The TUC has published a report estimating that about five million UK supply chain workers are being cheated out of their rightful holiday pay and the national minimum wage because of a lack of accountability.

In the report entitled “Shifting the risk”, it claims that organisations are using a range of strategies to transfer accountability to other parties so that the “parent company” has little responsibility for people who work for them.

These include outsourcing, franchising, using recruitment agencies and umbrella companies as well as developing complex supply chains. For instance, under the current law, a fast food worker at a McDonalds’ franchise cannot bring a claim against McDonalds’ HQ if they are paid less than the national minimum wage.

In total, the TUC estimates that 3.3 million workers are employed through outsourced companies; 615,000 are employed by franchise businesses; and at least one million are employed by recruitment agencies, umbrella companies and personal service companies.

The TUC argues that UK supply chain workers should have the right to challenge the parent company in order to restore accountability to these fragmented employment relationships and ensure that organisations have a legal responsibility to protect their workers’ core workplace rights.

It therefore proposes an extension to joint liability laws so that workers can bring a claim for unpaid wages, holiday pay and sick pay against any contractor above them in the supply chain. This would give workers multiple avenues to seek compensation. In addition, they would have a course of action to enforce their rights if a company goes insolvent, or the employer disappears.

The TUC suggests that, as a result, lead contractors might become more diligent and careful in choosing their subcontractors. They would also be incentivised to risk assess and tackle potential breaches of employment standards in their supply chains.

Finally, the TUC argues that it would lead to the creation of more secure, permanent employment, as fewer contractors would be willing to take the risk of working with subcontractors who might create liabilities for them.

Gerard Airey of Thompsons Solicitors commented: “The TUC’s report outlines some worrying statistics. They suggest that these issues are causing people to miss out on the equivalent of £1.6 billion in holiday pay each year and also that up to 580,000 workers are paid below the national minimum wage.

The government needs to address the issue of employers who are engaging in practices which are designed to limit their liabilities and not provide employment rights, but enabling profits to be made. I would echo the report that there needs to be more accountability for these companies and enforcement mechanisms for individuals who are being deprived by shell games”.

Visit the TUC website to read the report in full and visit the Thompsons website to read more about the law and the “gig” economy.