Jeremy Corbyn Vows To Ban Umbrella Companies

The official Labour party manifesto was published on May 16th, in it it states that umbrella companies will be shut down and outlawed if the Labour party are voted in on the 8th of June.

The labour party leader Jeremy Corbyn said this will be one of the steps taken if they are voted in because these self-employment companies (in his words) ‘create a false structure to limit employers’ tax liabilities and limit workers rights.’

There are a total of seven pledges in the manifesto that labour have come up with regarding the rules around self employment. It is good to note that although they are outlawing umbrella companies they do not believe that self-employment is a negative influence on society. In fact it is encouraged and said to have ‘many benefits’ the issue lies when employers try to avoid costs and shy away from their duties and responsibilities that they have to their employees.

The mantra that labour have taken on for this season is ‘for the many, not the few’ which has fallen on unimpressed ears in the shape of The Freelancer and Contractor Services Association (FCSA) some of the members of which include umbrella corporations. The point that the FCSA is trying to get across to the Labour party is the fact that they seem to be forgetting the economical contributions Umbrella companies provide the economy with. They are not in complete disagreement however, and some umbrella companies may be abusing the system as suggested but to unilaterally ban all of them could and probably would be at a severe detriment to the economy.

Looking at it factually the umbrella companies that come under the self-employment sector supply the economy with over ￡3bn in tax and national insurance per annum. That is a major knock. It is also a fact that the companies that are legitimate will in fact provide those working for them will full employment rights - which is what the Labour parties goal is.

In an ideal world freelancers and their clients would be completely supported, with those in government understanding how it is that lawful umbrella companies work and would want to help them remain successful and build. At the end of the day the sector is completely unregulated and therefore those firms who are not legitimate are able to run riot and give the sector as a whole a ‘bad name’.

There is also a major issue currently with the Tory party forcing public sector contractors to use umbrella firms, they did they not by contacting the contractors directly but implementing an off-payroll rule - removing the 5% allowance that will no longer be available for those who work in the public sector but will be available for those in self-employment. Forcing self-employment is not going to encourage good practice. So, forced self-employment along with bogus self-employment is causing some concern.

As well as the economical concerns that the FCSA and other people who may be following the story may have. Another major concern is the fact that Umbrella companies in many ways act as a stepping stone for some people to full time employment. Many temporary workers will no longer have access to full time employment and this will leave them open for exploitation which is the opposite of the parties goal.

Umbrella companies can be looked at from both ends of the spectrum in some peoples opinion and with some fact umbrella companies help to protect workings rights, and by helping their agency company fulfil their legal obligations and improve compliance the whole system works like a smooth running clock. Remove the umbrella companies and it could be as detrimental as removing the cog on a clock - it will no longer work.

As mentioned previously, not all umbrella corporations are set up and managed correctly. Many of them come about with ulterior motives and therefore are not concerned about the best interests of their users or their employees and are abused for their tax benefits. Ross says;

“My own suggestion, which I made at Labour's self-employment commission in March would be to also force agencies to be transparent about their margins to both the end -client and the contractor,” he said.

“As well as [transparency around] anything received from any such umbrella firms. How can it be when I buy a pension or mortgage I can see that commission, but not from an agency?”

As well as Ross’ suggestion the FCSA also had an alternative solution to a blanket ban on Umbrella companies.

“Rather than a blanket ban,” it said, “we would look to work together with Labour policymakers on initiatives that promote compliance and truly support workers that choose to work through umbrellas.”

However, unfortunately when it comes to this section of the Labour party manifesto it seems all alternatives and potential solutions are falling on deaf ears. It is a shame because it seems that this pledge came about with no understanding of the contracting sector and almost stereotyped all umbrella companies and put them under one roof. There thoughts to understand the contracting sector at all, leaving those legitimate companies, and contractors stumped. There are questions as to whether the intentions of the Labour party was to in fact willfully come across as ignorant and uncaring towards the sector.

Even cynical and self-serving. The question you have to ask is after providing our economy with such a large monetary contribution, and providing so many jobs that people can step up from; how serious are the labour party actually taking their own mantra for their current campaign? ‘For the many, not the few?’ What about the many people who wont be able to find full time employment, or the services that may be missing out from the knock to the economy.

Umbrella companies have become an integrated and necessary part of our economy. According to the FCSA it will be a foolish mistake to outlaw them.

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