Julia Kermode, CEO of the Freelancer and Contractor Services Association (FCSA), has defended the Umbrella sector following remarks made by Scottish Labour Party Leader Richard Leonard which implied that they were inherently exploitative.

Writing in The Scotsman, Leonard was addressing employment practices in the construction industry in the wake of the collapse of Carillion. He was sharply critical of the use of Umbrella Companies, which he said allowed giant contractors like Carillion to shirk their responsibilities to their workers, ignore their rights, dodge tax and reap enormous profits.

Carillion, Leonard noted, had employed many of its workers on zero-hours contracts and then forced them to pay “up to £100 to an umbrella company to get their wages.”

He urged the Scottish government to ensure that when contracts are awarded to industry leviathans like Carillion or Balfour Beatty, they should sign its business pledge guaranteeing workers the living wage and protecting them from zero-hours contracts.

In her response, Kermode immediately clarified that Umbrella firms do not exist to exploit workers but “to provide a valued service enabling workers to be employed, with all the 84 statutory rights and benefits that come with employment, whilst also having the flexibility of working on a number of short-term for various end-hirers.”

Umbrella Companies, she explained, provide not only stability to workers engaged on a series of short-term projects but also enable them to access important financial products such as loans and mortgages that they would otherwise be unable to secure without the continuity of employment offered by Umbrellas. Moreover, Umbrella employees working simultaneously for several hirers will receive a single consolidated pay packet, with all due tax and NICs paid to HMRC.

She went on to clarify that umbrella margins and employers NICs are overhead costs that are factored into the overall assignment rate by reputable Umbrellas as additions to the pay rate the worker is told that they will receive. No worker should be charged for receiving their wages, and neither should they be paying employers NICs.

The FCSA, Kermode added, fully supports Matthew Taylor’s proposals for improving transparency about pay for such workers, as well as Leonard’s call for all large government contractors to sign the government’s employment pledge. No respectable Umbrella, she said, would have an issue with that.

She added:

“As the professional body for the umbrella sector, we are keen to work with all political parties and unions to ensure good practice is the norm and stamp out bad practice where it exists.  I would appreciate the opportunity to meet with MPs in Scotland to discuss the use of umbrella firms north of the border.”

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