Call for Evidence Could Spark a Potential Shake-Up for Umbrella Companies
The Government has announced a call for evidence on the umbrella company market. Umbrella companies need to be aware of what the review could mean for their operations.
What Is an Umbrella Company?
Umbrella companies are managed service companies which are used as intermediaries to employ staff. Staff then either source work directly with a client or through an agency. The umbrella company invoices the client for the individual's services and pays the individual out of the fee they receive.
The Call for Evidence
On 30 November 2021, HM Treasury announced a call for evidence on the role of umbrella companies in the labour market and how they operate. Consultation is now open until 22 February 2021.
There has been concern for some time about the role umbrella companies play in the labour market and whether they can be used to disguise employment relationships and avoid tax. In addition, umbrella companies are not currently subject to the regulations placed on the recruitment sector and agency workers.
Following the introduction of the Key Information Document in April 2020, the Government has confirmed its commitment to regulating umbrella companies and has announced that it intends to implement legislation which will bring umbrella companies within the scope of the framework that regulates employment agencies.