Why do workers use umbrella companies?

There are many reasons. For example:

• workers often have no practical choice. They are often referred by an employment agency to the umbrella company, the two often working in collusion. This is especially true for migrant workers with limited understanding of their legal rights;

• workers are increasingly under pressure from the Department of Work and Pensions to take “any job”, or else risk benefits sanction;

• workers are led to believe there are potential tax savings, although these are often illusory;

• there is widespread ignorance about contract terms including the employer’s identity. This lack of understanding is exacerbated by the HMRC’s Digital by Default strategy, which places growing amounts of tax information online, even though those who need it most often either cannot use or have no access to a computer.