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Employment: A new assault on workers’ rights

STEVE MURPHY spotlights the emergence of a new scourge in construction – umbrella companies

Despite decades of experience in the industry, I am still amazed at the lengths that construction companies will go to exploit workers and deny them their rights.

Umbrella companies are the latest scam to afflict construction workers.

This problem emerged in our industry this April. The sudden explosion in umbrella companies was a result of the government — incredibly — doing something vaguely progressive in its Finance Bill by ruling that agencies and payroll companies could no longer pretend that construction workers were self-employed.

The government’s primary motivation was to increase revenues. By registering workers as self-employed, employers were avoiding paying their national insurance contributions of 13.8 per cent.

It was hoped that this reform would result in thousands of construction workers becoming directly employed, paid normally through PAYE and able to enjoy basic employment rights.

That was not the case. Overnight, workers who had been working self-employed through payroll companies were moved onto umbrella companies. 

Workers are given no choice. You either work via an umbrella company or you don’t work. 

Making workers operate through an umbrella company means that they are significantly worse-off financially. 

Workers are still being paid the same gross wage as previously, but then they experience a series of very complicated and opaque deductions. 

The payslips that workers receive are made so complex — probably deliberately — that it is incredibly difficult to understand how pay is calculated.

With an umbrella company, it is the worker who has to pay both the employer’s and employee’s national insurance contributions. 

Then, to add insult to injury, the worker is officially only paid the minimum wage, despite the normal rate for skilled construction workers being in excess of £10 an hour.

The final wage is then boosted by a bizarre mixture of expenses, performance-related pay and bonuses.

In another financial insult for the worker, holiday pay is only paid at the minimum wage. 

Often holiday pay is rolled up into the rate, which means that workers receive their holiday pay in their weekly pay packet and then when they take annual leave they are unpaid. 

This results in workers not taking the holidays to which they are legally entitled.

In a further painful financial twist, workers are charged by the umbrella company for the privilege of being paid in this manner. 

These charges, which are taken straight out of a worker’s pay, are likely to be in excess of £25 a week.

In an additional attack on workers’ terms and conditions, many of the umbrella companies use zero-hours contracts and some of them include exclusivity clauses. This is a further step towards casualisation.

There are two fundamental issues about the umbrella company scam. 

First, it is outrageous and morally wrong that a worker can be required to pay both the employer’s and employee’s national insurance contributions. 

That means that over a quarter of a worker’s eligible pay is going towards NI contributions. 

Yet again, construction employers have found a way to avoid paying employers’ national insurance contributions.

Second, this is a huge attack on workers’ pay and conditions. Highly skilled workers are officially only being paid the minimum wage. 

It demonstrates the contempt that employers have for construction workers to even consider that it is appropriate to reduce workers’ pay in this way. 

Workers are left feeling devalued and demotivated and inevitably productivity and the quality of work will suffer.

The problem of umbrella companies goes much further than the construction industry. For example, the teaching unions are very concerned about how supply teachers are increasingly being paid through umbrella companies.

Despite the incredibly dubious nature of the umbrella company model, it appears there is nothing illegal in what my members are experiencing. 

The umbrella company model is accepted by HMRC for “temporary workers.”

It is imperative that pressure is applied on the government and all political parties to ensure that this latest form of exploitation is quickly ended.

We then need a long-term solution to ensure that workers in industries such as construction are properly directly employed on a standard PAYE basis. 

It is the age-old battle that workers deserve a fair day’s pay for a fair day’s work. In the 21st century surely that is not too much to ask.

 

Steve Murphy is general secretary of construction union Ucatt

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