by Tim Lezard Unions are today holding a lobby of Parliament in England and Scotland to protest at exploitative ‘umbrella’ companies that cost construction workers up to £120 a week. Tens of thousands of construction workers have been forced to work vi …
Unions are today holding a lobby of Parliament in England and Scotland to protest at exploitative ‘umbrella’ companies that cost construction workers up to £120 a week.
Tens of thousands of construction workers have been forced to work via umbrella companies since April 2014 when the government introduced new measures which required workers to be paid via PAYE. By forcing workers to be paid via an umbrella company, neither the agency, contractor nor the payroll company are liable to increased costs.
Instead the additional costs are met by the worker who has to pay both employee and employer National Insurance Contributions (over 25% of eligible pay).
In addition workers are officially paid at the national minimum wage, despite having negotiated a pay rate far in excess of this figure. Pay is then partially re-boosted through the use of expenses, performance-related pay and other methods. Holiday pay is rolled up into the rate, meaning that when workers take annual leave they are unpaid.
Payslips are made so complex that workers have reported that they do not understand how their pay is being calculated.
Additionally many umbrella company contracts are for zero hours, often with an exclusivity clause included. This means that workers have no certainty how many hours they will be required to work each week and an exclusivity clause prevents them from working for anyone else. UCATT members working at the Middlesbrough Sports Village say it is costing them £100 to be paid by a umbrella company.
While UCATT members are protesting at the site from 7.30am, members of GMB, RMT and Unite will join them outside the UK Parliament in Westminster at 10.45am and outside the Scottish Parliament in Holyrood at 11am.
UCATT general secretary Steve Murphy said: “Construction workers are being exploited by construction companies who are prepared to use every trick in the book to boost their profits at the expense of workers.
“The government needs to take urgent action to crack down on this tax misery which is resulting in workers struggling to make ends meet, while employers are feathering their nests.”
GMB national officer Phil Whitehurst said: “An umbrella company is a company that acts as an employer to agency workers like construction and other workers. So instead of their being two parties the contractor and the worker, umbrella arrangements usually involve four parties – the worker, the contractor, the agency and the umbrella company.
“On construction sites there will be a main contractor, and often multiple layers of subcontractors, employment agencies but the worker’s employment contract is with the umbrella company, not the agency.
“Normally the agency will agree a job and pay rate with a contractor and then contact the worker about the job. The umbrella company receives the payment from the contractor for the work done by the worker. It processes the payment, deducting PAYE income tax, employee’s and employer’s National Insurance contributions and the umbrella company’s fee.
“The residual sum is then paid to the worker as net pay. Often workers are officially paid at the national minimum wage, despite having negotiated a pay rate far in excess of this figure. Pay is then partially re-boosted through scams using expenses, performance related pay and other methods.
“Payslips are often so complex that workers tell us that they do not understand how their pay is being calculated.
“Many umbrella companies also withhold an amount of money that should be paid to the worker at a later date in the form of holiday pay but is not paid.
“The benefit to construction companies and agencies of using umbrella companies is that of reducing tax and national insurance liabilities. These liabilities and other costs, including the cost of the employer’s NI contributions and the umbrella company fee for providing payroll services, are passed on to the construction workers. This is an abuse.
“We have construction companies negating their responsibilities of direct employment by using parasitic umbrella companies and forcing workers into accepting the terms offered or they quite simply don’t get the work.
“These spurious tax avoidance contracts leave staff with no employment or financial stability. They are very often put on zero hours contracts with holiday and other payments rolled up into one composite rate of pay. Workers are then forced by the very nature of the contracts to pay both the employees and the employers National Insurance contributions. This can cost them up to £120 per week. These parasitic companies then have the brass neck to charge between £20 – £30 admin fees per week for their troubles.
“The practice of using umbrella companies is spreading to other sectors of the economy. The government must step in to deal with these four party tax avoidance abuses and scams which are costing workers income and the Exchequer much needed revenues.”
RMT general secretary Mick Cash said: “This is a joint rally with our colleagues in UCATT and Unite who both organise in the construction industry and who are up against many of the companies we encounter working on the rail network.
“This is an important opportunity for rail workers to raise their concerns in Parliament and also to show the firms using umbrella companies that the trade union movement is united in opposition to this super exploitation.
“RMT has repeatedly pointed out that casualisation and exploitation on the rail network is diluting the safety culture. Fatigue, zero-hours contracts and the pay-roll rip off are massive issues for RMT members that we intend to raise with MP’s on Wednesday.”
Unite assistant general secretary Gail Cartmail said: “Construction workers are crucial in laying the foundations for our NHS and other public services, which are dependent on all workers paying income tax and National Insurance. The injustice of umbrella companies is that they rip off workers who are forced to pay more than their fair share.
“Unite is campaigning for direct employment and an end to all scams that foster a race to the bottom. There is a public interest in our campaign for fair employment and tax justice that goes to the heart of what we in Britain value, a well-funded NHS”.
* UCATT has published a report into the impact of umbrella companies that you can download here.
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