CONSTRUCTION union Ucatt warned yesterday that unscrupulous bosses are using so-called umbrella companies to shirk their responsibilities and rob workers’ pension pots of up to £17,000.

The union said that the use of such schemes is undermining the implementation of the government’s auto-enrolment pension scheme and effectively means workers are hit with a contributions “double whammy.” 

Under the umbrella company scheme workers are required to pay both the employers’ and the employees’ pension and national insurance contributions.

Ucatt is highlighting the fact that this contradicts the government’s “all in” auto-enrolment advertising campaign — which claimed that both workers and bosses will pay into the new scheme together.

Currently umbrella company workers will have to pay 1 per cent of employees’ earnings and 1 per cent of employer earnings. 

These percentages will increase over the next few years so that eventually employees will pay 4 per cent and employers 3 per cent of a worker’s earnings. 

Workers being asked to pay both contributions are more likely to opt out of the scheme as it would be unaffordable, and would therefore not save for their retirement, the union said.

Ucatt general secretary Steve Murphy said: “Not only are umbrella companies undermining the pay of workers today — they are undermining workers’ futures by making it unaffordable for them to save for their retirement.”

The firms further undermine workers’ pensions as a large element of pay is made up of “expenses” not eligible for use in calculating contributions.

Ucatt calculates that this could cost a worker as much as £17,280 over 30 years from their pension pot.

Most of the firms also delay workers being able to sign up for auto-enrolment for the maximum three month period.

As construction workers in particular frequently change sites and agencies, this will also create large gaps in their pension payments and further reduce retirement income.

Mr Murphy added: “If the government is serious about encouraging workers to save for their future then they need to close down these fly-by-night operations which undermine auto-enrolment.”