You might have read recently about an Employment Appeal Tribunal case that has been hailed by trade union Unite as ‘blowing a hole’ in agency payroll models.  It involved a pipe fitter who was employed via a contractor and a recruitment agency with his wages coming through a separate umbrella company.

Here’s what happened:

The umbrella company called the pipe fitter an employee, taxed him under PAYE, and took employers national insurance and their fee from his wages. However, they didn’t pay him holiday pay when he took leave or provide any other employment rights.

An Employment Tribunal ruled the pipe fitter was self-employed.  But the complex case – which was bankrolled by Unite – went to the Appeal Tribunal, where the verdict was overturned.

Since then, Unite has been celebrating their ‘groundbreaking victory’.  They say it highlights the way employment agencies hide behind agency and umbrella companies and pretend that they are not responsible for the employment of the workers they recruit.

Hudson Contract’s view is different:

• We believe that far from being a game changer, this case reinforces why we insist processes and procedures must be diligently followed. 
• Yes, we sometimes lose business to agencies, umbrellas, and payroll firms who promise protection against status challenges without any annoying procedures to follow.
• We regularly decline the offer to do business with agencies because we don’t see how they can possibly satisfy the business-critical April 2014 rules around supervision, direction and control.  It’s our experience that generally, they find paperwork and procedures too much of a bother.  And the stiff competition between them all means they often – unreasonably, and illegally - pass on costs to work-seekers.

Why the case is good news:

The Employment Appeal Tribunal judgment puts in writing where the agency and umbrella company went wrong.  Which means we can use this case to draw a distinction, and demonstrate that what Hudson Contract does is correct.

From our clients' perspective, there is nothing to worry about.  The importance of this case is simply a reminder that our engagement method statement should be followed at all times when engaging new operatives.

Click here for the full judgment

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