business practices.

That’s not to say that it’s the wild west out there. All umbrella companies are required to comply with laws pertaining to taxation and employment. And there is an independent body – the FCSA (Freelancer & Contractor Services Association) who accredit member umbrella companies, giving some assurance of good practice.

But the fact remains that there are still a few cowboys out there. But also, like many things, there seems to be a general lack of agreement on whose job it would be to regulate umbrella companies and what a regulatory framework should look like. The FCSA has been given the nod by the government that stricter regulation will go ahead, and over the last 12 months, tighter standards have been enforced, but there is still no news on whether or not the predicted 2020 timeframe for these new umbrella company compliance standards is to be announced, let alone when they will be enforced. This is following the end of a government consultation which ended in October 2019. Since then… it’s all gone a bit quiet.

Here at UCHQ we welcome tighter regulation. There are all too many sad cases of contractors using dodgy umbrellas who have paid the price and found themselves or their pension pots out of pocket, and some who have been ripped off, plain and simple. But like most things (and like IR35 is proving), it’s one thing to say you’re going to do something, and another to come up with a strategy and framework that not only sets out to do what it’s intended to do, but also doesn’t end up shooting the good guys in the foot.

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