The umbrella company market: Assessing the attitudes and concerns of umbrella company workers

Executive Summary

  • Over three in five umbrella company workers (61%) believe that there are no advantages to operating via an umbrella company
  • Over two-thirds (69%) reported that their clients have insisted they operate through an umbrella company as a result of IR35 reforms
  • Over seven in 10 umbrella company workers (74%) are dissatisfied about working via an umbrella company, with one in two (50%) very dissatisfied

The use of umbrella companies – which act as an intermediary between contractors and clients in the supply chain for payroll purposes – has grown substantially since the reforms to IR35 in the private sector in April 2021. In fact, over two-thirds of umbrella company workers (69%) have stated that their clients insisted they work through an umbrella company since the changes to IR35 last year. Furthermore, almost two-thirds (63%) stated that they had some level of choice but were given a limited range of umbrella companies to choose from whilst, concerningly, five per cent were unable to choose their umbrella company and had to operate through one allocated to them.

However, despite self-employed workers being forced to operate via an umbrella company, over half of umbrella company workers (57%) believe that their role is outside of IR35 and that the supply chain won’t allow them to take the risk of working through their own limited company. 

The disadvantages to working via an umbrella company

Despite the recent growth in the use of umbrella companies, the research found that over seven in 10 umbrella company workers (74%) are dissatisfied about working via an umbrella company, with one in two (50%) very dissatisfied. When asked why they are dissatisfied, eight in 10 (80%) cited the fact that they have to cover the liability for Employer’s National Insurance, and where applicable, the Apprenticeship Levy, through a reduction in their day rate.

Moreover, 79 per cent of umbrella company workers cited the fact that they have to pay umbrella company fees, whilst over seven in 10 (72%) argued that they don't have the same full employment benefits as an employee and a further seven in 10 (70%) reported that they lost their independence and ability to work however they wish.

Introduction

Over a third of freelancers (34%) now operate through an umbrella company in the UK, with freelancers increasingly operating in this way since the introduction of the off-payroll working reforms (IR35) in the private sector in April 2021.1

The IR35 reforms shifted the responsibility for determining the employment status of freelancers and contractors to the end-clients for medium and large sized private business clients.

Initially implemented in the public sector in 2017, the changes affect how freelancers and contractors can engage with clients, predominantly affecting individuals operating through limited companies.

We know that as a result of the IR35 reforms, and particularly in the immediate aftermath of the implementation, working through an umbrella company has been a requirement for many contractors to secure certain contracts.2

In fact, IPSE’s previous research has revealed that over a third of contractors (35%) have left self-employment since the IR35 reforms and of those who remain, one in three contractors (36%) are now working in engagements that are deemed inside IR35.3

This is largely driven by the actions of clients when determining IR35 status, with IPSE research revealing that one in five clients (20%) have implemented blanket assessments and determined that all their contractor engagements are within IR35.4

Despite the many reputable umbrella companies in the sector, the unregulated nature of the umbrella company market now means that unscrupulous operators and fraudulent companies continue to pose a threat to freelancers by engaging in tax and employment rights non-compliance, whilst undermining the offers of compliant umbrella companies.5

Similarly, we also know that of those now operating through an umbrella company, almost two thirds (63%) had some level of choice but were given a limited range of umbrella companies to choose from whilst, concerningly, five per cent were unable to choose their umbrella company and had to operate through one allocated to them.6

This report will assess the impact of increased umbrella company use amongst the self-employed sector by evaluating satisfaction levels with a range of different aspects of umbrella company use, reviewing the onboarding process and the provision of key documents whilst also highlighting some of the areas of concern within the unregulated market.

Working via an umbrella company

Working via an umbrella company

We asked umbrella company workers why they either currently or previously operated through an umbrella company.

The majority of umbrella company workers (69%) reported that their client insisted they operate through an umbrella company as a result of the IR35 changes in the private sector.

A further 31 per cent of umbrella company workers stated that their agency insisted that they operate through an umbrella company, 14 per cent stated that their engagement was advertised as ‘umbrella only’ whereas just eight per cent made the decision themselves to operate through an umbrella.

“I'm effectively being forced to work this way against my will due to my Client's lack of understanding of IR35!”

"Quite often they [umbrella companies] are "a necessary evil" as a consequence of IR35 regulation and clients wishing to protect themselves across the board rather than judging each case in its merits.”

"All financial service companies have blanket banned using contractors through Ltd companies, despite what HMRC say. It’s incredibly unfair to be taxed like an employee and also pay employers taxes while not being entitled to the same benefits as employees. Being a so called ‘employee’ of an umbrella is a joke.”

69% of umbrella company workers reported that their clients insisted they operate in this way as a result of the IR35 changes in the private sector.

Why do you work via an umbrella company?

1. Which of the following best describes why you currently work via an umbrella company.png

Percentages do not add up to 100% because respondents were able to select multiple responses

 

We also asked umbrella company workers what percentage of their annual income comes from roles performed whilst operating through an umbrella company in order to understand how freelancers are now operating and whether they now operate in numerous ways since the implementation of the IR35 reforms.

On average, respondents had an average of 85 per cent of their annual income coming from roles performed while operating through an umbrella company, with almost half (47%) reporting that 100 per cent of their annual income comes from roles while employed through an umbrella company.

Just eight per cent indicated that roles performed via an umbrella accounted for less than 50 per cent of their annual income.

Onboarding process

Onboarding process

In order to understand the experience of umbrella company workers when moving to umbrella company work, we asked whether they were able to continue with their existing pension provider and whether the rate paid to the umbrella company was amended from the original rate paid to their limited company.

Two-fifths of umbrella company workers (40%) reported that their umbrella company allowed for them to keep their existing pension provider whereas 30 per cent reported that their umbrella company was unable to keep their existing pension provider.

On whether the rate paid to the umbrella company was amended from the original rate paid to their limited company, 29 per cent of umbrella company workers reported that the rate was not amended and a rate change not discussed whilst 12 per cent stated that it was not amended but it was discussed.

A further 13 per cent reported that their rate was increased but not for specific employment costs and nine per cent reported that it was increased to account for costs such as Employer’s National Insurance contributions.

“I am on my second umbrella company in 4 months. I have no idea when I will be paid… I cannot get them to integrate with existing pensions. Nothing is joined up.”

“Much more difficult to set up pension payments to an existing personal pension than under a limited company.”

“I was even forced to take a mandatory pension scheme when I told them I had my own arrangements which I pay into every month and have done for 5 years as a self employed - but they didn't want to listen - I had to wait until the scheme had started and then had to write and OPT OUT of their scheme - total nonsense.”

“I cannot stand it. I was so proud of working through my own limited business, but this is a huge chore. They've messed up my tax (telling HMRC they expect me to earn 300k this year - which has moved me onto an insane tax band. Whereas I'll actually earn around 60k). I lose so much more in tax.”

Key documents

Provision of key documents

We also asked umbrella company workers whether their umbrella company had provided them with a payslip, a contract or terms and a Key Information Document when starting out with their umbrella company.

Overall, 88 per cent of umbrella company workers reported that they were provided with terms or a contract by their current or last umbrella company, with just six per cent reporting they had not and four per cent unsure.

In addition, just over half of umbrella company workers (54%) reported that they were provided with a Key Information Document by their current or last umbrella company, with 24 per cent reporting they had not and 19 per cent unsure.

Similarly, the majority of umbrella company workers (94%) stated that they had been provided with a payslip by their current or last umbrella company, with just three per cent reporting they had not and one per cent unsure.

“Payslips are provided, but are difficult to interpret and check because of holiday, use of low regular pay with fake bonus, bundling of tax. I have no choice but to be paid weekly and this can skew the tax & NI compared with monthly. Also makes a mess of pension payments.”

“The company accidentally paid me somebody else's pay slip in the first month. I was asked to keep the money, and pay it back over time. This was initially disturbing, but worked out okay.”

“Payslips wrong almost every month. They have one job and do not do it very well, costing me money.”

“[…] had a very complicated Employment Contract that I contacted them about to ask to opt out of several ridiculous clauses, but they have never produced an amended version.”

Satisfaction

Satisfaction

The majority of umbrella company workers (74%) reported that they were either somewhat or very dissatisfied about working through an umbrella company, with half (50%) very dissatisfied.

Only 16 per cent reported that they were either somewhat or very satisfied about working through an umbrella company.

“It is rubbish. It erodes any advantage there is to being a freelancer against, what is without question, already a backdrop of risk and uncertainty.”

“The Umbrella I chose was one of the few good ones. However, I still ended up disadvantaged with extra costs, extra taxes and NI, no rate change (more of a drop actually) and none of the employee rights and benefits.”

“This seems to offer no benefit to me - i.e., they take no risk, yet take a management charge for doing very little.”

In order to understand levels of satisfaction across a range of different aspects to operating via an umbrella company, we asked umbrella company workers what they considered an advantage to operating in this way.

Just over one in four umbrella company workers (26%) cited reduced administrative and time burden as an advantage to operating via an umbrella company whilst a further eight per cent reported that access to professional liability insurance was also an advantage to operating in this way.

A further six per cent cited the advantage of being enrolled onto a pension scheme and another six per cent cited the ability to have a continuous income stream.

In addition, access to holiday pay and Statutory Sick Pay were only deemed advantages by five per cent of all respondents.

However, 61 per cent of umbrella company workers reported that there were no advantages to working via an umbrella company.

“My experience so far (< 2 months) has been satisfactory. It is nice to be receiving a salary quickly and to have reduced stress managing my limited company. However, this contract could easily be justified as outside IR35, and it is distressing to think that my company may become unviable if this is the future of contracting.”

“My whole consultancy business has been destroyed by blanket banning of contractors outside IR35 and there is no benefit of using an umbrella company.”

“No benefits at all - just huge administration burden (two lots of timesheets to do - one for client and one for umbrella company).”

74% of umbrella company workers were either somewhat or very dissatisfied about working via an umbrella company. 61% of umbrella company workers reported that there were no advantages to working via an umbrella company.

 Advantages of working via an umbrella company

6. What are the advantages, if any, of working via an umbrella company-.png
Percentages do not add up to 100% because respondents were able to select multiple responses

 

Similarly, in order to understand levels of dissatisfaction across a range of different aspects to operating via an umbrella company, we asked umbrella company workers what they considered a disadvantage to operating in this way.

The majority of umbrella company workers (80%) reported that having to cover the liability for Employer’s National Insurance, and where applicable, the Apprenticeship Levy was a disadvantage to operating via an umbrella company.

Other disadvantages included having to pay umbrella company fees (79%), fewer tax breaks compared to operating through a limited company (75%), not being entitled to the same full employment benefits as an employee (72%) and loss of independence and control (70%).

Notably, just one per cent of umbrella company workers reported that there were no disadvantages to working via an umbrella company.

“Umbrella companies often wrongly state that IR35 is irrelevant if working through an umbrella company. This is untrue. IR35 status affects ability to claim expenses for all and working through an umbrella on an outside IR35 contract results in paying a huge amount of unnecessary National Insurance.”

“Just that it is overwhelmingly sad that we have had our livelihoods taken away from us. No control, forced into higher tax brackets, nil benefits.”

“I am an employee in name only. I get none of the benefits of being an employee. The day rate that I negotiate with the end client gets paid to the umbrella and then they take away their NI contribution, apprenticeship levy and a 'fee'. I don't get a salary if I don't work unlike a real employee and on my payslip most of the pay is made up of 'commission' rather than basic pay which means I can't get loans or finance because commission is not guaranteed income even though it's not commission it's my income from my work with my client! The umbrella is just a middle man. My end client doesn't want the hassle of having to run IR35 assessments for all its contractors so they've passed us to umbrellas who just act as middle men. I'd much rather work directly for the end client as a contractor and choose to pay the tax they insist upon, directly to HMRC. We are treated as second rate employees with no rights!”

 80% of umbrella company workers cited having to cover the liability for Employer's National Insurance as a disadvantage of operating via an umbrella company.

Disadvantages of working via an umbrella company

7. What are the disadvantages, if any, of working via an umbrella company-.png

Percentages do not add up to 100% because respondents were able to select multiple responses 

Deductions

Employer's National Insurance and Apprenticeship Levy deductions

All UK employers have to pay Employer's National Insurance contributions, including umbrella companies, and is calculated at a standard rate of 13.8 per cent on earnings over £156 per week. Similarly, the Apprenticeship Levy is also paid by all employers with annual contract work exceeding three million pounds at a rate of 0.5 per cent of the company’s total pay in order to fund new apprenticeships and vocational skills in the UK. However, the umbrella companies, then in some cases, pass on this cost to contractors through a deduction on their payslip or a reduction in their negotiated day rate.

Previous IPSE research in 2021 revealed that some of the key reasons for dissatisfaction amongst contractors was that they were responsible for this liability despite the fact they are not entitled to certain employment rights.7

In order to understand how the liability for Employer’s National Insurance, and where applicable, Apprenticeship Levy deductions is covered for those operating via an umbrella company, we asked who is responsible for the liability and overall satisfaction levels for this arrangement with their umbrella company.

Overall, when asked about who ultimately foots the bill for this liability, the overwhelming majority of umbrella company workers (80%) reported that they themselves cover the liability for the Employer’s National Insurance, and where applicable, the Apprenticeship Levy, through a reduction in their day rate.

Other responses on who covers this liability included the umbrella company (7%), the client (4%) and the agency (2%).

When asked about their satisfaction with the handling of Employer’s National Insurance, and where applicable, Apprenticeship Levy deductions from their umbrella company, 43 per cent of umbrella company workers reported that they were either somewhat or very dissatisfied.

On the other hand, one fifth of umbrella company workers (20%) reported that they were either somewhat or very satisfied.

“The umbrella actually confirmed they were the employer in written communication but still evaded the Employers NI and took it from my pay.”

“I would prefer to have a direct Fixed Term contract with the company at the rate I was engaged at before IR35 came into force, then I can do away with Employers NI & Apprentice Levy which I think are totally unfair given the nature of our standing within the business.”

80% of umbrella company workers reported that they themselves cover the liability for Employer's National Insurance through a reduction in their day rate.
Holiday pay

Holiday pay

38% of umbrella company workers did not understand how holiday pay is calculated and administered when operating through an umbrella company.

We also asked umbrella company workers about their current holiday pay arrangements, satisfaction with their current arrangements, whether they understand the way holiday pay is calculated and administered and how they would like holiday pay to operate when working via an umbrella company.

Currently, when operating through an umbrella company, umbrella company workers are entitled to 28 days holiday per year but, unlike employees, umbrella companies do not fund this holiday entitlement, with 12.07 per cent typically taken out of the umbrella company workers’ day rate in order to fund the annual leave.8

The majority of umbrella company workers (77%) reported that they receive their holiday pay as part of their normal pay whereas, concerningly, nine per cent stated that they were unclear about the holiday pay arrangements that they have with their umbrella company.

A further four per cent reported that their holiday pay is withheld by their umbrella company and they have to claim it back whilst three per cent reported that their holiday pay is automatically paid to them at the end of an assignment or time period.

When asked about their satisfaction with their current holiday pay arrangements whilst operating via an umbrella company, over one in three (35%) stated that they were either somewhat or very dissatisfied with the holiday pay of their umbrella company, with 22 per cent very dissatisfied.

A further 23 per cent reported that they were either somewhat or very satisfied with the holiday pay arrangements of their umbrella company.

On whether they understand the way holiday pay is calculated and administered when operating through an umbrella company, just over half of umbrella company workers (53%) reported that they did understand the way it is calculated and administered.

However, 38 per cent reported that they did not understand how holiday pay is calculated and administered when operating through an umbrella company.

When asked about how they would like holiday pay to operate when working via an umbrella company, over half of umbrella company workers (55%) reported that they would like to be able to elect to receive all their pay as they go and ignore holiday pay on temporary and fixed term assignments so they know nothing is withheld.

Other responses included wanting to be able to take holiday pay as they accrue it, automatically, so they know nothing is withheld (39%), wanting holiday pay to be abolished for temporary and fixed term working as it can be used to withhold funds from them (26%), wanting to be able to take time off and get paid holiday pay if they’ve accrued it like a permanent employee (15%) and wanting the rate the supply chain pays to the umbrella to include a specific amount for holiday pay (10%).

“I don't feel in control. The umbrella company should not be taking employers NI from me and the method they use to calculate my holiday pay is baroque to say the least.”

“Working through an umbrella is frustrating as the relevant deductions aren't always transparent (e.g. holiday pay) on the payslip.”

“The umbrella tried to convince me that it was a benefit that they provided me holiday pay - took a while for the penny to drop when I tried to point out to them that it was me funding my own holiday pay, they just benefit from the temporary interest on my cash.”

When operating through an umbrella company, how would you like holiday pay to operate?

17. When working through an umbrella company, how would you like holiday pay to operate.png

Percentages do not add up to 100% because respondents were able to select multiple responses 

Umbrella company provision

Other areas of umbrella company provision

In order to understand umbrella company workers’ satisfaction with several key aspects of umbrella company provision, we explored a range of elements such as payment timings, pension arrangements, holiday pay, communication, management of business expenses and their handling of Employer’s National Insurance, and where applicable, Apprenticeship Levy deductions.

Payment timings

Currently, due to the lack of regulation within the sector, there is no legal requirement for umbrella companies to pay umbrella company workers within a certain timeframe, with umbrellas only responsible for fulfilling their contractual agreements that have been agreed with the individual umbrella company worker.

When asked about the payment timings of their current umbrella company, the majority of umbrella company workers (60%) reported that they were either somewhat or very satisfied with the payment timings of their umbrella company, with 39 per cent very satisfied.

On the other hand, 24 per cent of umbrella company workers reported that they were either somewhat or very dissatisfied with the payment timings of their umbrella company.

This represents a small increase on our research from August 2021, where almost one in five (18%) reported that they were either somewhat or very dissatisfied9, and likely linked to recent high-profile umbrella companies experiencing cyber-attacks and as such being unable to pay their contractors.10

“... They were also late payers and really did not care about freelancers. They just wanted their money.”

“Numerous late payments and poor communication when trying to address these late payments.”

Pension arrangements

Currently, an umbrella company must contribute at least three per cent to an individual’s pension if they are enrolled on their scheme.

Overall, when asked about their satisfaction with the pension arrangements offered by their umbrella company, 37 per cent of umbrella company workers stated that they were either somewhat or very dissatisfied with the pension arrangements of their umbrella company, with 22 per cent very dissatisfied.

This actually represents a small increase on our research from 2021, where over a quarter (28%) were either somewhat or very dissatisfied with the pension arrangements offered by their umbrella company.11

A further 28 per cent reported that they were either somewhat or very satisfied with the pension arrangements of their umbrella company.

“There is no consistency. Some do not let you pay into your own private pension, some do let you take expenses, some charge you for business insurance. It is a disgrace.”

“… However, IR35 no longer makes it financially worthwhile for me to continue to work anymore than 2 days a week with most of my salary being sacrificed to the mandatory […] pension provider.”

“They deduct pension contributions but can take up to 6 weeks after the deduction is made before I see it in my pension.”

Communication

When asked about their satisfaction with the communication of their umbrella company, 38 per cent of umbrella company workers reported that they were either somewhat or very dissatisfied with the communication of their umbrella company, with 21 per cent very dissatisfied.

A further 37 per cent were either somewhat or very satisfied with the communication of their umbrella company.

“I'm constantly chasing payments and have to mess around with so much more admin. It's just awful. The communication is terrible. I'm enrolled in pensions I know nothing about and this week they have been hacked and so we have no access to anything. It's a nightmare.”

“Recent malicious attack on mine and other umbrella companies. The communication has been terrible, I have not been paid on time or paid correctly and I'm not convinced my personal data hasn't been compromised.”

Management of business expenses

Overall, when asked about their satisfaction with the management of business expenses from their umbrella company, two-fifths of umbrella company workers (40%) reported that they were either somewhat or very dissatisfied, with almost one-third (30%) very dissatisfied.

Just seven per cent of respondents reported that they were either somewhat or very satisfied with the management of business expenses from their umbrella company.

“I receive no benefit working through the umbrella. I just have to foot my own work expenses/training etc now.”

“Not being able to claim expenses on a weekly basis means that working away from home is now cost prohibitive which makes the contract workforce less flexible.”

IR35 status

IR35 status of the role

In order to understand how umbrella company workers view the IR35 status of their current arrangement whilst operating via an umbrella, we also asked how they view their current role in terms of whether it should fall inside or outside of IR35 and why they think this is the case.

Over half of respondents (57%) thought that their role is outside of IR35 but the supply chain just doesn’t want any risk so is avoiding limited company workers whereas 13 per cent thought their role is inside of IR35 and could understand why they are engaged through an umbrella company as an employee.

A further nine per cent thought that their role is outside of IR35 but the supply chain doesn’t have the expertise to assess it properly.

In addition, eight per cent thought that their role is inside of IR35 but they would rather be engaged directly by the end-client as an employee.

“It just seems wrong to be forced to work via an umbrella when my contract should be outside IR35 but that was the only choice other than not accepting the assignment.”

“I hate the fact that I am paying employers NI on a role I would be confident is outside of IR35 but due to a blanket ban, I'll never know.”

Thinking about your current engagement through an umbrella company, do you believe the role is inside or outside IR35?

13. Thinking about your current engagement.png
Tax non-compliance

Concerns over tax non-compliance

With media reports of fraudulent mini-umbrellas and other tax avoidance schemes from some umbrella companies12, it was important to ask umbrella company workers whether they have encountered or suspected any tax non-compliance or avoidance from their umbrella company.

Overall, when asked if they were concerned with tax non-compliance from their current umbrella company, over half of respondents (53%) stated that they were either not very concerned or not at all concerned with tax non-compliance from their current umbrella company.

However, 15 per cent of umbrella company workers indicated that they were either fairly or very concerned with tax non-compliance from their umbrella company.

In addition, when asked if they had suspected an umbrella company to be adopting a tax avoidance scheme, the majority of respondents (69%) reported that they had not suspected an umbrella company to be adopting such as a scheme.

However, 14 per cent of umbrella company workers reported that they have suspected an umbrella company to be adopting a tax avoidance scheme.

“It's a minefield. Implementing IR35 has created a whole new industry of con artists and liars. I killed my income when I was forced to be inside. Plus, I suspected a tax avoidance scheme with no recourse to anyone without fear of penalties on myself so quit the role and remained unemployed for months after.”

Conclusion

Conclusion and recommendations

Since the implementation of IR35 reforms in the private sector, contractors are increasingly moving towards umbrella companies and often not on their own accord. In fact, this report worryingly shows that a significant number of self-employed workers have been forced by their clients to operate through an umbrella company due to fears of falling foul of the rules.

While some will argue that they help solve the issues that hiring organisations have around IR35, the unregulated nature of the market means that contractors are now at risk of unscrupulous practices whilst often foregoing previous independence and with increased concerns around pensions, holiday pay, privacy and payment timings.

Similarly, with the majority of umbrella company workers finding no advantages to working via an umbrella, it is clear that more needs to be done to give tangible benefits to umbrella company workers and correct the unregulated nature of this entrant into the supply chain as a result of the IR35 reforms.

Recommendations

1. Government must expediate its plans to introduce regulation of the umbrella company market with the creation of a Single Enforcement Body. IPSE welcomes the recent Call for Evidence on the umbrella market but urges government to make the establishment of a Single Enforcement Body a priority.

2. As part of its work to regulate the umbrella market, government should ensure that employer liabilities, such as Employer's National Insurance and the Apprenticeship Levy, are genuinely covered by employers and not contractors. This report reveals that 80 per cent of umbrella company workers are covering the liability for Employer's National Insurance themselves, through a reduction in their day rate.

3. Umbrella company providers should introduce transparent calculations and clearer explanations for how holiday pay is calculated and administered. With this report finding that 38 per cent of umbrella company workers did not understand how holiday pay is calculated and administered when operating through an umbrella company, umbrella company providers should improve their communication over how holiday pay works and provide greater clarity over the figures provided on payslips.

4. Government should consider how it can ensure freelancers’ incomes are better protected when working inside IR35. Umbrella company providers should be under the same responsibility as other employer's in ensuring that sensitive information is protected and details of any threat to employees' data and earnings should be efficiently and clearly communicated to those affected.

5. Umbrella companies should ensure that their contractors are paid on time – ideally within a 30-day period, like other employees. Despite being required to work in an employment style relationship, a significant proportion of contractors are not receiving their employment income on time – with 24 per cent of contractors reporting that they are dissatisfied with the payment timings of their umbrella company. Ultimately, if contractors caught by IR35 are to be treated like employees, then they must be paid on time and in a transparent way like other employees.

6. Government should review the effectiveness of the current IR35 dispute resolution rules. It is clear that for most contractors, working through an umbrella is not their preferred choice, with more than two thirds (69%) reporting that their client insisted upon it, whilst 61 per cent said that there were no advantages to working through an umbrella company. When a contractor disagrees with their client’s inside-IR35 determination, they can ask the client to review their decision – but ultimately, they often have little choice but to work through an umbrella or refuse work. In fact, previous IPSE research has revealed that just 17 per cent of contractors that challenged their determination had successfully changed their determination outcome. As part of its promised review into the implementation of the off-payroll rules in the private sector, government should assess the effectiveness of the current dispute resolution system to ensure that freelancers with sufficient reason to disagree with their client’s determination can request an independent resolution.

Appendix

References

1. IPSE, Taking stock: Assessing the impact of IR35reforms in the private sector, 2021

2. IPSE, Taking stock: Assessing the impact of IR35reforms in the private sector, 2021

3. IPSE, Taking stock: Assessing the impact of IR35reforms in the private sector, 2021

4. IPSE, The client's perspective: Assessing the impact of IR35 reforms in the private sector, 2022

5. IPSE, Response: Call for Evidence - Umbrella Company Market, 2022

6. IPSE, Taking stock: Assessing the impact of IR35 reforms in the private sector, 2021

7. IPSE, Taking stock: Assessing the impact of IR35reforms in the private sector, 2021

8. https://www.contracteye.co.uk/umbrella-companies-holiday-pay.shtml Accessed 23/02/22

9. IPSE, Taking stock: Assessing the impact of IR35reforms in the private sector, 2021

10. https://www.contractoruk.com/news/0015341hackers_attack_parasol_and_brookson_leaving_umbrella_contractors_unpaid.html Accessed 23/02/22

11. IPSE, Taking stock: Assessing the impact of IR35 reforms in the private sector, 2021

12. https://www.bbc.co.uk/news/uk-57021128 Accessed 24/02/22

Acknowledgements

The report was written by Joshua Toovey, Senior Research and Policy Officer at IPSE.

Methodology

This report is based on the results of an online survey conducted by IPSE between Monday 17 January and 8 February 2022. The respondents were a sample of 584 umbrella company workers working across a range of occupations in the top three highly skilled Standard Occupational Categories (SOC1-3). A total of 71 per cent of the sample were currently operating through an umbrella company whilst 29 per cent had previously operated via an umbrella company.