10 things umbrella company regulation must contain, at today's Budget 2023 or beyond

On this potentially seminal day for the contractor industry, I think it is fair to say that we can expect some sort of announcement in today’s Spring Budget 2023 or, if not, in the coming weeks, on umbrella companies and their long-overdue regulation, writes Rebecca Seeley Harris of ReLegal Consulting. 

After all, Kevin Hollinrake MP, the parliamentary under-secretary for small business indicated only last month that we will be hearing the government address the issue of umbrella company regulation “shortly.”

Hollinrake also indicated that we will hear the outcome of the Treasury call for evidence on the umbrella market as a whole, and what the government's response is.

Formerly a businessman, the Conservative MP interestingly said that the government is keen to have more control over what organisations like umbrella companies are doing.

Having considered updating the policy recommendations I delivered to the department of Business, Energy and Industrial Strategy (BEIS) in 2021, under the Fair Umbrella campaign, I have decided to pause my update until after the announcements to which Mr Hollinrake is referring to.

Perhaps -- hopefully -- we will hear those announcements in just a few hours. Regardless, I have a checklist of items I would like to see included in any government effort to regulate umbrella companies, if that effort is to succeed. Here are the ten main items:

1. One for all

We need a department or body that is dedicated to the regulation of umbrella companies and the protection of the umbrella company worker. This may be a revived Single Enforcement Body or the Employment Agency Standards inspectorate, or even the Gangmasters and Labour Abuse Authority. But it needs to be one, and it needs to be dedicated.

2. Not just guidance

Preferably the umbrella company sector needs new legislation. Or, if not, the government should use existing legislation, such as the Conduct Regulations, to put umbrella regulation (and protections for umbrella company workers) on the statute books.

3. Clarify key case law

A Treasury response to its umbrella call for evidence (which closed a year ago), or the new and sought-after dedicated regulatory body for umbrellas, must address the issue of the percentage of holiday pay paid to workers under Harpur Trust v. Brazel. 

4. Revise the working time regs

The government should amend Regulation 13 of the Working Time Regulations (as proposed in Smith v. Pimlico Plumbers) to enshrine the rights in statute. And those rights are that the employer must transparently and specifically tell the worker they are entitled to paid holiday, otherwise the entitlement carries over until termination.

5. Remove the cloud over rolled-up

A framework for umbrella companies should reconsider the legitimate use of rolled-up holiday pay for umbrella companies and other industries.

6. Spell out skimming with definitions

The government should establish what constitutes “salary skimming" with some technical, much-needed definitions.

7. Out with the fitted kitchens

Officials should regulate the relationship between umbrella companies and recruitment companies, to ban backhanders and kickbacks (which include fitted kitchens for directors).

8. Victim support

The Single Enforcement Body or whatever is established in its place should help the worker recover unpaid holiday pay, rather than the worker having to go to tribunal.

9. Action

The sincere hope from me and many in the contractor sector is that the government follows through on long-promised umbrella company regulation, as delaying further is unconscionable.

10. Balance

The right umbrella regulation framework of course governs the activities of umbrella companies but more importantly, enshrines protection for the workers who use them.