News Item

Posted: 29th February
By: rlf

Construction workers denied access to auto-enrolment pension scheme

According to a new report published in the Guardian, there has been a dramatic rise in the construction industry of the number of construction workers being made to register as self-employed by their employers.

Not only that, but these construction workers are being made to use ‘umbrella’ companies to receive their wages, meaning they’re missing out on pension contributions.

Umbrella companies operate by requiring a worker to sign a contract stating they are self-employed.

Employers do this to avoid paying employees’ NICs and auto-enrolment payments, as ‘self-employed’ status passes this responsibility over to the employees themselves. They are also denied all the other rights of an employee, such as holiday pay, paid sick leave and overtime.

To add insult to injury, the worker is usually expected to pay for the payroll company’s services with a weekly charge (usually £15-£25), taken directly from their wages.

More than two million workers on British construction sites are employed through agencies, and the Citizens Advice Bureau has estimated that as many as 460,000 people could be bogusly self-employed.


The use of umbrella firms is highly controversial: unions accuse them of dodging taxes and denying employees the full employment rights they’re entitled to.

And undoubtedly, it’s the biggest employment rights challenge in the construction industry. In the past, the government has tried to tackle the issue, going so far as to ban agencies and payroll companies from falsely claiming workers are self-employed. But it is still rife in the industry.

In September 2013 UCATT strongly welcomed Labour’s announcement that they will stamp out false self-employment in the construction industry and other major tax breaks for businesses to fund the removal of the bedroom tax.

Labour are now committed to implementing a policy that will see workers with all the characteristics of employees but registered as self-employed, deemed to be employees for tax purposes, unless they meet strict criteria to prove that they are self-employed.


The Construction industry typically has a far higher proportion of self-employed workers and sub- contractors than most sectors, and they will often move jobs every few months. This means that employers are not obliged to offer the worker the opportunity to sign up for auto enrolment. This is creating large holes in workers’ pensions and they risk remaining in pension limbo and never being able to save for retirement.

If the Government is serious about encouraging construction industry workers to save for their future, they need to close down these fly-by-night operations which undermine the rights of employees.