Workers throughout the UK are being conned by a complex company structure that makes them pay both employers’ and employee’s National Insurance.
They also have to pay a fee of around £50 per week for ‘administration’, leaving agency workers supposedly on an hourly rate of £12.00 actually getting pay rates at national minimum wage levels.
This is what happens to one of my constituents – a highly skilled electrician – who approached me and explained that process.
Having such a substantial pay cut meant it was difficult for him to make ends meet.
The question for my constituent, and for many others in the construction industry – how is this allowed to happen?
I was shocked to learn that this trick perpetrated by employment agencies is entirely legal – they use a complex pay structure to pass on to workers the costs of employers’ national insurance and processing pay.
Employment agencies are able to pass on these costs, normally met by employers, by putting an umbrella company between themselves and the staff they recruit.
This is a clear loophole in the law – making the employee pay for what was always intended to be an employer’s contribution to national insurance.
These practices have now become endemic throughout the construction industry.
Not only are construction workers finding they are paying double NI contributions, many are also losing out on their pension, with holiday pay being slashed as well.
This results in workers feeling increasingly devalued and productivity being hit hard.
What is the government doing to tackle this?
In short – very little.
I have highlighted these practices to Ministers who tell me that they are working on ‘improving guidance’ to workers so they understand the contracts they are entering into. This shirks the issue and will do nothing for my constituent who will still not be paid properly or enjoy basic employment rights.
What’s more, the Government actually receives significantly less tax when a worker is employed via an umbrella company compared to when he or she is employed directly – which makes their indifference to this matter all the more baffling.
Over the next five years an extra 182,000 extra jobs will be created in the construction industry – we need more skilled workers. Are we really going to get them if this is the treatment they can expect?