The government announced this week that it is to close the minimum wage loophole which could affect some contractors working via an umbrella company.
According to Contract Eye, some umbrella companies have been paying their contractors less than the national minimum wage – which currently stands at £5.80 – and topping up their salaries with expenses claims. The method is a means of reducing both tax and national insurance payments for umbrella contractors.
The government has chosen to make these amendments to the National Minimum Wage (NMW) regulations from 1st January in an attempt to reduce the exploitation of vulnerable workers. The changes will affect temporary workers earning up to £9 an hour.
Stuart Davis, chairman of the Freelancer & Contractor Services Association (FCSA), told Recruiter the trade body “supports all moves to protect the UK’s vulnerable workers, but continues to urge that government develops a better understanding of the different constituent populations of the UK’s freelance workforce and effects a regulatory environment that fosters rather than hinders their productivity.
“We see the government’s action to address the issue relating to a specific, vulnerable portion of the temporary labour market as an implicit acknowledgment of this developing understanding.”
