Auto-enrolment pensions: Why some construction workers are missing out

Construction workers risk missing out on auto-enrolment pensions through mis-use of “umbrella” companies.

Construction workers are being forced to use “umbrella” firms to receive their wages and missing out on the auto enrolment pension scheme as a result.

A recent report in The Guardian has again raised the issue of a significant number people who work in the construction industry being shifted into “umbrella” companies in an effort to hide them as being full time employees, meaning they miss out on pension contributions.

Unions claim that their use forces workers to pay higher taxes and miss out on the rights that full employment brings, including the auto enrolment pension scheme.

The use of umbrella companies is controversial. The Union of Construction, Allied Trades and Technicians (UCATT) says that their use has increased dramatically since legislation was passed by the government in April 2014 to put an end to employment agencies masquerading employees as being self employed to avoid paying National Insurance.

It was envisaged that this would result in construction workers being paid on a normal PAYE basis.

However, to bypass the new rules, employees are required to join umbrella companies and end up paying both the employee’s and employer’s National Insurance contribution.

Umbrella companies are legal but only for temporary workers. UCATT published a report titled ‘The Umbrella Company Con-Trick”, which states that their use leaves employees in “pension limbo”.

The report states: “Some workers paid via umbrella companies are losing out on their pension. This is because some umbrella companies are taking advantage of an optional three months’ waiting period or ‘assessment postponement’ before enrolling workers onto the government’s auto enrolment pension scheme.

“Many construction workers move from job to job and agency to agency every few months. So because many workers will be paid via a given umbrella company for a period of less than three months, before they move onto another employment agency and another umbrella company, they risk remaining in a pensions limbo and never being enrolled onto the auto enrolment scheme.”

UCATT claim that if this situation is left unaddressed, the state could end up counting the cost in the long term and are calling on the government to intervene: “All this is storing up a potential disaster which could condemn thousands of construction workers to an old age lived in poverty, with only the state pension for support. This in turn will put huge pressure on state services, including health and housing, as individuals struggle to provide for themselves.

“The government’s auto-enrolment pension scheme was intended to ensure dignity in old age. The activities of employment agencies and the umbrella companies they use are undermining this aspiration.”

Workers who feel they are victims of this exploitation are advised to contact their union for further advice and keep copies of wage slips and any contracts signed.

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