Payroll companies enable companies and employment agencies to register workers as self-employed while the union believes they should be treated as employees.

By using a payroll company to register workers as self-employed companies can avoid paying employers national insurance contributions of 12.8%.

Self-employed workers do not receive holiday or sick pay and can often be sacked without notice or reason.

Workers themselves, rather than the contractor they work for, have to pay the payroll company for its services. Payroll companies either deduct a flat fee or a percentage of earnings directly from the workers’ pay.

Ucatt have written to the Inland Revenue and David Gauke MP the Exchequer Secretary who has responsibility for tax avoidance demanding an urgent investigation into the practices of payroll companies.

General secretary Alan Ritchie said: “There has been a huge growth in payroll companies. These companies do not perform construction work, nor do they hire labour to companies, their sole reason for existence is to enable companies to deny workers basic employment rights whilst avoiding paying national insurance contributions.

“The Government and the Revenue need to intervene to end these practices once and for all.”