The TUC has called for umbrella companies to be banned and said it wants recruitment agencies to be legally obligated to directly employ any workers they place.
Umbrella companies are used by recruitment agencies to employ workers, but the process has come under scrutiny after an increase in workers’ abuse claims
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TUC general secretary, Frances O’Grady said: “These scandalous workplace practices have no place in modern Britain.
“But our inadequate regulations let dodgy umbrella companies off the hook, allowing them to act with impunity.”
According to TUC research, as many as half of all agency workers are employed through umbrella companies.
“Employers shouldn’t be able to wash their hands of any responsibility by farming out their duties to a long line of intermediaries,” O’Grady said.
“Enough is enough. It’s time for ministers to ban umbrella companies, without delay.”
Julia Kermode, founder of IWORK, said the TUC’s action against umbrella companies has been exacerbated recently due to media attention given to their non-compliance.
As example, she said: “This is particularly due to the holiday pay scandal which sees unscrupulous umbrella firms pocketing their workers' holiday pay despite end-hirers expressly paying for holiday within the workers' rate.
“Occasionally workers' holiday pay is even split with recruitment firms, which is an additional twist to an already abhorrent practice.”
Shazia Ejaz, director of campaigns at the Recruitment & Employment Confederation (REC), said recruiters want a robust and fair supply chain where workers’ rights and pay are protected, and all parties’ responsibilities are clear.
She said: "There are many compliant umbrella companies out there which provide valuable services, but clearly there are too many which act unethically and exploit loopholes in the law.
“These bad-faith companies have been allowed to thrive alongside legitimate businesses for too long.”
Ejaz said the REC is glad that the government is moving forward with the creation of a single labour market enforcement body which will have the power to regulate umbrella companies.
“We also advise our members to always conduct rigorous due diligence on their supply chains and have published guidance on what to look out for when working with an umbrella company so that recruiters can ensure they operate with fairness and transparency,” she said.