Furlough and the push for better regulation of the umbrella sector

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The past 12 months have, without doubt, been some of the toughest in our lifetimes and I know that for so many of our Parasol employees, this period has brought stress, anxiety and uncertainty like never before.

Back in May, I said that contractors represented the backbone of the UK economy and that's something I'm even more convinced of today. The strength and resilience I've seen from contractors all over the country gives me great confidence that as a sector, we will come back from the challenges of the past year stronger.

I also said back in May that contractors were at the heart of everything we do at Parasol and that this was very much in the DNA of our business. Our aim is to be with our employees all the way, and we've stood shoulder to shoulder with our contractors throughout some of the darkest days of this pandemic.

Furlough pay and the CJRS

I'm incredibly proud of the position we adopted as a business in relation to the Coronavirus Job Retention Scheme (CJRS) and the support we were able to provide through furlough pay.

Back in March when the pandemic had first taken hold, we were working tirelessly behind the scenes to seek clarity on how the CJRS would apply to umbrella employees. It was clear from the original guidance that the government hadn’t fully considered the way in which an umbrella employee works, and although we appreciate the complexities that come with creating so many new policies and support mechanisms at speed, the confusion it caused created a difficult situation for us and the many contractors we support.

Many in the industry, including us at Parasol, were left in a difficult position. Without clarification from HMRC, any attempt to calculate furlough pay could have also run the risk of being non-compliant with the scheme – a position we refused to put our employees in.

As one of the industry's biggest umbrella employers, the impact of getting this wrong would have been hugely significant. Thankfully, we did receive the clarity we had pushed for on furlough eligibility in May and this meant we could pay our umbrella workers quickly, but importantly we also did so from a fully compliant standpoint, which has always been central to everything we do at Parasol.

Furlough extensions

In June, after the government had confirmed its intention to cut the grant available through the CJRS from August, Parasol made the unprecedented decision to absorb the full cost of employer’s National Insurance (NI) and pension contributions for all of our furloughed contractors in addition to the cost of statutory holiday pay that accrued during the period of furlough. On top of that, we also stepped in to top up our employees’ salaries in September and October, ensuring that all furloughed contractors continued to receive 80% of their average income – up to a maximum of £2,500 per month – until the end of October, where eligible.

There were many umbrella companies that ceased furlough pay altogether at that point. The costs associated with accessing the scheme meant that many umbrella companies simply could not afford to continue to offer this support to their employees. But we went even further. We then took the decision to extend our support to the end of December 2020 at significant cost to our business – more than £1million was paid out directly by Parasol to eligible employees in 2020 for costs that were not recoverable by the scheme – and I look back with pride on those decisions and the bold action we took as a business.

Our hope was that this continuation of our furlough support could go some way to ensuring financial peace of mind at an important time of year for so many people, and some of the positive feedback our Employee Support Team received in connection with this decision confirmed that we made the right call. There are many umbrella companies that simply could not provide the same level of support, however due to Parasol’s size and longevity in the market, we were able to put the financial needs of our contractors before anything else.

Championing change

Our furlough support did come to an end at the end of 2020 and as I write this, I'm acutely aware that there will be many contractors still considering what they can do now to get their careers back on track.

I do think there are reasons to be optimistic about the future, with the coronavirus vaccine rollout continuing at pace and a clearer roadmap on how lockdown restrictions will be lifted in what we all hope will be the near future. These changes will no doubt help to unlock the economy and I'm confident that – even with IR35 reforms on the horizon – contractors will have a crucial role to play in the UK’s economic recovery.

One thing that remains a concern for us is the lack of regulation of our sector and a low level of understanding of the industry from the government. This is what contributed to the difficulties with the application of the CJRS last year and it is something we categorically do not want to see happen again.

The government has confirmed that regulation is on the way, but the reality is that this may still be some way off with the lasting impacts of COVID-19 and other issues likely to be higher on the national agenda. We will continue to provide our support, working with respected industry organisations such as IPSE, REC, ASPCO and the FCSA to promote the use of compliant umbrella companies like Parasol, while championing change and more robust compliance for our sector.

This year may not have started how any of us would have hoped, but I truly believe that contractors and the flexible workforce remains one of our economy’s most valuable assets. I sincerely hope anyone reading this that has seen work paused or cancelled because of Covid-19 will bounce back even stronger than before.

Our business will continue to be progressive and compliant, acting as a leading light in the umbrella sector to protect and enhance its reputation. I am sure the future will be brighter for all of us.

Doug