Unite the UK’s largest union, has called on the NHS to outlaw umbrella companies operating throughout the organisation. Comment from Unite national officer for health, Colenzo Jarrett-Thorpe.

In April this year the Government introduced new rules which effectively outlawed agency workers operating in the public sector from being paid on a non-PAYE basis. The changes affect all grades in the NHS including: paramedics, porters, nurses and doctors.

As a result of this decision some agencies operating within the NHS have begun to force workers to be paid via umbrella company contracts. If a worker is employed via an umbrella company, they lose 46 pence in the pound of eligible earnings, through national insurance (workers have to pay employer’s national insurance contributions) and income tax.

After being contacted by several members working in the NHS, Unite contacted the NHS and urged them to stamp out the use of umbrella companies. However NHS Improvement, the body responsible for overseeing foundation and NHS trusts, refused to do so.

It said: “NHS Improvement has for some time been concerned about the fees staff working through agencies have to pay if they are not employed under PAYE terms and conditions. NHS Improvement has stated through the agency programme that we do not encourage the use of personal service companies or umbrella payment methods within trusts and have encouraged the use of PAYE mechanisms.

“We are also aware of some umbrella organisations that are working outside of tax rules and are creating a risk to staff and have been working with HMRC to get a clear message on these unlawful practices.”

Unite national officer for health Colenzo Jarrett-Thorpe said: “Despite the warm words from the NHS their response is entirely inadequate, workers are being ripped off and exploited and their message is essentially that it is down to individual trusts if they allow umbrella companies or not.

“It is especially alarming that the NHS is aware that there are illegal umbrella companies operating in its environs and they are still not prepared to ban them.” Under an umbrella company contract the worker does not receive the pay agreed with an agency. Instead, from the workers’ earnings the employer’s national insurance contributions are deducted as well as the standard employee’s national insurance contributions and income tax.

On top of this workers often have their holiday pay rolled up into the rate, which means they have a weekly amount of holiday pay allocated as part of their pay and when they actually take annual leave they receive nothing.

If the worker agrees to pay into an auto-enrolment pension scheme, they again have to pay both the employer’s and the employee’s contributions. To add insult to injury the umbrella company then takes a further slice of the worker’s pay, usually around £20 a week, for the privilege of being paid in this way.

The reason that agencies, force workers to be paid via umbrella companies, is to avoid paying employer’s national insurance contributions, holiday pay and pension contributions and effectively boosting their profits.

Umbrella companies are legal but Unite has been able to take cases on behalf of members depending on the worker’s individual circumstances.

Colenzo Jarrett-Thorpe added: “Umbrella companies are simply parasites feasting off workers wages. Although they are not technically illegal they are certainly immoral.

Unite will be now targeting individual NHS trusts that allow umbrella companies to be used, not only will we ensure they ban their use in future but we will also demand they pay back the money our members have lost, in being paid in this way.”