The UK healthcare sector, and the NHS in particular, are facing well-documented issues with understaffing and low pay. The cost-of-living crisis is exacerbating these problems, with recent strikes a clear demonstration of the dissatisfaction of the workforce.

To help resolve this issue, healthcare providers and workers themselves are frequently turning towards contract work. It seems this method has become the norm within the NHS, with The Guardian recently reporting that £10 billion a year is spent hiring temporary frontline NHS staff.

This practise means health centres can continue running and patients can still be attended to. For professionals, it offers higher pay and greater flexibility, a work-life balance many crave due to the high demands of the roles they undertake.

However, working in this way often involves being paid via an outsourced payroll provider, known as an umbrella company. The unregulated payroll sector is rife with fraudulent activity by unscrupulous companies looking to make a profit through tax evasion strategies.

A widespread lack of awareness of this within the sector risks jeopardising the financial wellbeing of these temporary healthcare staff and costing healthcare providers, including the NHS, through unpaid taxes to HMRC.

Temporary healthcare workforce status quo

 In the UK, the healthcare sector's contract workforce is vast. The amount spent on agency staff in England has been increasing year on year, exceeding £3 billion in 2022 and rising 16 per cent to £3.5 billion over the last year, the highest expenditure since 2015. But agencies are still unable to provide enough workers. Demand is outstripping supply, and while the NHS is trying to reduce spending on agency workers, reliance on temporary staff has soared.

The Nuffield Trust's 2022 report showed that 4 in 5 nurse vacancies and 7 in 8 doctor vacancies are filled by temporary staff. Further research by the Nuffield Trust, submitted as part of a cross-party parliamentary report, estimates that on a single day, 20 May 2021, the number of temporary staff requests equated to 98,800 nursing absences, of which 17,200 remained unfilled by temporary staff.

The need for temporary healthcare staff is evident, and contract workers make up a large proportion of the healthcare workforce. NHS Professionals, the largest staff bank that is not a private recruiter, employed 193,000 staff in 2022, up from 130,000 in 2019. The COVID-19 pandemic has contributed to the increased need for healthcare workers, but demand is likely to continue rising to manage the backlog caused by the pandemic and to tackle looming challenges, such as supporting the ageing population.

Whilst establishing an exact figure for how many healthcare workers are paid by umbrella companies is currently not possible through publicly available sources, the figures are evidently high. This means the number of healthcare staff and organisations potentially at risk of exploitation by fraudulent umbrella companies has increased dramatically and is growing.

Why are healthcare workers particularly vulnerable to fraud?

In the unregulated payroll sector, umbrella companies vie to attract recruiters and contract workers through appealing pay deals. Many of these are, in fact, too good to be true and the result of fraudulent schemes.

Recognising which deals are legal and which are not is a significant challenge and one in which neither or healthcare workers are trained. Tax evasion can be neatly woven into seemingly legitimate schemes that even thorough due diligence may not pick up. Given the size of the temporary workforce within the healthcare sector, this is a substantial problem and a lucrative market for unscrupulous players.

Furthermore, the widespread lack of awareness in the sector about the risks of fraudulent umbrella companies may lead a worker not to question the legitimacy of attractive payroll packages. This can be exacerbated by seeing people in the same role, but contracted by a different company, receiving higher pay. With long hours, high stress, and major understaffing, healthcare workers will seek pay deals with as much take-home pay as possible, offering an ideal scenario for fraudulent activity.

Unless the payroll industry becomes fully regulated or illegitimate payroll practices become more well-known and easier to spot, there are likely to be increasing instances of tax evasion and profiteering at the expense of temporary healthcare staff, particularly as this workforce grows.