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The umbrella industry is increasingly becoming a major focus for both the government and regulators due to growing concerns about non-compliance. HMRC data shows that £500 million was lost to disguised remuneration tax avoidance schemes in 2022 to 2023 - almost all of which was facilitated by umbrella companies.
Given these concerns, it’s not surprising that Chancellor Rachel Reeves has pledged to take action to tackle the problem, with plans to shift responsibility for accounting for PAYE tax when an umbrella company is used within a labour supply chain to engage workers – a measure due to take effect from 2026. The intention is to tighten oversight and accountability in the workier supply chain, requiring greater transparency in tax deductions and employment protections.
With this backdrop of increased scrutiny, it’s clear that compliance and transparency should be top-of-mind for umbrella companies moving forward. Here, we’ll examine six key steps for umbrella companies to build trust and demonstrate a commitment to compliance.
There are numerous compliance partners in the UK who can help advise companies on their supply chain integrity. These organisations provide guidance on best practices, helping you establish robust internal operating structures that exceed basic legal requirements. They set benchmarks for ethical behaviour and transparency, supporting your company in maintaining credibility with workers and employment agencies. Not only does this accreditation help establish a compliant internal operating structure, it also helps demonstrate reliability and trust to workers and employment agencies.
Having a dedicated Compliance Officer can have a few benefits. They can streamline how your company handles regulatory and legal changes and put quick action plans in place, assist with staff training, and be a point of contact for employment agencies and contractors should they have questions and concerns. They can also conduct regular internal audits, identifying any potential risks early and creating policies to address them. In a fast-changing regulatory environment, this role helps build a solid compliance framework, reducing the chance of costly errors and demonstrating that the company takes its obligations seriously.
Keeping your team up-to-date on compliance standards, tax rules, and ethical guidelines helps build a culture where everyone knows their stuff and takes responsibility seriously. For complex topics, outsourcing your training to subject matter experts can be particularly beneficial.
To make training impactful, try tailoring it to fit each role’s unique needs so that everyone feels it applies to them. For example, finance teams might benefit from deep dives into tax compliance, while account managers could focus on the ins and outs of worker relations. Mixing up your training methods — like using workshops, interactive online modules, or inviting guest speakers to cover specialised topics—can also keep things engaging and prevent training fatigue.
Creating a centralised internal resource bank can be incredibly valuable for both new hires and existing team members. This might include guides on compliance protocols, tax regulations, FAQs, templates, and cheat sheets for quick reference. Think of it as a “one-stop shop” where employees can quickly access the information they need to handle issues as they arise.
To ensure its effectiveness, it's important to regularly review and update internal documents and processes to reflect current regulations and industry best practices, keeping the team equipped with accurate and up-to-date information.
Regular audits are essential to keeping your compliance efforts on track and catching any potential issues before they become costly problems. Set up a schedule to review internal processes, financial records, and regulatory adherence, ensuring that everything aligns with FCSA standards. These audits don’t just protect the company - they can also reveal areas where processes might be simplified or improved.
For example, conducting quarterly checks on payroll and tax compliance can help spot any discrepancies early, while a yearly review of contractor agreements can ensure all documentation remains up-to-date and legally sound.
Getting an outside perspective on your processes can also be incredibly helpful for staying on top of compliance. External audits offer a fresh, unbiased look at how things are running and can help pinpoint areas that need improvement to keep up with the latest regulations. Using software to automate parts of the audit and review process can also save time and cut down on mistakes. Taking these steps shows you’re serious about doing things the right way and keeping everything running smoothly.
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