An agency worker who was forced by his agency to enter into an umbrella company arrangement has received compensation from the agency following a successful claim for unlawful deductions of wages and holiday pay.

umbrella companyThe agency worker, in this case, was told by his agency that in order to be paid he needed to enter into an umbrella company arrangement. The umbrella company charged him management deductions each week to be paid in this manner. It also deducted from his pay employer’s national insurance contributions.

He was asked to sign a contract of services, which claimed he was either an employee nor a worker but was self-employed. He refused to sign the contract and when he took holiday he was not asked to return.

Umbrella company arrangement successfully challenged

Allowing an appeal against a tribunal’s decision to dismiss his claim, the Employment Appeal Tribunal said that the commercial reality was that there was a contract of some sort between the worker and the agency. It ruled that:

  • The individual was a worker
  • When deciding whether there was a contact an employment tribunal should consider the intentions of the worker and not just the employer
  • There was a contract between the individual and the agency and the use of an umbrella company did not avoid this relationship
  • Agency workers paid via an umbrella company could be a worker of the agency, the umbrella company or both.


Case reference: Blakely v On-Site Recruitment Solutions Limited