[UK] Seven in 10 contractors forced into umbrella companies by IR35

A study by the Association of Independent Professionals and the Self-Employed (IPSE) has revealed that almost seven in ten contractors say their clients insist they work through an umbrella company because of the new off-payroll rules, Contractor UK reports.

Instead of removing 'disguised employees' or addressing 'disguised employment,' the April 2021 framework from HMRC appears to have created ‘forced employees,’ or ‘forced employment.’

IPSE polled contractors and found that 69 per cent of umbrella company workers are only using an umbrella company because their end-user forced them to as a result of IR35 reform.

“The fundamental problem here is that people are being forced into pseudo-employment relationships they do not want,” IPSE policy director Andy Chamberlain said.

“Since the IR35 changes came in a year ago, thousands who proudly consider themselves to [be] self-employed are being pushed into umbrella companies.”

Contractor Mark Crisp - a transformation project manager on an NHS supply chain - wrote in a LinkedIn post, "[I am] absolutely sick of being forced to work through umbrella companies.”

“The government really needs to set up and regulate these companies. After all -- it is the government that forced contractors and businesses down this road.”

He is not alone. A LinkedIn poll of 122 people asked, "Why do you work through an umbrella company?" and 74 per cent of respondents selected the option, “I think I have no choice.”

This was reportedly in addition to the 13 per cent of respondents who selected, "The end-user insisted and I’m scared."

Dr Iain Campbell - formerly of the locums' body the IHPA - responded, “This is a pretty damning indictment of the effects of off-payroll with small contractor businesses ending up forced to use umbrellas.” 

In a post above the poll in 2021, Dr Campbell - who has given evidence to the Lords on IR35 - asked how it can be “right” that business owners prone to "financial risk" must suddenly become employed.

According to the IPSE study, the vast majority of umbrella company workers (70 per cent) complained that working through an umbrella company meant they had lost their “independence and ability to work however they wish.”

However, Mr Chamberlain reportedly hinted that the “disadvantageous conditions” of umbrella company working is more than just a loss of flexibility.

Umbrella companies have “no advantages” whatsoever according to 61 per cent of respondents. This perhaps explains why 74 per cent are “dissatisfied,” according to IPSE’s findings.

When asked for specifics, 80 per cent of the umbrella users condemned having to cover Employer's National Insurance and, if applicable, the Apprenticeship Levy, through a reduction to their day rate.

Further contractor gripes about using an umbrella company have been bravely shared by an umbrella company.

Lucy Smith - managing director of Clarity Umbrella - said, “One of our contractors has pushed back at a large agency [because the contractor] wants to work through us.

“But in a [shocking] turn of events, the agency has now said they will consider it, but as we are not part of the agency's PSL they will only pay on 45-day payment terms, as opposed to seven days if the contractor goes with one of their chosen brollies. If there are no concerns of non-compliance, why penalise the contractor?”

Penalised is exactly how contractors seem to feel. One wrote online, “I am really enjoying my current assignment with a great client and interesting work, but this really will be my last inside IR35 contract [via an umbrella].”

At IPSE, Mr Chamberlain assured that the association would be sharing these findings of extreme contractor dissatisfaction with umbrellas (one in two are “very dissatisfied”) directly with the government.

“We hope that they [government] put forward recommendations,” he said. “[They need to] stop freelancers from being forced into working for umbrella companies that limit their independence and [seemingly] give them no real benefits.”

Source: Contractor UK

(Link and quotes via original reporting)

A study by the Association of Independent Professionals and the Self-Employed (IPSE) has revealed that almost seven in ten contractors say their clients insist they work through an umbrella company because of the new off-payroll rules, Contractor UK reports.

Instead of removing 'disguised employees' or addressing 'disguised employment,' the April 2021 framework from HMRC appears to have created ‘forced employees,’ or ‘forced employment.’

IPSE polled contractors and found that 69 per cent of umbrella company workers are only using an umbrella company because their end-user forced them to as a result of IR35 reform.

“The fundamental problem here is that people are being forced into pseudo-employment relationships they do not want,” IPSE policy director Andy Chamberlain said.

“Since the IR35 changes came in a year ago, thousands who proudly consider themselves to [be] self-employed are being pushed into umbrella companies.”

Contractor Mark Crisp - a transformation project manager on an NHS supply chain - wrote in a LinkedIn post, "[I am] absolutely sick of being forced to work through umbrella companies.”

“The government really needs to set up and regulate these companies. After all -- it is the government that forced contractors and businesses down this road.”

He is not alone. A LinkedIn poll of 122 people asked, "Why do you work through an umbrella company?" and 74 per cent of respondents selected the option, “I think I have no choice.”

This was reportedly in addition to the 13 per cent of respondents who selected, "The end-user insisted and I’m scared."

Dr Iain Campbell - formerly of the locums' body the IHPA - responded, “This is a pretty damning indictment of the effects of off-payroll with small contractor businesses ending up forced to use umbrellas.” 

In a post above the poll in 2021, Dr Campbell - who has given evidence to the Lords on IR35 - asked how it can be “right” that business owners prone to "financial risk" must suddenly become employed.

According to the IPSE study, the vast majority of umbrella company workers (70 per cent) complained that working through an umbrella company meant they had lost their “independence and ability to work however they wish.”

However, Mr Chamberlain reportedly hinted that the “disadvantageous conditions” of umbrella company working is more than just a loss of flexibility.

Umbrella companies have “no advantages” whatsoever according to 61 per cent of respondents. This perhaps explains why 74 per cent are “dissatisfied,” according to IPSE’s findings.

When asked for specifics, 80 per cent of the umbrella users condemned having to cover Employer's National Insurance and, if applicable, the Apprenticeship Levy, through a reduction to their day rate.

Further contractor gripes about using an umbrella company have been bravely shared by an umbrella company.

Lucy Smith - managing director of Clarity Umbrella - said, “One of our contractors has pushed back at a large agency [because the contractor] wants to work through us.

“But in a [shocking] turn of events, the agency has now said they will consider it, but as we are not part of the agency's PSL they will only pay on 45-day payment terms, as opposed to seven days if the contractor goes with one of their chosen brollies. If there are no concerns of non-compliance, why penalise the contractor?”

Penalised is exactly how contractors seem to feel. One wrote online, “I am really enjoying my current assignment with a great client and interesting work, but this really will be my last inside IR35 contract [via an umbrella].”

At IPSE, Mr Chamberlain assured that the association would be sharing these findings of extreme contractor dissatisfaction with umbrellas (one in two are “very dissatisfied”) directly with the government.

“We hope that they [government] put forward recommendations,” he said. “[They need to] stop freelancers from being forced into working for umbrella companies that limit their independence and [seemingly] give them no real benefits.”

Source: Contractor UK

(Link and quotes via original reporting)