Survey unveils worrying levels of non-compliance in the umbrella industry - online calculators

Survey unveils worrying levels of non-compliance in the umbrella industry


A survey conducted by ContractorCalculator has uncovered alarming levels of non-compliance and a lack of worker protections within the umbrella industry. The findings paint a bleak picture of systemic abuse, neglect and confusion around umbrella working.


The survey found that most contractors are forced into umbrellas against their will, with restricted choices and promotions of dubious schemes. Most contractors are unaware of fundamental legal rights and compliance requirements regarding pay, pensions, and regulations, and there is widespread confusion and lack of transparency around pay rates, payslips, holiday pay accruals, and deductions, with less than half able to determine if they are being paid correctly.


Commenting on the results, Dave Chaplin, CEO and founder of ContractorCalculator, said:


“The survey results paint a picture of an industry rife with unacceptable non-compliance and contractor exploitation. The umbrella mess has festered for years under a government that does not care about the flexible workforce. Now is the time for reform and accountability. Workers deserve better than more broken promises and inaction from the government. The umbrella industry needs intervention and regulation urgently, else a race to the bottom will ensue.”

Umbrella survey key findings


The survey received 611 responses to over 40 questions, of which the key findings show:

  • 80% of contractors are told “umbrella only” when hired “Inside IR35”, demonstrating that the IR35 Reforms are directly responsible for the considerable rise in umbrella use.
  • Of those pushed towards an umbrella, 63% are given a restricted list, 27% are allowed to select their umbrella, and 10% are only given one choice.
  • 85% are told they must use an umbrella because the role is “Inside IR35”, but only 17% are given a Status Determination Statement as legally required under the Off-payroll legislation.
  • On holiday pay, just 54% understand accrued versus rollover structures. 19% have had holiday pay problems, and 11% have been unlawfully withheld.
  • Half the respondents are confused over pay, with only 49% understanding the difference between an assignment and PAYE rate. Just 40% say they can determine if their payslip is accurate. Only 45% receive the legally required Key Information Document.
  • Shockingly, 24% have not been auto-enrolled into a pension, and 14% are unlawfully told they cannot even have one. Worryingly, half don’t know how to check their pension contributions are correct.
  • 37% don’t understand the Conduct Regulations, provisions in place to protect agency workers. 87% say agencies and umbrellas have never explained these to them. 49% don’t know if they have opted out of them, while 14% have been (unlawfully) told they can only get the work if they opt-out.

Anecdotal feedback


We asked all respondents the open question “Would you like to share any other useful insights regarding your thoughts and experiences on the umbrella industry?” 214 responded.


Whilst some of the feedback was positive, the vast majority of respondents painted the industry in a negative light.


One respondent demonstrates the mixed levels of service in the market: “One Umbrella company was great and I felt well looked after. All payments were on time. The current Umbrella company is awful. My pay is far lower than I think it should be, they have missed days on my pay and I have to chase them. Absolutely awful.”


On payment issues, some respondent’s views were:

  • “…restrictive payment terms if you don’t use their PSL umbrella list – 6 weeks in arrears rather than 7 days.”
  • “Main problem with brolly is getting paid on time owing to supply chain not paying brolly.”
  • “I do not think it is acceptable that as a contractor I have to pay both Employee and Employee Contributions.”
  • “Always requires multiple calls to the umbrella company to work out what on earth is going on.”
  • “…the wider issue is that the client has opted to pass NI ERs onto the consultant”
  • “I only received the Key Information the day before it was due to start. This was when I found out the day rate was in fact the umbrella rate and so all NICS would be taken out of it. I found this very sly”
  • “…the process of getting paid is slower than with an agency”
  • “Employers National Insurance should not be taken from a contractors gross rate.”
  • “Nobody else has to pay money to someone else just to get paid.”
  • “It’s a mine field. I have no idea if I’m getting the correct pay.”
  • “…colleagues have been left without pay when they have failed”
  • “The big problem is “pay when paid” where the entity above the brolly always fails to pay on time.”
  • “…had salary ‘skimmed’ as part of the [NAME REDACTED] scandal.”


Some contractors told us they had got into tax trouble:

  • “Currently informed by HMRC I owe many thousands of pounds in tax, incorrectly paid by my umbrella company . Which has now gone out of business”
  • “Recently been approached by the pension provider to say my umbrella company has not paid pension payments for 60 days”
  • “My 1st year under Umbrella, they taxed me incorrectly and I now have a £7000 bill I have to pay off”
  • “The umbrella company paid my tax however this was insufficient and I ended up spending 4 months sorting out additional payments and straightening out my tax affairs with HMRC.”


A lack of choice was often cited:

  • “I had no choice but to use an umbrella company.”
  • “It just seems like a middle man company has come in to benefit off the workers”
  • “Umbrella company forced me to have their additional add ins such as ‘benefits discounts’ and additional insurance.”
  • “Forced to use one. Not happy”
  • “…some umbrella companies will not process pension payments via direct debit which creates further issues.”
  • “force you to switch to umbrella working inside without a choice, either you take it or no work”


Some respondents shared ideas for what should happen:

  • “Umbrella Companies need to be regulated, and people need protection.”
  • “I would like that only way of work is through agency payroll.”

ContractorCalculator Opinion


Whilst the figures are alarming, we should be mindful that the respondents are a small selection of the flexible workforce and ones who have experienced problems.


The government was warned about unregulated umbrellas before the IR35 Reforms in April 2017 came into effect but failed to act. They’ve sat on data that could have prevented abuse yet done nothing. And they haven’t educated workers enough to protect themselves. The statistics speak for themselves.


There is concern that legislation won’t come until 2025 or later, and a General Election could also stall matters. Some short-term fixes could help, like removing the ability to opt out of the conduct of employment regulations when umbrellas are used. It makes no sense for workers to forfeit rights they should be getting as agency workers. Mandating agencies to offer payroll options, not just the umbrella way of working, would also help give contractors a choice and bolster competition and quality of service.


While complete legislative reform may not come by April 2024, enforcement activity should help curb abuse in the short term. Once reforms are enacted, the umbrella market will likely shrink as dodgy operators leave, leaving the quality providers to thrive. More contractors may end up on the agency payroll.


It appears inevitable, to prevent the longstanding issues, that agencies will have debt transfer obligations to resolve payroll fraud. The result may be that some agencies run their payroll or use properly audited umbrellas where every penny is scrutinised independently.


Chaplin concludes: “Umbrellas operating compliantly, simply processing pay and retaining their published margin, should not have any concerns. There might be extra reporting requirements to satisfy independent due diligence, but the systems can easily be adapted.”

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