Umbrella Company

Contractors employed by umbrella companies and who are often paid more than staff in end user organisations should be excluded from proposals to give temporary workers the same rights as permanent workers, says giant group plc, the contractor services provider.

Proposals announced by the Government (20/05/08) to give equal rights to temps after 12 weeks, including pay, could be implemented as early as next year.

According to giant, the UK Government needs to ensure that a concession included in the draft of the EU Temporary Workers Directive (TWD), that aims to exclude contractors operating through umbrella companies from equal rights, should be incorporated into legislation introduced in the UK. Limited company contractors may also be excluded from the legislation.

Pressure

However, the UK Government is under pressure from the unions to ditch the ‘Swedish derogation’, as the umbrella company exclusion is known, from UK legislation, warns giant.

Matthew Brown, Managing Director, giant group, says: “It would be absurd if the UK Government introduced legislation that in some areas is more draconian than the Directive it is currently blocking in Europe simply to appease the unions.”

“Contractors working through umbrella companies are already employees, so if they were included in the legislation the Government would effectively be saying that employees in entirely separate organisations should be paid the same purely because they are working in close proximity. That would be a ridiculous position.”

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He adds: “Umbrella company contractors in knowledge-based industries like IT, finance or engineering are usually paid significantly more than the employees at the organisations they are seconded to, so their inclusion in this legislation would be unnecessary as well as potentially unworkable.”

According to giant, the cost of using contractors could rise significantly if umbrella company contractors are included in the proposed legislation. This could reduce their attractiveness to end users and undermine the flexibility of the UK workforce.

Matthew Brown says: “The Government needs to clarify its position and stop sending out mixed signals. It has been staunchly opposed to extending rights to high end contractors at European level, but it needs to acknowledge the ‘one-size-fits-all’ approach is not appropriate for UK legislation as well.”