Government Responds to Consultation and Unveils Plans to Tackle Umbrella Company Non-Compliance

On the back of a Call for Evidence, the government ran a consultation in 2023 (June to August) with the aim of tackling non-compliance in the umbrella company market. During the subsequent consultation, stakeholders highlighted the importance of regulating the umbrella company sector and for the government to provide a legal definition of what an umbrella company is and where they fit within the temporary labour supply chain.

Umbrella companies were also referenced unexpectedly in the in the Autumn Budget 2024, as the government announced plans to implement legislation to “change who has responsibility to account for Pay As You Earn” when an umbrella company engages a worker in the labour supply chain.

Initially met with some scepticism from stakeholders, new developments have arisen in the government’s official response to the consultation, released in March 2025.

Keep reading for more information on the future landscape of the umbrella company sector, and the new responsibilities recruitment agencies and end-hirers face from April 2026.

Developments in March 2025

In March 2025, the government issued a response to the umbrella company consultation based on feedback received from 75 stakeholders (including responses generated at 16 roundtable events hosted by government officials).

We have summarised the two key aspects of the government’s official response below.

Definition of umbrella companies

The government will be defining umbrella companies “to allow for their regulation and to bring them within scope of the Employment Agency Standards Inspectorate’s (and subsequently, the Fair Work Agency’s) remit, through an amendment to the Employment Rights Bill.”

New PAYE responsibility for recruitment agencies (and end-hirers)

From April 2026, the government will be initiating legislation first referenced in the Autumn Budget 2024. The responsibility to account for Pay As You Earn (PAYE) tax deductions will move from the umbrella company to the recruitment agency supplying the worker (or end-client if there is no agency). The government estimate this new legislation will generate £500 million in 2029-30.

While it’s always been essential that agencies and end-hirers engage solely with compliance-driven umbrella companies, the new legislation will undoubtedly call for even tougher in-house due diligence, despite the government stating they “will not introduce a mandatory due diligence requirement” on the back of the consultation.

Luckily for our partners, Stonebridge Pay continues to set the standards in compliance and transparency, and we’ve summarised the benefits we provide contractors, recruitment agencies and end-hirers at the end of this article.

You can read the official documentation entitled ‘Tackling non-compliance in the umbrella company market – Government response to the consultation’ here.

The government’s consultation response presents “a fantastic opportunity”

Giles Gibson, a Director at Stonebridge Pay, shared his views on the latest developments surrounding umbrella company compliance and the additional responsibilities faced by recruitment agencies from April 2026. He said:

“Efforts by the government to improve compliance and eliminate tax avoidance schemes in the market are always welcome. With the latest announcement, it’s extremely reassuring to represent an umbrella company that has always prioritised compliance because these developments present a fantastic opportunity to partner with more like-minded, compliance-driven staffing agencies and hirers that want to ensure their businesses and temporary workers are protected.”

“Whether agencies are liable for ensuring the correct PAYE deductions for temporary candidates or not, Stonebridge Pay has always and will always process payments in accordance with HMRC’s rules and regulations, and our procedures will always be transparent and in the best interests of every member of the supply chain.”

“As an FCSA member, we’ve proven we adhere to the very highest compliance standards, and our ongoing commitment to maintaining this prestigious accreditation will provide our agency partners with the proof that Stonebridge Pay operates with integrity.”

“If any recruitment professionals would like to discuss the government’s plans to implement new umbrella company legislation and the added PAYE responsibilities being faced by agencies, I would be delighted to have a chat. Simply drop me an email ([email protected]) and we’ll get a call in the diary.”

Partnering with Stonebridge Pay eliminates any risks of non-compliance

With compliance at the heart of everything we do, Stonebridge Pay is an FCSA accredited umbrella company trusted by hundreds of recruitment agencies and end-hirers throughout the UK. Every week, we process payments for thousands of temporary workers and we’re continuing to appear on a growing number of Preferred Supplier Lists.

Industry-leading service for contractors

From the initial registration process through to being paid, our experts are on hand to support workers every step of the way. Our contractors benefit from:

• Stress-free onboarding – Joining Stonebridge Pay and being paid compliantly and efficiently is very straightforward and we’ll support you throughout the journey.
• 24/7 GP hotline – Contractors have access to a GP hotline, discounts when shopping online and eating out, and more. Providing you with added value has always been a priority.
• Comprehensive insurance – All the protection you need to work on your assignments with complete peace of mind, including Personal Accident Insurance.
• Statutory Employee Benefits – Including Sick Pay and Maternity/Paternity Pay.
• Continuity of Employment – You can work on multiple assignments without the need to change your umbrella company. Stonebridge Pay will remain your sole-employer for the duration of your contracting journey. Not only does this mean less administration, but continuity of employment makes sourcing finance easier for contractors (e.g. mortgages or a loan).

If you’re a contractor ready to join an umbrella company you can trust, use our instant take-home pay calculator (for umbrella and CIS) here or call our team on 0203 789 2490.

Unbeatable benefits for recruitment agencies

Since the day we launched in 2017, we’ve built hundreds of meaningful relationships with industry-leading recruitment agencies and organisations engaging with temporary workers. Below are just a few of the reasons Stonebridge Pay is appearing on an ever-growing number of Preferred Supplier Lists (PSL):

• Experts in compliance – In an industry with plenty of legislative updates and developments, our in-house compliance experts are always up to speed and available to support you with any questions or concerns.
• Streamlined processes – We appreciate you require efficient onboarding and reporting from your payroll partners. Stonebridge Pay aims to exceed your expectations with easy referrals (small to large volumes), access to your own portal for real-time information on your referrals, and flexible commercial terms.
• American Express – You can pay our invoices with a corporate AMEX card. Why pay invoices without any additional advantages? American Express allows you to pay invoices AND earn fantastic benefits at the same time!
• Credit – To help our partners with cashflow and efficiency, we offer credit terms (subject to insurance approval) with flexible length payment options. Please speak to a member of the team for more information.
• Multiple services – We’ve got you covered. Our services include PAYE umbrella, CIS and PEO.

Please call 0203 789 2490 to learn more about Stonebridge Pay and the many benefits of referring your temporary candidates to us.

Stonebridge – Built to Last.