Employment agencies and umbrella companies

Many workers now work through agencies or umbrella companies, and this can be very confusing. It can often be difficult to establish basic things like who the employer is, what the agreed rate of pay is, and who is responsible for answering questions about these issues if things go wrong.

The HMRC tax authority has published some new guidance for agencies (employment businesses), Responsibilities for employment businesses working with umbrella companies, which is on the gov.uk website.

It reminds agencies of their responsibilities to comply with employment and tax law when working with umbrella companies, and of the potentially serious consequences of being involved in non-compliant supply chains if they don't take reasonable measures to check this.

In particular, agencies should be clear with workers about the assignment rate (the rate paid to the umbrella company, not the worker), and the worker's gross pay rate.

All workers must also be provided with a key information document (KID), which should be updated and reissued when there are significant changes.

There is some corresponding guidance on the gov.uk site for workers, Working through an umbrella company. This helps explain how an umbrella company works, outlines basic employment rights and gives guidance on understanding how gross pay is calculated.

It contains tips on checking payslips and other ways workers can protect themselves.