The much anticipated first budget for the new Labour government has now been delivered, for the first time by a female Chancellor of the Exchequer, and the initial reactions are rolling in on the extensive range of measures announced, many of which previously 'leaked'.

The Payroll Compliance Authority (PCA) is pleased to hear that a crackdown on the umbrella company market through legislation was given an express mention by the Chancellor. The supporting Budget documentation states that the government is 'committed to taking stronger action on the most egregious tax fraud, including by expanding HMRC's criminal investigation work and legislating to prevent abuse in non-compliant umbrella companies'.

The PCA has long been campaigning for regulation, something which was mooted by the previous government earlier this year. Following the specific mention of legislation in Parliament we hope this may now move up the agenda.

One measure which is causing concern to Martin Innes, Director at the Payroll Compliance Authority (PCA), is the rise in employer National Insurance contributions. He warns that the rise will likely to lead to a pay cut for around 700,000 workers paid by umbrella companies in the UK or else push them towards fraudulent operators.

Martin explains: "Now that the Chancellor has chosen to raise employer National Insurance contributions, this means an increased cost for the hundreds of umbrella companies that manage an outsourced payroll function for hiring businesses up and down the country. The strong likelihood is that this cost will immediately be passed on to the workers themselves and taken from their pay. The end result is not a tax on businesses, but a reduced salary for these workers.

"There is also another risk with this measure. The umbrella company market is unregulated, which has led to a proliferation of fraudulent schemes and activities by a minority of these payroll suppliers, including incorrect tax deductions and pay skimming. This is why the PCA and other organisations have long been calling for regulation. Another risk of raising employer NI contributions is that it will push more of our temporary workforce towards the umbrella firms operating illegally, because they will continue to offer more attractive rates of pay whilst not paying the taxes owed, exacerbating worker exploitation.

"This move by the Chancellor risks driving more workers towards non-compliant umbrella companies that are offering better renumeration, or forcing a pay cut as the additional cost is passed on to workers, amounting to a tax on the working people of the UK. This is a step the government have repeatedly pledged they would not take."

The PCA, which is a not-for-profit accreditor in the outsourced payroll market, will continue to monitor and engage with the government on the umbrella company market in order to protect workers and hiring businesses and compliant payroll operators.