Welsh Government to ban Umbrella Companies for Construction Contracts
It has been reported that following a successful campaign from UCATT, albeit completely inaccurate, Edwina Hart the Minister for Economy, Science and Transport has now announced that the Government in Wales will amend contracts to ensure Umbrella Companies cannot be used for new Construction Contracts.
UCATT claim that construction workers can be £100 a week worse off by using umbrella companies but this is completely untrue. Construction Workers are worse off because the Government changed legislation in respect of false self-employment that meant that numerous workers who were previously paid through CIS (Construction Industry Scheme) had to be paid through PAYE. The outcome was either contractors paid extra tax or the clients using their services paid an additional rate to cover their cost.
The majority of Umbrella Companies liaised with agencies that they work alongside and made sure that if workers were looking at switching over to PAYE umbrella, they were on the correct uplifted rate of pay. Many contractors on lower rates of pay did move back to PAYE through the agency.
An agency pays a higher contract rate to an umbrella company than one that it pays through its in-house PAYE, this is to reflect the umbrella company’s employers national insurance cost and the contractors holiday entitlement. It would appear that for a minority this did not happen or that the contractor was already being paid the higher rate. The situation appears to have been complicated by the forced change. For new assignments this would not be the case. All compliant umbrella companies provide illustrations comparing a contractor’s expected take home pay and it is the contractor’s choice if they decide working through an umbrella company is for them. It is therefore complete nonsense to tar all umbrella companies with the same brush.
The reason contractors can be better off through an umbrella company is that by becoming a permanent employee of the umbrella company they are entitled to be reimbursed some costs in respect of travel and subsistence tax free. This is because contractors have to take varied assignments at far away temporary locations. Many contractors have to travel considerable distances to work at assignments with many having to stay away all week in hotels or bed and breakfasts. It is only right that these costs benefit from relief. They do not have the luxury of always living close to their place of work as they are prepared to travel to meet short term needs. It would be detrimental to the economy if this was not the case.
Umbrella.co.uk are in the process of working alongside other influential umbrella companies with a view to deliver a concise and consolidated industry response against the inaccuracies in UCATT and Labours attack on all umbrella companies. Umbrella Companies provide a valuable resource to contractors working in the UK ensuring only valid expenses gain tax relief and ensuring the Government collect taxes and national insurance from contractors on a timely basis.