• Research
• 25 Apr 2022
• Joshua Toovey

• 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.

Read the full report here