The Union of Construction, Allied Trades and Technicians (UCATT) and Unite the Union (Unite, formerly known as Amicus and the Transport and General Workers' Union) are completely wrong to target contractor umbrella companies with their media and lobbying campaigns about falling pay.
In a blatant tax grab, it was the Government and HMRC that created and implemented the heavily criticised Onshore Employment Intermediaries: false self-employment legislation. It is these new rules that are driving many construction workers, including contractors, out of self-employment and into umbrella companies where their net, take-home pay may reduce.
It is beyond absurd for the unions to blame the professional employment solutions industry for properly implementing the rules about income tax and National Insurance Contributions (NICs). An industry that is made up of the reputable umbrella companies which are actually part of the solution.
Surely the unions would prefer these workers to move from being self-employed sole traders into the security of employment by an umbrella company that delivers proper employment rights and benefits?
Pay is only reducing because of the additional income tax, employee NICs and employer NICs that these workers are now having to pay. Who do the unions think should be picking up the tab? Should recruitment agencies and construction sector clients subsidise the tax bills of their workers?
Not surprisingly, the contracting service industry has reacted strongly, highlighting that umbrella companies are part of the solution and not the problem.
According to umbrella trade body the Freelancer and Contractor Services Association, project budgets are not rising in line with the additional tax burden of workers becoming employed. This is why some workers are receiving less take-home pay.
“What is lacking from the union campaign is a sense of balance,” believes umbrella company Parasol founder and chief executive Rob Crossland. “There has been no attempt to distinguish between unethical payroll companies that use dubious methods, and professional employment providers offering contractors and freelancers genuine support.”
“Some contractors are receiving smaller pay packets as a result of these rules and are directing their anger towards umbrella companies,” adds NoPalaver Director Graham Jenner.
What will eventually happen is that the market will correct itself, and pay will adjust with some workers winning and others losing, depending on their skill set and resulting marketability. It is even possible that some workers will decide to leave the sector altogether, which will worsen skills shortages, increase demand and then drive up pay.
But whatever the result, it is not the umbrella companies that the unions should be holding to account for falling take-home pay. It wasn’t the umbrella companies that introduced the tax legislation that has caused this issue. You can’t expect to introduce draconian new tax legislation without behaviours changing and a financial impact on those affected.