The Government has finally published its Good Work Plan, following findings in the Taylor Review. It includes changes to workers’ rights and employment status, some of which will impact contractors in the future.

Read on to find out what exactly is going to change, when the changes will come into force and how it will affect you.

What is the Taylor Review?

In 2016, the government commissioned an independent review of modern working practices. Developed by Matthew Taylor, chief executive of the Royal Society of Arts, the Taylor Review was eventually published in July 2017. It explored a variety of aspects surrounding employment, including quality of work, scope for development and one-sided flexibility.

Chapter 10 of the Taylor Review comprised “a new offer to the self-employed”. Because there are now more self-employed people in the UK than ever before, it is time for the Government to reconsider how it supports those people, the report suggests. This includes:

  • Recognising modern self-employment in a variety of forms
  • Harnessing the potential of digital platforms to offer support
  • Encouraging self-employed people to plan for the future

Fairer enforcement for contractors

Another chapter which was notable for contractors, however, was the section on fairer enforcement. It suggested that more action is needed to enforce employment protections. That includes umbrella companies. Some of which have been known to force contractors into problematic contracts:

“There have been examples of individuals being compelled into these arrangements or signed up to them with the detail hidden in the small print of a contract. This can result in a range of issues from a worker not knowing who their employer is if they want to make a complaint to not fully understanding pay rates”

According to the report, this was particularly prevalent for lower skilled, lower paid roles. While higher skilled roles were much better served by umbrellas.

At the time of writing, government bodies like the Employment Agency Standards Inspectorate (EAS) could not apply penalties to umbrella companies. Instead, they were focused on recruitment agencies alone. The Taylor Review suggested that this should change:

“The new Director of Labour Market Enforcement should consider whether the remit of EAS should be extended to cover policing umbrella companies and other intermediaries in the supply chain”

The Good Work Plan

In response to the Taylor Review, the Government published its Good Work Plan in December 2018, with a number of key changes:

  • An increased maximum fine for employers who demonstrate malice, spite or gross oversight towards employees, from £5,000 up to £20,000.
  • A repeal of the Swedish Derogation clause, which permits employers to pay agency workers less than permanent employees.
  • Companies will be liable to provide all workers a full statement of rights, including the entitlement to paid leave.
  • Holiday pay will be calculated based on a full 52 weeks, from the current 12 weeks, so people aren’t penalised for seasonal roles.
  • Employers will no longer be legally allowed to make deductions from staff tips.

The plan also outlined increased protection for agency workers through state enforcement. That includes new legislation for the EAS to cover umbrella companies within its remit.

What this means for umbrella companies

Being regulated by the EAS means all umbrella companies will need to meet certain standards. Like those of the FCSA – the UK’s professional membership body for umbrella companies. Rather than simply posing as compliant, they will be assessed to make sure they are meeting the required standards.

This includes things like adequate pay, taxation and the provision of workers’ rights. With a clearer definition of umbrella companies and what is required of them, a number of ‘middle men’ payroll companies will no longer be able to market themselves as umbrella companies.

The end goal is to remove uncertainty with regards to who contractors are employed by. Making it simpler to claim for any unpaid wages and a lack of employment rights. In short, this will empower contractors working through umbrella companies – particularly those in low-skilled sectors.

Pitfalls of the Good Work Plan

One of the biggest criticisms of the Government’s Good Work Plan is that it fails to address some of the key findings from the Taylor Review. One example is the introduction of a new employment status: “dependent contractors”.

This was put forward by the Taylor Review. Referring to people who aren’t employees but are still eligible for workers’ rights. It included a “more limited set of key employment rights”, to eliminate the current ‘all or nothing’ choice between the rights of full-time employees versus self-employed contractors.

The Taylor Review recommended that the Government adds dependent contractors into its current approach. It suggests control should be given more importance when deciding a worker’s status. So, who is in control of a worker? If they are totally in control of their own work, they are truly self-employed. On the other hand, if an employer is effectively in control of a contractor for the duration of their contract, they should be providing workers’ rights.

However, the Good Work Plan does not make any response to these specific recommendations.

When does the Good Work Plan come into force?

Despite a clear rise in the UK’s self-employment market, the changes from the Good Work Plan are not set to be implemented until April 2020. Specifically, they are set to come into force on 6th April 2020, the start of the 2020/21 tax year.

By that date, umbrella companies will need to review how they employ contractors. With regulation in force, they will be held accountable for any missed payments or lack of statutory rights.

Most importantly, these changes will leave contractors in a better position. They will be able to work through an umbrella company with much more clarity on who their employer is, who is paying them and who is providing things like paid leave.

Finding the right umbrella company

Umbrella companies make it easier to reap the rewards of self-employment, taking care of invoicing, payroll and benefits. However, as discussed, not all companies are equal.

At Umbrella Broker, we make it easy to find the perfect umbrella company for you. Use our quick and easy umbrella comparison site. You can compare a range of reputable providers and see just how much income you will receive. Try it today.