Contractors who use Umbrella Companies are being cheated out of monies by suffering unlawful deductions of Employers Costs such as Employers NIC’s, Apprenticeship Levy and Employers Workplace Pension Costs. 

These deductions are a contravention of the Social Security Contributions & Benefits Act 1992 which prohibits the direct or indirect recovery from employees of employer’s National Insurance Contributions. 

In addition, the Employment Rights Act 1996 also adds additional protection for workers on the other deductions which states employees must not suffer deductions from their wages unless: the deduction is required, authorised by statute or by the worker's contract (which won’t apply here); or the worker has given their prior written consent to the deduction.

We have already seen cases brought before the Courts and Employment Tribunals and in each case the respective Judges ruled this practice is unlawful and made the Umbrella company repay these deductions.  In a case brought by the union - Unison, the Judge made the agency repay these deductions as the Umbrella Co had ceased to trade prior to the hearing.