Deloitte’s Umbrella-Only Policy Could Breach Longstanding Contractor Protection Laws

Deloitte’s Umbrella-Only Policy Could Breach Longstanding Contractor Protection Laws

As regulatory and tax changes continue to reshape the UK contracting market, attention is turning to how large firms engage contingent workers — and whether they are doing so lawfully. One such firm under scrutiny is Deloitte, whose contractor policy may conflict with long-standing employment regulations if current practices are being applied without the necessary legal nuance.

What the Law Says: Conduct Regulations 2003

The Conduct of Employment Agencies and Employment Businesses Regulations 2003 (the “Conduct Regulations”) were introduced to protect agency workers from exploitation and to ensure fair treatment and transparency when they are placed into roles.

Crucially, Regulation 5 prohibits employment businesses (i.e. recruitment agencies) and end clients from restricting a work-seeker’s freedom to choose how they operate, unless certain exemptions apply.

If a contractor has not opted out of the Conduct Regulations, then they are entitled to the full protections offered — including the right not to be compelled to use a specific umbrella company. Agencies and clients can suggest preferred umbrellas, but they cannot require or coerce a contractor to use only those on a pre-approved list.

Where Deloitte Could Be in Breach

Deloitte’s public contractor engagement policy states:

“We have created a preferred list of umbrella companies. While we cannot accept outside suppliers, we are confident that our in-house list will provide you with the high-quality service you are looking for.”

This language appears unequivocal — contractors must choose from Deloitte’s list and are not permitted to use any umbrella company outside of it.

If any contractor currently working with Deloitte has not opted out of the Conduct Regulations, this practice could constitute a breach. Deloitte — or any recruitment agency acting on its behalf — would be unlawfully restricting the work-seeker’s freedom to choose their method of engagement, which is explicitly prohibited.

Opt-Out vs. Opt-In: The Critical Factor

The legality of Deloitte’s PSL-only approach hinges on whether contractors are opted out of the Conduct Regulations. If contractors have explicitly and validly opted out before being introduced to the client, the rules don’t apply — and Deloitte and the agency have more flexibility.

However, if any contractor is opted in — whether by oversight, policy, or personal choice — Deloitte’s enforcement of an umbrella-only PSL may be unlawful.

Moreover, even in opt-out scenarios, ethical concerns remain. Restricting umbrella choice has been tied to:

• Lack of transparency over fees and deductions,
• Risk of tying workers to non-compliant providers,
• And potential misclassification of employment status.

Wider Industry Practice vs. Compliance Risk

Deloitte’s competitors, such as PwC, continue to provide contractors with greater flexibility, allowing a mix of engagement types including personal service companies (PSCs), fixed-term contracts, and umbrella options. This diversity of models not only supports contractor autonomy but also minimizes regulatory exposure under the Conduct Regulations and broader employment law.

As scrutiny of umbrella companies increases — particularly in the wake of proposed PAYE liability reforms and increasing regulatory scrutiny — experts are urging large firms to review their contractor engagement policies carefully to ensure they do not violate either the letter or the spirit of the law.

Conclusion: A Potential Compliance Gap

Deloitte’s apparent policy of restricting contractors exclusively to its PSL of umbrella companies could be non-compliant with the Conduct Regulations, if even a single contractor has not opted out. While the firm has declined to comment on how it will adapt to regulatory pressures, failure to address this issue could result in legal challenges, reputational harm, or intervention by the Employment Agency Standards (EAS) inspectorate.

Contractors should check whether they are opted in or out of the Conduct Regulations, and those who are opted in may wish to challenge restrictions on how they operate.