Your questions answered about the new Umbrella Legislation and its impact on the recruitment sector
Your questions answered about the new Umbrella Legislation and its impact on the recruitment sector
Need Answers To Your Umbrella Legislation Questions?…
Let our expert ‘Umbrella Man’ shed a light on several questions recruiters and end clients have asked about the legislation that comes into play on April 6th, 2026.
Let’s hear what he has to say in response to your questions…
What is the shift in risk and responsibility?
The new legislation fundamentally shifts the responsibility for PAYE compliance up the labour supply chain, placing greater accountability on recruitment agencies.
What is Joint and Several Liability?
Recruitment agencies will become jointly and severally liable for unpaid PAYE if their partnered umbrella company fails to meet its tax obligations. This means HMRC can pursue the agency in the first instance for any unpaid amounts, even if the agency was not directly involved in the non-compliance.
What is the increased burden on compliance?
Agencies will need to significantly enhance their due diligence processes and ongoing monitoring of umbrella companies to ensure compliance and mitigate potential liabilities. This includes verifying their compliance status, reviewing detailed compliance documents, and auditing payslips and reconciliation statements.
What is the potential rise in costs?
The need for increased due diligence, compliance tools, and ongoing monitoring may result in higher operational costs for recruitment agencies.
Could there be any reputational damage for getting it wrong?
Agencies may face reputational damage if they are associated with non-compliant umbrella companies or those engaging in questionable pay practices.
How do I navigate the new and complex regulatory landscape?
The new legislation, alongside the Employment Rights Bill, creates a complex regulatory environment that agencies must navigate to ensure continued compliance.
Umbrella Man’s thoughts on tackling the legislation:
- Strengthen due diligence processes: Implement robust and continuous checks on umbrella companies, including using due diligence tools and verifying compliance certifications. FCSA members (New Red Planet Ltd is one) hold the highest level of compliance in the market.
- Partner with certified umbrellas: Prioritise working with independently certified and accredited umbrella companies (FCSA recommended companies such as New Red Planet) that can provide verifiable proof of compliance.
- Stay informed and engage with industry updates: Monitor updates from HMRC and industry bodies like the FCSA, REC, and New Red Planet Ltd website and LinkedIn page to stay ahead of regulatory developments.
- Proactive Approach: Begin preparing for the changes now, rather than waiting for the final implementation, to avoid potential financial and reputational risks. To stay ahead of the game and have a no obligation conversation with an FCSA Accredited member, just give New Red Planet Ltd a call or email on the details below.
- Consider Diversifying Candidate Payment Options: Explore alternatives to umbrella options, such as PEO or direct PAYE employment, to reduce exposure to the new risks associated with the legislation. New Red Planet Ltd can offer many options to our clients including outsourced payroll and Bureau options to reduce in-house employment, compliance and legal costs associated with bringing payroll inhouse.
- Centralise Documentation: Ensure contracts, payment records, and proof of PAYE compliance are accessible and consistent for potential HMRC inquiries.
By implementing these measures, you can proactively manage the risks associated with the new umbrella company legislation, ensuring compliance, protecting your business, and building stronger relationships with both clients and contractors.
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