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Umbrella companies barred from fiddling National Minimum Wage calculations
Posted Jan 6, 2011
Updated National Minimum Wage Regulations came into effect on 1st January 2011, which prevent umbrella companies from using travel and subsistence expenses in the calculation of the NMW.
In a statement, HMRC and the Department for BIS say that there are a number of umbrella schemes in operation who claim to be able to provide 'savings' for employers whilst still complying with the requirements of the NMW Regulations. Some of the common methods used include paying subsistence rather than travel expenses, classifying workers as directors, under recording the number of hours worked, and making 'Holiday Pay Adjustments'.
Of course, none of these methods comply with current legislation, and according to the statement:
"They have clearly been constructed with the express intention of operating contrary to the intention of Parliament and as such HMRC will identify businesses seeking to circumvent the NMW and take appropriate action"
More bad practices stamped out
Rob Crossland, chief executive at umbrella company Parasol, welcomed the clampdown:
"This is great news for those umbrella service providers who have worked hard to improve standards within our industry and encourage transparency and best practice.
"Before the legislation was introduced at the beginning of the month, you could argue that vulnerable temporary workers were being exploited as a result of some umbrella companies and recruitment agencies using the tax relief on travel and subsistence expenses to top up pay to the NMW level when NMW is a legal right for all workers. Travel and subsistence is reimbursed as tax relief for temporary workers so that they are not out of pocket for taking a job. It is vital that the UK temporary workforce is supported with things such as this as they make such an important contribution to the UK economy. It is important that temporary working remains an attractive option for workers in the UK.
"For umbrella companies at the low skilled end of the market it now creates a level playing field. For all umbrella companies, it stamps out another of the poor practices that tarnishes the whole industry. Positive news all round."
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