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Why the umbrella industry should take its lead from the financial sector part 2

In our last blog, we discussed why it’s so important that the umbrella sector is governed along similar lines to other financial services – implementing networks to control and govern members’ compliance.


Here, we look at the intricacies of operating such a system and how it could work.


A simple concept

The starting point should be establishing compliance accreditation bodies that are responsible for the compliance of their members.


In this way, where one fails, and it can be proven that adequate steps were not taken, they could be held liable.


One drawback to this proposition would be the increased costs involved for members. However, the enhanced reassurances for contractors, agencies and other compliant members, would outweigh the sums involved.


Secondly, with compliance standards set, supply chains would then be in a position to either rely on them, secure in the knowledge that due diligence has already been carried out, or they could conduct their own investigations.


If a supply chain has already carried out its own due diligence it would be a simple matter for it to assume the role of the compliance network and its associated liabilities, many of which are already on the statute books.


Additionally, if recruiters received payment from any intermediaries they would automatically assume joint liability with the compliance network.


Significant changes

These changes would prove significant and would provide a more even distribution of responsibilities across compliance networks and their members.


They would also lead to more of the 1,200 payment intermediaries operating under a compliance network assisting in enforcement.


For organisations that did not want to operate through a compliance network, a system of direct registration with the enforcer which would possibly be the Employment Agency Standards Inspectorate (EAS), would be required.


A further idea to pursue would be to instigate a compensation scheme for contractors when they suffer losses. This could be developed by contributions from providers based on their annual turnover, and would provide reassurances for contractors who fall victim to unscrupulous providers.


How would it work?

To establish such a concept, in reality both HMRC and the Department for Business, Energy & Industrial Strategy (BEIS) would have to collaborate closely with the compliance networks in order to establish a clear framework of operational processes.


Fortunately, most of these already exist on an informal basis and could be easily adapted and implemented. These efforts would align enforcement with the existing standards and ensure a more robust and coherent approach to compliance within the industry.

It will take a bold and forward-thinking strategy to implement these suggestions, and currently, with no alternative solutions either suggested or available, it seems to be the only option worth exploring.


We must build relationships with the responsible providers in our industry in order to fully understand the challenges that face us. Only in this way can we begin to tackle the issues that mar the umbrella industry’s reputation and start to explore real and practical options in order to build a sector which is not only sustainable and compliant, but is also future-proof.

Failure to find a workable solution to these problems will result in the continuation of non-compliant and illegal practices, with the resultant £1 billion annual loss to the Treasury that the UK economy can ill afford at the moment, as well as the continued damage to the reputation of an industry that does so much for so many.


You can find other useful articles and videos in the Hot Topics section of our website.

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