Chancellor, regulate umbrella companies to usher in a fairer future

On this eve of Autumn Budget 2021, it’s high time the contractor umbrella industry worked together and fought for fairness, regardless of whether the ideal of regulation emerges tomorrow, writes chartered accountant James Poyser, CEO of inniAccounts and offpayroll.org.uk.

From a position of fairness, and aspiration

Life isn’t fair. How many times did we hear that as children? I know I certainly did. Yet the last 18 months of campaigning for contractors’ rights have taught me, and many others, that life can be fair if we are prepared to fight for it.

I have been greatly encouraged by the industry reception to the policy-plan which tax lawyer Rebecca Seely Harris and I presented to the department for Business, Energy and Industrial Strategy in May. The umbrella industry wants it, or at least the brollies who can hand on heart say they run ethical businesses do!

These bonafide brollies want to work together and go beyond the legal minimum on employment and tax law. As a community they agree with the notion that things can be even better when it comes to umbrella company usage if we all adjusted our expectations of one another when it comes to ethical conduct and fairness. They support a labour supply model that shares the same values at every point in the chain.

The need for next-gen umbrellas

Of course, it’s easier said than done to create the next generation of umbrellas. The market is complex and has grown up using a web of commercial arrangements, exerting undue pressure on umbrella companies. Changing this approach to business overnight would push viable companies into insolvency.

Much of this situation has arisen from policy that isn’t fit for the way we want to work, and the way companies hire today. I empathise deeply with the challenges umbrellas face. They have to fix the problem of managing a contingent workforce within laws that simply aren’t designed for their business model.

But it’s creating untamed frustration among so many parties – the-end clients who need flexibility; workers who want fair pay and employment rights, umbrellas who feel they can’t win. It has created a race to the bottom and a Frankenstein monster in the process.

Introducing you -- the fall guy

The pressures of managing costs in a supply chain and the lack of opposing tension means the worker, the contractor, is the fall guy. We’ve heard and seen the horror stories of subtle skims and scams through to downright theft, showing just how far some pockets of the industry have to go. In some cases, they do it simply to stay afloat. In more extreme cases it is simple profiteering. Whatever the reason, it’s all at the worker’s expense.

We therefore need to re-establish some tension. How can umbrella companies have the confidence to push back on those demanding unsustainable kickbacks? How do we support those brollies who say no to the existing model? How can we back those that strive to change and who will always make the right business decision, no matter the consequence?

Strength (and safety) in numbers

We need to come together as a community and foster the demand from workers to be – and do -- better. We need to create a situation where being an ethical operator and being successful are not mutually exclusive.

What’s more, in a renewed era of ESG, we must ensure every boardroom understands what’s at stake. That’s a must, because prioritising the use of ethical supply chains has to be at the heart of industry transformation.  It’s an enormous task and I acknowledge it will take a leap of faith for many. Yet -- is there not safety in numbers?

Speaking with many industry experts there is a consensus that collaboration is the answer. That’s why we have worked with them to develop FairScore. It’s a culmination of recommendations and a reflection of the work of existing professional bodies. It’s an assessment and scoring system based on fairness and ethical conduct, giving umbrella companies a score between 0 and 100. You can see it in action over at: https://www.offpayroll.org.uk/umbrella

FairScore, with your help it can be a helpful stop-gap

Fundamentally, it brings further transparency to the supply chain, it’s free and we’re inviting umbrella companies to come forward, get their score and support the initiative. Board directors will be able to make the right labour supply chain decisions using it. 

Of course, what we’d really like is new legislation to govern umbrella companies. This week’s Spending Review and Autumn Budget will determine that. But even if funding is granted for a Single Enforcement Body (the organisation floated as a suitable regulator of brollies), it will take time to come to fruition. That is why FairScore is a helpful stopgap. It provides a single place to understand what’s what and who’s who, so contractors can see which umbrellas are rated highly and which aren’t. It’s a start in bringing tension to the market, to help stop workers being the fall guy.

Moving the dial

I can’t claim it’s a perfect solution to protect worker rights and stop tax evasion. But we can use it to at least move the dial. With more input and guidance from professional bodies, whom I have contacted, we can arrive at a better solution and truly work towards the goal of achieving ‘even better.’

We’re ready to get the conversation started on resetting expectations and behaviours. We’re ready to help make positive change. So now I ask, who believes in ‘even better’ and who is ready to join us? I’ll be asking that question regardless of whether chancellor Rish Sunak does the right thing tomorrow and that right thing is to regulate umbrella companies once and for all.