Umbrella company scam costing workers hundreds per month, says Emma

October 30, 2014

141029 UCATT report launchEmma joined Labour MPs and construction workers to speak out against a new scheme which has seen workers’ wages fall by hundreds of pounds per month.

Tens of thousands of workers in construction and other industries have been moved onto new contracts which see them lose out on pay and benefits.

Under the new arrangements these employees are paid by an ‘umbrella payroll company’ which takes a cut of their wages and helps employers to avoid their tax and national insurance contributions.

A new report by the construction workers’ union UCATT exposes what it calls the ‘Umbrella Company Con-trick’.

Emma spoke at the launch of the report on Wednesday (29 October), explaining that the Government was aware of the problem but was not doing enough to close the loophole.

Emma has previously questioned Treasury ministers on this issue in Parliament, and called for a debate on the subject.  So far Ministers have not offered time for a debate.

Emma’s speech at the launch of UCATT’s Report, ‘The Umbrella Company Con-trick’:

Good morning friends.

This issue first came to my attention a few months ago, when my constituent Ron Boyle, a builder in the construction industry came to my surgery with one of the most complex payslips I have ever seen. Bearing in mind I’ve had over 15 jobs in the past myself, I thought I had seen every combination of payslip possible, and every trick in the book.  It seems I hadn’t.

Ron told me that he was working building a new NHS hospital in Northumberland. He said that since April he had been working on a new contract. He thought he would be continuing on the same rate of pay, but was shocked to find himself nearly eighty pounds worse off at the end of the week. He said some workers were losing as much as a third of their take home pay.

Sadly people like Ron are used to having their employer try all sorts of tricks to avoid paying them a fair wage. But this latest scheme is a new low.

Workers were given false hope when the Government changed the rules on self-employment in April. They were told they would receive proper pay and that their basic employment rights would be protected.

Instead thousands of employees have been moved onto these new umbrella schemes, and many are worse off than before.

How does the scheme work? As Jamie’s report shows, many of the people I and UCATT have spoken to are completely mystified by their pay slip, and that confusion helps employers get away with it.

Many of them signed up to the new umbrella scheme without knowing what they were getting in to.  Most didn’t have a choice – they were told that if they didn’t sign there would be no work for them.

These workers thought they would be on the same pay as under their old contract. Little did they know that the umbrella company takes a cut.

Then deductions for employers’ national insurance and other costs are taken away.

Some workers take a job advertised as paying £12 an hour, but end up getting only the minimum wage.

In short some workers are losing hundreds of pounds per week and when they dare to question why they have not been paid the hourly rate they agreed, in good faith they are treated with contempt and told there is nothing they can do about it they either put up or go and work elsewhere.

It’s not just wages that are hit – workers on umbrella schemes also lose out on pension entitlement and holiday pay. Altogether this is a shameful attack on the pay and conditions of construction workers.

So why is this allowed to happen?

It’s not as though the Government was not warned. Over a year ago, a House of Lords committee heard about the widespread use of umbrella companies across the economy.   When the Treasury changed the rules on self-employment in April, UCATT warned them that employers would find new loopholes.  Just a few months later thousands of workers are again being exploited – just in a new way.

I have raised this issue with Treasury Ministers repeatedly, but there is no sign that they are going to act. The best I have heard is that HMRC is working on ‘improving guidance’ to workers so they understand the contracts they are entering into.  As if a builder or an electrician can afford to turn down work at the moment.

All this will mean is that workers will understand how they are being cheated – it won’t do anything to put a stop to it.

This isn’t good enough.  With millions of workers losing out on hundreds of pounds a month, the Treasury should be acting urgently to fix this loophole and defend construction workers’ right to a fair day’s pay. But once again, the Government is failing to stand up for working people.

UCATTs report that we are here to launch today exposes the umbrella company scam and is a total must read for anyone who has felt the confusion my constituent Ron felt.

The report makes sound and practical recommendations that would cause an end to the misery many workers are facing.

I know what is happening is wrong, you all know it is wrong, but worst of all this nasty government knows it is wrong

The Government’s reluctance to take the side of the two million plus workers employed in the construction industry over the shady umbrella companies is typical and not surprising at all.

Everyone but this Government is up for the fight, up for making the changes needed

I and my Labour colleagues are certainly up for the fight, and friends I know you are too.

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