The contractor and freelancer industry has been dealt a blow by the government, as it abandons plans to introduce the Single Enforcement Body (SEB) for employment rights – the aim of which was to regulate umbrella companies.
I think this is a colossal mistake that will negatively affect overall employment regulation. In this blog, I’ll detail the benefits the SEB would have brought to the industry, and why the government should U-turn on its decision.
What is the SEB?
Enforced regulation of umbrella companies has been needed for a long time. In its manifesto, the Conservative government originally promised to introduce the SEB to protect workers’ rights and prevent bad practices in the labour market.
The SEB would have had specific powers to combat non-compliance, including civil penalties for:
- Underpayment breaches under the gangmasters licensing
- Employment agency standards regimes that lead to wage arrears
Plus, the SEB would have made statutory sick pay and holiday pay compulsory, and ensured supply chain transparency and modern slavery statement reporting.
The withdrawal
Clearly, these workers would have experienced significant improvements. But Business Secretary, Grant Shapps, has unfortunately announced that plans for the SEB have been shelved. What’s more, the absence of mention in the late Queen’s speeches since the 2019 election might indicate complete abandonment of the SEB plans.
Of course, the government may pick up the initiative again at some point in the future. But for the time being, it doesn’t look positive. And in the meantime, temporary workers and contractors suffer.
The Impact
Scrapping the SEB initiative means the umbrella sector remains unregulated.
This puts those using them – ordinary workers – at risk. For instance, they may fall victim to:
Tax avoidance schemes
Companies who ‘phoenix’ (close and set up under a different name, usually within the first two years of incorporation) – this results in a contractor losing any holiday pay they accrued
Non-payment of tax and National Insurance to HMRC – the umbrella company may keep it for themselves
Non-compliance with the AWR, meaning their contracts are incorrect and they miss out on things they’re entitled to, such as automatic pension enrolment
Without the SEB, umbrella companies will continue to self-regulate, which impacts recruitment agencies and end clients. Any parties engaging umbrella companies must perform their own checks to ensure compliance.
The future
We believe the government shouldn’t have scrapped the SEB. This initiative was vital to regulate and enforce standards across the labour market. The current government has made many U-turns – and reversing its decision to abandon the SEB should be a priority.
We think the government should regulate employment standards, and establishing the SEB would have been key. But for now, we’ll continue to campaign to raise standards.