Umbrella Companies

Please note this section is currently being updated to include recent developments.

Policy

The previous Government launched a consultation in 2023 on non-compliance in the umbrella company market (i.e. a business which employs a worker with a view to that worker being supplied to work for, and be under the control of, an end-client). The new Government has issued a response and has decided to take steps to reform the umbrella company market.

The Employment Rights Bill will expand the definition of ‘employment businesses’ to include umbrella companies, allowing for the regulation of umbrella companies, and for state enforcement (currently by the Employment Agency Standards Inspectorate, but then by the Fair Work Agency once established).

Existing laws that regulate the conduct of employment agencies and businesses, include: (i) providing a ‘key information document’ to agency workers; (ii) maintaining accurate records of compliance with regulations; (iii) protections from detriment for the agency worker if they terminate their agreement with the employment business or work elsewhere; and (iv) ensuring transparency regarding pay and deductions.

The debate regarding the proposed amendments to the Employment Rights Bill on 11 March 2025 and the subsequent Fact Sheet published on 27 March 2025 suggests that the Government will consult on whether amendments to those regulatory obligations should be made to ensure they are “appropriate for application to umbrella companies and address the main harms identified in this sector (for example, lack of pay transparency and difficulty in enforcing employment rights and obligations).”

Separately, the Government has decided to introduce (via the next Finance Bill) tax reforms to umbrella company arrangements (essentially introducing joint and several liability provisions within the labour supply chain), with such changes to take effect from April 2026. Details of this are outside the scope of this hub.

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Timing and developments

The employment law changes are included in the Employment Rights Bill following amendments on 5 March 2025.

The Government has promised to consult on the regulation of Umbrella Companies in Autumn 2025 and has said that the measure will take effect in 2027, although a specific date is not provided.