A torrid 18 months for contractors just got worse, but not even Giant staff should suffer in silence

It has been a torrid 18 months for contractors up and down the UK, dealing with the problems associated with the pandemic and the jobs uncertainty caused by IR35 reform, writes Keith Rosser, chair of JobsAware and group director at REED.

The contractor's sector problems: in review

False starts have hit spirits too because just as the freelance labour market bounced back from lockdowns in late Spring, and pay climbed upwards, international contracting grinded to a near-halt, the pingdemic kept many of us at home, and state support for PSC-using contractors never made it past the furlough scheme.

But late last month umbrella contractors were drawn into the malaise as well, with a cyber-attack on Giant, and the still ongoing technology challenges at the umbrella company resulting in no pay for thousands of its employees. For some of the company’s contractors, the Giant hack has meant no new money for over a month.

Attack of the clones

Equally as worrying is the revelation that a sustained attack has been launched by fraudsters on the umbrella company industry.

In fact, so-called ‘Umbrella Company Cloning’ (the setting up of bogus but similarly-spelt organisations on Companies House), with the aim of diverting payments from recruitment companies, appears to be part of a growing, unresolved, but not unprecedented problem.

Indeed, cloning in the recruitment sector is not new. For many years, fraudsters have cloned genuine hirers to offer fake jobs to recruitment agencies, in attempts to trick the agencies into placing contractors into those roles -- all the time paying the contractors weekly as recruitment agencies do, only for them to find out later that no payment has come from the (fake) hirer! The result was genuine agencies being left thousands of pounds out of pocket, often by as much as £50,000. The new brolly cloning spree on Companies House feels like a spreading of that same toxic activity.

What contractors can do about it

The challenge for contractors arises (at least in financial terms) because, unlike agency workers, they are not universally covered by the UK’s recruitment sector legislation, which ensures agency staff get paid, no matter what. 

Some contractors may indirectly be covered by the legislation, but coverage will usually depend on their specific contract, meaning a case-by-case examination is required. Contractors on a dual contract -- those which generally specify who is responsible for making the payment -- may find that they are covered by the Conduct of Employment Agencies and Employment Businesses Regulations 2003 (albeit where they have not opted-out of the regulations).

Generally speaking, if the recruitment agency is contractually responsible for paying the worker, even though the agency may have paid the umbrella, the agency has a responsibility to ensure the worker is paid. If in doubt, here are some sensible steps for contractors to take:

• Check if the recruitment agency has paid your umbrella, if it has and you have not been paid, contact the recruitment regulator (the EAS) to report your case. And if the agency has not paid your umbrella, contact the regulator and report the recruitment agency.
• Report a similar or related issue for free at www.jobsaware.co.uk. Whether you’re affected by non-payment or any other kind of problem, JobsAware may be able to help. (N.B. They provide quarterly data on labour market abuses to the government, so reporting can help inform future policy-making).
• If in need of general help and guidance, contractors can get advice from ACAS.
• Consider the tribunals and small claims courts. But be aware – mounting a legal case can be time-consuming and often, issues can get resolved by the time of the hearing.

A (further) case for regulation

What is indisputable to me is that Giant’s well-publicised IT and payment problems represent defeat in the final arguments against regulation of the umbrella company sector.

Following a torrid year and much-angst for the contractor sector, and therefore quite an understandable movement towards the regulation of umbrellas, the Giant hack is likely to spell the end of the regulation-resistance groups. Could a state-appointed regulator of umbrella companies have been able to ensure faster payments to contractors? This is perhaps questionable, but what a brolly regulator could have done is reassure contractors in one foul effective swoop. And it could issue demands on an umbrella company which doesn’t or isn’t paying while carrying out and communicating to the affected (and to other umbrellas) about follow-up enforcement work.   

Unfortunately fraud doesn't end there

If it all wasn't hard enough right now for contractors, the freelance work sector has also reported a steep rise in impersonation fraud.

A bit like I referred to earlier, impersonation fraud is where genuine job adverts and companies have been copied by fraudsters, but here they get advertised online to trick work-seekers into parting with money and/or personal information, in their keenness to land the contract.

Such is the scale of the problem that Mel Stride MP, chair of the Treasury Select Committee, on Friday wrote to large technology companies including Google, Amazon and eBay, to ask how they are intending to tackle the recruitment fraud epidemic. 

What contractors’ recruiters ought to be doing

Whether it is impersonation fraud, cloning, or umbrella company ‘issues,’ recruitment agencies must be absolutely sure who they are working with.

When taking new jobs or working with umbrella companies, contractors’ recruiters and individual agents must do their ‘due diligence.’ This includes looking out for micro-accounts; checking for changes to website domain names, and conducting credit checks. If a recruiter pays the wrong umbrella company, they could well find they are in breach of the Conduct Regulations. 

Be jobs-aware

JobsAware, the brand of SAFERjobs - a charity with cross-government and law enforcement support, is working hard to help non-permanent workers and work-seekers.

Funded by the government, the initiative provides a free A-Z of help and a free reporting tool to flag up any issues of labour market exploitation, including non-payment. And we meet regularly with the government on a range of labour market topics including umbrella companies, supply chains, and online recruitment, so you’ll be in safe hands if you come forward with concerns about the brolly, agency or even end-hirer you’re working with.