Ever since Contractor’s Voice shone a spotlight on Orange Genie’s malpractice of skimming from workers’ payslips, the conversation around umbrella companies and their handling of deductions has intensified.
Notably, HMRC, in their latest guidance, introduced the term “skimming” and advised agencies to
“check payslips and reconciliation statements […] for unexplained deductions (sometimes called skimming)” (Source: gov.uk).
This directive is a significant win for transparency and is particularly relevant as we delve into the practices and contractual engagement of payroll companies – can umbrella companies deduct as margin more than what they quote?
What Happened?
A few months ago, whistleblower reports from two FCSA umbrella companies highlighted alarming inconsistencies in the way Workwell calculated employer National Insurance (NI) contributions in 2023 for those enrolled in pension schemes. Without access to SafeRec, Contractor Voice facilitated audits via several Certified Umbrella Companies, which revealed systemic miscalculations in Employer NI and Apprenticeship Levy, affecting all pension-enrolled workers that we audited.
The core of the issue lies in Workwell’s pension scheme practices. Seemingly, Workwell gets their workers engaged in salary sacrifice schemes and then converts their employee pension contributions (5% of Qualifying Earnings) into employer pension contributions (therefore changing the employer pension contribution from 3% to 8%). By doing so, the employee pension contribution of 5% becomes exempt from Employer NI, Apprenticeship Levy and Employee NI.
This method of calculation is great and very beneficial for workers when savings on Employer NI, Apprenticeship Levy, and NIC are passed down to them from the Umbrella Company. However, Workwell retains the Employer NI and Apprenticeship savings made instead of passing them on to the employees, inflating (in some cases like in the example below) their margins by over 60%! When contractors have queried this practice with Workwell, they confirm that they keep the employer savings and state that any “employer NI Saving” was included in the Employer National Insurance value referenced in the reconciliation.
Full redacted payslips
Where is the hidden deduction on Workwell payslips?
Workwell (formerly known as JSA), exposed for pocketing holiday pay when Contractor Voice exposed them for the practice in 2022, was in the spotlight again when Julia Kermode, from iWork, received a cease-and-desist letter from them.
Given this backdrop, we are asking what is the ethical stance of this practice and highlighting the deduction as an: “unexplained deduction.”
The intricacies of Workwell’s manoeuvres become apparent when scrutinising their reconciliation statements. In the example above, the designation of costs under “Employer National Insurance” and “Apprenticeship Levy” doesn’t solely account for the sums remitted to HMRC but also include Employer NI and Apprenticeship levy that Workwell retains.
Can you imagine, how would you react as an employee knowing that the statutory deductions listed on your payslip also conceal an additional margin retained by your employer? What would be your reaction?
This question becomes all the more poignant for the many contractors and agencies entangled with Workwell. It is important to highlight that it seems in payslips audited for Q4 2023, Workwell shows an additional line item in their reconciliation called “Employer Salary Sacrifice Saving” highlighting and confirming the practice we have just describe. The term “saving” is ambiguous and contractors we spoke to confirmed they “understood that the savings benefitted them, considering it was [their] payslips”. However, this purported “saving” is, in reality, extra revenue for Workwell.
The presence of this deduction serves to confirm suspicions regarding previously hidden deductions, thereby igniting a broader discussion on the ethicality and transparency of payroll practices and why the FCSA never addressed this breach to their code of compliance by Workwell?
Will the FCSA Take any Action?
The revelation that Workwell has been obscuring the true nature of deductions from workers’ payslips casts a shadow not only on their operations but also on the membership body supposed to oversee them: the FCSA.
The scepticism of Contractor Voice towards the FCSA’s willingness to enforce
these standards equitably is not without merit, especially considering the historical context. The exposé involving a Contract for Services by NumberMill—a company with direct ties to the FCSA board—resulted in no apparent action from the FCSA, further undermining confidence in its commitment to compliance and enforcement; the FCSA has remained disappointingly silent on the questionable practice of their umbrella member. (Link to NumberMill article)
The core issue at hand extends beyond individual companies to the integrity of the FCSA’s oversight. If, indeed, the FCSA has been aware of such practices for years without taking action, it suggests a significant gap in effectiveness. The expectation that the FCSA would update its members about these practices and take steps to prevent them has not been met, leading to a crisis of confidence in the association’s ability to protect fairness between FCSA Umbrella Companies.
In light of these developments, the contracting community is left to ponder the implications of these practices for the broader industry. The FCSA’s response—or the lack thereof—to Workwell’s practices will be a litmus test for its commitment to integrity and ethical standards within the umbrella company sector. As calls for accountability grow louder, the onus is on the FCSA to take action on its members.
Contractor Voice demands fairness for all FCSA members
In the wake of revelations surrounding Workwell’s practices, Contractor Voice stands firmly in its call for integrity and fairness across the board.
A business model that allows for a staggering 60% increase in margins through financial manoeuvres not only raises ethical questions but also puts into perspective the broader impact such practices have on the industry’s landscape.
As Workwell continues to expand its empire through acquisitions, one cannot help but ponder the sustainability of such growth that potentially comes at the expense of transparency and fairness. The situation calls for a collective reflection within the contracting community, urging those affected—be they agencies or workers engaged with Workwell—to come forward.
By sharing their experiences, they contribute to a crucial dialogue that could pave the way for much-needed reform. Contractor Voice is more than a platform; it’s a catalyst for change, advocating for a level playing field where fairness isn’t just demanded but inherently practised by all payroll providers.
