Agencies push umbrella switches before April 2026

Rapid shifts to preferred umbrellas spark contractor backlash

Reports reaching Contractor News indicate that major staffing firms, including Adecco and Reed, have told contractors to move to selected umbrella companies by 1 March, with remaining workers to follow by 20 March. Contractors say these hard March cut-off dates ahead of the April 2026 joint and several PAYE liability changes feel less like compliance planning and more like coercion, especially where long-standing umbrella relationships are being disrupted at short notice.

Why hard March cut-offs are contentious

Agencies are signalling that tighter control of umbrella supply chains is essential before the April 2026 tax shift. Contractors, however, point to abrupt deadlines and restricted choices as evidence that risk transfer is being handled through compulsion rather than engagement. The core complaint is that work is being made contingent on joining a particular umbrella panel, even where a contractor’s current umbrella is accredited and has previously cleared agency due diligence. Continuity of employment, pension contributions, and benefits can all be unsettled by mid-assignment switches, while repeated onboarding increases administrative burden and the chance of payroll errors.

The legal guard-rails: Conduct Regulations

Under the Conduct of Employment Agencies and Employment Businesses Regulations 2003, Regulation 5 restricts making work-finding services conditional on a work-seeker paying for additional services from the agency or from a third party. In plain terms, an agency cannot make access to assignments dependent on purchasing or using a paid-for service that sits outside the work-finding function. Mandated umbrella selection engages this principle when contractors are told they must use a named provider, particularly if the provider levies margins or charges that are effectively inseparable from pay. The question is whether compelling a move to a specific umbrella crosses the line from permissible commercial preference into unlawful tying of work to a third-party paid-for service.

EAS guidance - clear signals on choice

The Employment Agency Standards Inspectorate has issued guidance stating: “Work-seekers cannot be forced to work through or be paid by umbrella companies.” The guidance further explains: “If umbrella pay is the only route an agency uses, this must be made clear up front so the worker can decide whether to engage.” Read together with Regulation 5, the message is that while agencies may prefer umbrella engagement, they must be transparent from the outset and cannot compel an individual to use a particular umbrella as a condition of being offered work.

Enforcement, undertakings, and penalties

Breaches of the Conduct Regulations can amount to offences and can attract fines. EAS has the power to seek labour market enforcement undertakings and orders, which formalise remedial commitments and can escalate consequences for non-compliance. Ignoring an order carries serious criminal penalties, amplifying the risk where agencies set rigid policies that may be read as unlawfully restricting worker choice. Beyond penalties, enforcement action can disrupt client relationships and procurement status, compounding commercial exposure.

What changes in April 2026 - tax risk in plain English

From April 2026, joint and several liability for PAYE in labour supply chains means HMRC can pursue the agency in the first instance if an umbrella fails to operate PAYE correctly or to remit deductions. Government statements indicate the intent is to prevent payroll tax leakage by allowing HMRC to collect from the point in the chain with the most direct leverage. Industry summaries have described a strict liability effect for agencies with direct contractual links to end clients, intensifying incentives to control which umbrellas sit in the chain. The result is a shift in default risk from remote intermediaries to agencies, with HMRC free to collect quickly from the most solvent and reachable party.

Why preferred lists are tightening

Against this backdrop, agencies such as Adecco and Reed, and many more, are reportedly narrowing umbrella panels and imposing short cut-offs to migrate contractors. Their rationale is straightforward: fewer suppliers, stronger oversight, and clearer indemnity routes if something goes wrong. Yet that approach can collide with worker choice, established employment continuity, and the Conduct Regulations if mandate drifts into compulsion. The tight March 2026 dates are read by many contractors as pressure tactics that leave too little time to assess alternatives, check costs, or safeguard pensions and benefits.

Due diligence today - accreditations and monitoring

Effective due diligence typically blends pre-approval checks with ongoing monitoring. Agencies often reference industry body accreditation, including FCSA and Professional Passport, which aim to assess tax compliance, employment practices, and financial controls. Some programmes now incorporate SafeRec-style auditing that tests payslip accuracy and reconciles deductions to payments, helping to spot non-compliance early. HMRC has acknowledged that industry accreditations can form part of a risk-based approach, but has stressed they are not a guarantee of compliance. Best practice adds bank account verification, KYC checks on directors, evidence of RTI submissions, timely remittance of PAYE and NICs, and clear visibility of margin and employment costs.

Human impact - ethics and practicalities

For contractors, forced moves can interrupt continuous employment records used for mortgage underwriting, disturb workplace pensions and salary sacrifice arrangements, and risk loss of sick pay, holiday pay accrual, or insured benefits linked to a specific umbrella. Duplicate onboarding creates scope for errors, delayed pay, and unexpected costs where margins and employment cost allocations differ. Many report feeling compelled even when their existing umbrella holds recognised accreditation and has already passed the agency’s prior checks. Compliance specialists warn that concentrating risk into a tiny panel may reduce competition and resilience, while legal commentators highlight that narrow panels are lawful only if applied transparently and without making work-finding conditional on buying a third-party service.

Perspectives across the market

Contractors say choice, continuity, and clear pay illustrations are paramount, and that any migration should be voluntary with sufficient notice. Agencies argue that joint and several liability makes tighter control inevitable and that client governance demands documented, objective criteria. Compliance experts recommend transparent, criteria-based onboarding and ongoing testing rather than blanket mandates. Legal advisers underline the need to respect Regulation 5, give upfront transparency where umbrellas are used, and avoid any linkage that makes work conditional on choosing a named provider.

Contractor News commentary

The sector is moving quickly to prepare for April 2026. Agencies face real exposure under joint and several liability, yet the Conduct Regulations and EAS guidance remain clear on worker choice and upfront transparency. Measured risk management can coexist with lawful, fair access to work if agencies use objective compliance criteria, communicate early, and avoid hard mandates that feel like compulsion.

Practical next steps for contractors

Contractors should ask agencies to confirm in writing whether umbrella engagement is optional or the only route, request a full pay illustration showing gross pay, employment costs, holiday pay treatment, and umbrella margin, and seek proof of the umbrella’s accreditation, audit scope, and evidence of timely PAYE and pension remittances. They should clarify how continuous employment, insured benefits, and salary sacrifice will be protected, obtain the umbrella’s Key Information Document and up-to-date contract, and request a reasonable transition window if a change is required.

Practical next steps for agencies

Agencies can reduce joint and several liability risk without unlawfully restricting choice by setting transparent, upfront terms about payment models, publishing objective compliance criteria tied to tax operation, payroll controls, and auditing, and documenting the rationale for any refusal to onboard a provider. They should give contractors clear, early communication that explains options, preserves continuity of employment and pensions where possible, and avoids making work conditional on using a specific umbrella. Maintaining robust monitoring, escalation routes, and cooperation with EAS guidance helps align compliance duties with fair treatment of workers.