Construction workers missing out on auto-enrolment pensions

Builders and other professionals in the construction industry made to use ‘umbrella firms’ to receive their wages are missing out on pension contributions, according to unions.

The ‘umbrella’ companies were formed to move construction workers into these groups to avoid them appearing as full-time employees, but this is now undermining their chances of being auto-enrolled in a workplace pension scheme.

Presently, more than two million people who work on British construction sites are employed through agencies, and are regularly advised to be paid through an umbrella company.

However, the unions are accusing umbrella firms of dodging taxes and forcing their workers to be “self-employed” when, in reality, they are full-time employees deserving of full employment rights, including being enrolled into a pension scheme.

Back in 2014, the Government ruled against payroll companies and agencies from falsely claiming their construction workers were self-employed; allowing them to avoid paying employers’ national insurance contributions of 13.8 per cent per employee.

But to sidestep the regulations, temporary workers could join these umbrella companies which were deemed legal by HM Revenue and Customs (HMRC). However, this has resulted in construction staff paying not only their own national insurance contributions but their employer’s too; as well as missing out on pension contributions due to the fact they are deemed the employer themselves as part of the umbrella company.

The Union of Construction, Allied Trades and Technicians (UCATT) has launched a scathing attack, labelling umbrella companies the “boil on the back of the construction worker, bleeding our members dry”.

“Many construction workers move from job to job and agency to agency every few months,” added UCATT.

“Because they will be paid via an umbrella company for a period of less than three months before they move on to another agency and another umbrella company, they risk remaining in a pensions limbo and never being enrolled on auto-enrolment.”

Last August, Citizens Advice admitted there could be almost half-a-million (460,000) people who are “bogusly self-employed”.

Date published 11 Feb 2016 | Last updated 20 Sep 2022