Osborne Clarke was yesterday, 3rd May,  quoted by the Financial Times in relation to future labour supply chain regulation.

Kevin Barrow, a partner in the Osborne Clarke Workforce Solutions sector team, was quoted by the FT on a possible solution to the persistent problem in the UK of tax avoidance and general non-compliance by some (but not all) so-called umbrella companies. 

The UK government is currently considering whether to bring the umbrella industry more clearly under the regulatory regime enforced by the Employment Agencies Standards Inspectorate (part of BEIS) (New regulation of umbrellas? Government launches call for evidence - Osborne Clarke | Osborne Clarke). But new regulation per se may not eradicate the worst practices by some umbrellas.  What, therefore, is perhaps needed is more effective enforcement.

Increased use of criminal law sanctions might get rid of some operators and HMRC has said it is taking greater action (Increased HMRC activity to prevent tax evasion in labour supply chains – confirmation of two developments - Osborne Clarke | Osborne Clarke).  Ultimately the government may conclude that the only practical way of achieving that will be to make end users of the relevant supply arrangements liable for whatever bad happens in their supply chain.

As with the Gangmaster regime there may be a defence if the end user only uses suppliers which  have passed a rigorous statutory audit standard and have a licence (the licence fees for which will help pay for the administration of the regime). That may be seen as the only way the UK can materially reduce unlawful behaviour by some types of umbrella company in supply chains. More information about this sort of approach is in this briefing: Umbrella companies and PEOs: is this the end or the beginning? - Osborne Clarke | Osborne Clarke.

Without that sort of a new regime, companies that try to do the "right thing" are likely to be left facing competition from cheaper rivals who are not so scrupulous about the types of labour supplier they use, and so we imagine that the majority of well-run companies will welcome anything which can help reduce the race to the bottom that some sub-sectors have experienced in relation to use of labour intermediaries.

And we are sure that the better-run UK umbrellas will welcome enforcement of compliance and the eradication of dodgy practices in their sector – not least because that may open them up to the sorts of institutional investment and opportunity for global growth that their US equivalents (in the form of so-called Professional Employer Organisations) have enjoyed in the last couple of years.

For more information on how Osborne Clarke's Workforce Solutions team can advise you, please contact one of the team.

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