Two umbrella companies made unlawful deductions from their employees

Two employment tribunals have recently found that two umbrella companies made unlawful deductions from their employees whilst being FCSA-accredited.

Both were members of the FCSA at the time of the unlawful deductions, one of which is still a member.

The umbrella firms in question were DNS Umbrella Ltd and Umbrella Company Ltd, and the two tribunals rulings are:

The cases highlight a common theme within umbrella company compliance where confusion arises regarding what umbrella firms and employment agencies mean when they use the non-statutory term “assignment rate.”

The assignment rate is often referred to as the rate made up of the gross pay due to the contractors, plus the umbrella’s margin and other employment costs. Essentially, it’s the rate paid to the umbrella company by the agency.

Commenting on the cases, Dave Chaplin, CEO of contracting authority ContractorCalculator said: “Getting the “assignment rate” right and explained properly to workers is the basics of running a compliant umbrella, and it’s surprising to read about the lack of correct compliance process in the tribunal decision.

“Umbrellas should ensure the supply chain gets it right, including an evidence trail ensuring the worker is fully informed about what their offered rate actually means if they are asked to work via an umbrella.

“The historical confusion over rates is nothing new, and the Government introduced the Key Information Document (KID) to help avoid confusion and promote transparency. The ‘assignment rate’ issue was also highlighted in the recent Umbrella Consultation Response by Government.

“With umbrella regulation likely to result in debt transfer to both agencies and clients, operational compliance is essential, in conjunction with real-time checking of all basic procedures and the money flows.”