Shield for Business

The UK's leading contractor site. 200,000 average monthly visitors.

Contracting sector service providers and recruiters debate the future of umbrellas

ContractorCalculator CEO Dave Chaplin joined contracting sector service providers and recruiters to debate the future of umbrella companies in the new contracting environment that incorporates the Agency Workers Regulations (AWR) and a new Bribery Act. They met at an event hosted by umbrella employment solutions provider Parasol and Recruiter magazine.

According to Chaplin, although none of the key stakeholders in the industry who were present could predict the precise implications of AWR for contractors, everyone agreed that new legislation would only add further unwelcome layers of administration and new costs.

“No one yet knows how big the problem could be, or even if it is going to be a problem,” says Chaplin. “But for many small umbrella companies, AWR could well be too expensive for them to deal with.”

Of potential concern for contractors is that limited company contractors will automatically be excluded, simply by virtue of their trading vehicle. Chaplin explains: “A myth has arisen that limited company contractors will be automatically outside the scope of AWR when it comes into force in October 2011. But this is not the case; only limited company contractors genuinely in business will be outside the legislation.

“That means simply moving umbrella contractors into a limited company is not a solution,” continues Chaplin. “Plus, the regulations are there to protect vulnerable and generally lower paid contractors. Moving into a limited company is neither practical nor cost effective for such workers.”

Delegates agreed that umbrella companies would remain, as they play a vital role in the contracting supply chain. However, it was felt that new business models would emerge, such as adopting the Swedish Derogation model, which would see contractors paid between assignments and umbrellas obliged to find them work.

Another topic of conversation at the round table event was the Bribery Act, which comes into force on 1 July. This will also change the relationship between umbrella companies and agencies. “Gifts or payments from umbrella companies to recruiters in exchange for referrals are not uncommon,” says Chaplin. “In fact, the latest guidance on the act from the Ministry of Justice does not disallow gifts such as vouchers or hospitality, so if nothing else, umbrella companies may have to market themselves differently in future.”

A detailed report on the meeting’s conclusions is expected to be published by Recruiter alongside video taken at the event; videos will also appear on Parasol’s YouTube channel.

Published: 30 March 2011

If you need an umbrella company or are thinking of switching please complete the enquiry form below:

Parasol are our chosen partner for providing specialist umbrella services to contractors.

  • We only send your data to our chosen partner. More on how we use your data.

© 2021 All rights reserved. Reproduction in whole or in part without permission is prohibited. Please see our copyright notice.

IR35 Shield for Business