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Umbrella industry will be regulated, government vows 

Labour Market Enforcement Strategy reaffirms government’s ambition to regulate the umbrella industry

The government has released its Labour Market Enforcement Strategy document for 2022/23, in time for the end of the year that it applies to.

Compiled by Margaret Beel, the Director of Labour Market Enforcement in the Department for Business, Energy and Industrial Strategy (BEIS), the report sets out the key challenges facing the labour market. 

The headline takeaway is that Beel “wholeheartedly” supports the creation of a Single Enforcement Body (SEB), which the government has promised “will be taken forward via primary legislation when parliamentary time allows.”

Crucially, the publication of the document reaffirms the government’s manifesto pledge to regulate the umbrella industry – a promise that was seemingly abandoned by Grant Shapps late last year.


Umbrella industry regulation back on the cards

Seeking to “pave the way towards the SEB”, the report sets out the body’s ambition to “root-out non-compliance” in the umbrella industry: “The Government has committed to regulating umbrella companies”, it states.

On the face of it, this will be welcome news to the 500,000 umbrella company workers who currently operate in an unregulated industry where there is “scope for, and evidence of, significant non-compliance.”

As a result, it calls the SEB “a once-in-a-generation opportunity to bolster existing labour market compliance and enforcement efforts, extend state enforcement to new areas… and realise the benefits of a more joined-up approach.”

Finally, the strategy puts forward the Labour Market Enforcement team in BEIS as “uniquely placed to contribute to the design and the development of the SEB”.


IR35 “accelerated” growth in umbrella company working

The report also acknowledges that IR35 reform likely played a significant role in the increase in umbrella company working.

At the same time, it admits that the “lack of regulation” in the sector increases the risk of worker exploitation. Alongside this is the confession that the Employment Agency Standards Inspectorate “lack the resources and the statutory tools to protect workers.”


“A step in the right direction”

Industry leaders have welcomed the news, with Fred Dures, the founder of specialist payroll auditor PayePass, cautiously calling the move “a step in the right direction.”

“Promising to regulate the umbrella industry will help flush out tax avoidance schemes and in turn, protect the 500,000 people working through umbrella companies in the UK.”

“But let’s not get ahead of ourselves. There are a lot of promises made in this strategy, which we’ve heard before. Plus, a lot of these plans are caveated, based on available budget and parliamentary timescales.”

Similarly, Julia Kermode – founder of IWORK, a body championing independent workers – suggested that the report should be taken with “a pinch of salt”, as “Westminster has been talking about regulating the umbrella sector for years” without making any progress.

“On one hand, I’m glad this document is finally here,” she said. “But its publication and its promises don’t gloss over the fact that it’s nearly the end of the period the strategy covers.”

While the ambition to introduce the SEB exists at a departmental level, however, Kermode said it was “very disappointing” that the government has, in the past, “deprioritised dealing with problems in the labour market.”

1 Comment

  • Andy says:

    “The report also acknowledges that IR35 reform likely played a significant role in the increase in umbrella company working”.

    Likely? … Likely? ….. due to IR35 reform, contractors are FORCED to use umbrella companies to work with many clients.

    BREAKING NEWS: Government perplexed at sudden take up of unregulated umbrella company usage that came out of nowhere. A Government spokesperson has commented “Well, quite frankly, nobody* could have seen this coming”

    *with an ounce of intelligence

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