Make Work Pay: modernising the Agency Work Regulatory Framework

Our response explains our background and interest in the pay and tax issues affecting low-paid agency and umbrella workers and is structured around the themes of security, transparency and choice.

We set out that many workers enter agency or umbrella company arrangements because they have limited alternatives. This creates a power imbalance and makes strong baseline protections essential. However, parts of the current regulatory framework are outdated, complex and sometimes ineffective. In particular, information requirements can create “information overload” without leading to real understanding.

We also highlight the risk that, if regulation is too burdensome or poorly enforced, workers and businesses may move away from regulated models into less protected arrangements.

We call for urgent action to prohibit the ‘elective deduction model’, which can wrongly classify workers as self-employed and deprive them of rights such as holiday pay.

We support the new joint and several liability tax rules to tackle tax non-compliance and associated issues like kickbacks in umbrella company supply chains. However, we warn that giving workers greater ‘choice’ as part of the new regulatory regime could unintentionally encourage people to move away from this strengthened framework and into less protected agency arrangements.

Recognising that there will always be more that can be done in terms of improving outcomes for workers who remain within umbrella arrangements, we recommend that HMRC’s ‘what good looks like’ guidance for umbrella companies is mapped directly into the regulations to help improve standards. 

We conclude by emphasising that strong, proactive enforcement by the Fair Work Agency will be critical.