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Should Regulations Associated With Umbrella Companies Be Increased?

John Jennings discusses the current situation around the existent regulation of umbrella companies and possible avenues of restructuring and/or increasing government oversight in future.


(Tuesday, June 11th, 2013) United Kingdom - John Jennings tells of how “we have all heard this before – if it seems too good to be true, it almost always is. When we listen to some of the claims made by so-called umbrella companies we undoubtedly need to bear this in mind.”

“If such a company approaches you as an independent contractor and starts to make outrageous claims about what they may be able to achieve then it’s time to set the alarm bells ringing. Very often in these circumstances claims regarding take-home pay appear to be so appealing. Some companies say, for example, that the contractor will be able to retain 90% of the gross funds. Others go out of their way to publicise the fact that they will help you to avoid paying as much tax as possible.”

Host John Jennings says: “We all know that we need to pay our fair share, nothing more nothing less. But it seems that a number of organisations within this industry are seeking to muddy the waters for the best umbrella companies out there, who play by the rules.”

“Different companies seem to have different core principles altogether in this business and it may be time for an overarching chapter to be established, especially when it comes to satisfying the revenue collectors.”

At this point John Jennings goes on to say: “It could be argued that transparency is at the root of the problem. Sometimes a few of the less scrupulous umbrella companies may circle around an issue in order to make it seem more appealing to the independent contractor. They may not necessarily be doing anything wrong by pure legal standards, but such an approach may lead to misunderstandings and negative experience and this is hardly a good idea when trying to build a long-term relationship.”

John then emphasises that we should: “Remember that the umbrella company is also there to protect the independent contractor. The contractor may not be aware at all times whether they are being compliant with certain rules and regulations. Often they are so busy and so engrossed in their day-to-day activities that they may overlook something or complete a form incorrectly. In this case the best umbrella companies will immediately pick up on this and ensure that actions are taken to remedy.”

John Jennings of finally says: “When we can see a level playing field for umbrella companies then we are likely to see less controversy and less negative media coverage. It’s in the best interests of all concerned from the regulators down to the contractor him or herself to bring pressure to bear here. If the industry is seen as policing itself and establishing its own best practices then there is less likelihood of government agencies imposing restrictions which may or may not be ultimately in the best interests of those involved.”

“Meanwhile, the independent contractor should conduct due diligence in advance of signing any agreement with an umbrella organisation.”

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