New JSL Rules Hand Power to MSPs as Contractors Lose Ground
Joint and Several Liability lands — and agencies suddenly care (for the wrong reasons)
Joint and Several Liability (JSL) has officially come into force as of April 6th, 2026 — and while it’s being dressed up as a compliance win, the real story is who now carries the risk… and how they’re reacting.
After years of consultation dating back to 2021, the government has finally handed HM Revenue & Customs a much shorter route to recover unpaid tax from labour supply chains involving umbrella companies.
But don’t expect the market to become fairer overnight. If anything, it’s becoming more controlled — and not necessarily in contractors’ favour.
What actually changed?
Under JSL, if an umbrella company fails to pay the correct PAYE, HMRC can now chase any party in the chain — including recruitment agencies, end clients and MSPs — for the shortfall.
HMRC made it clear:
Agencies and end clients are now responsible for ensuring PAYE is correctly applied — and may be pursued if it isn’t.
In other words, liability has been widened. Responsibility has been redistributed. And risk has been dumped upstream.
Why this exists (and what it’s really about)
The official line is about tackling non-compliance and protecting workers. And yes, it does that — on paper.
But the primary driver is obvious: tax recovery.
With billions lost to disguised remuneration and non-compliant umbrellas, HM Treasury wants tighter control — and JSL delivers exactly that by making someone else easier to chase.
According to the Office for Budget Responsibility, the policy is expected to raise £2.8 billion by 2031.
That tells you everything about its priority.
Agencies: from indifferent to controlled (by MSPs)
For years, many agencies took a fairly relaxed approach to umbrella compliance — ticking boxes, accepting assurances, and moving on. Now that they’re on the hook financially? Suddenly, “due diligence” is the buzzword of the month.
But here’s the part that’s becoming increasingly obvious across the market: agencies aren’t really the ones making these decisions anymore.
In reality, it’s the Managed Service Providers (MSPs) sitting above them that are calling the shots — dictating which umbrella companies make it onto PSLs, and which are quietly excluded.
So while agencies are fronting the conversations with contractors, the rules are being written elsewhere.
And predictably, the response hasn’t been to improve standards across the board. Instead, we’re seeing a familiar pattern of control and consolidation:
PSLs being aggressively reduced — often under MSP instruction
Contractors funnelled into a small pool of “approved” umbrellas chosen at programme level
Agencies refusing to engage outside these lists, citing “risk” while having little real autonomy
A growing sense that compliance is being interpreted through a commercial and operational lens, not an objective one
In short, agencies may carry the liability under JSL — but MSPs are increasingly controlling the ecosystem in which that liability is managed.
And for contractors, that means less choice, less flexibility, and more decisions being made behind closed doors.
Contractors pay the price
The immediate fallout is already visible:
Reduced choice of umbrella companies
Pressure to switch providers mid-assignment
“Take it or leave it” ultimatums from agencies
And it gets worse.
Reports suggest contractors are being moved without proper TUPE transfers — meaning they risk losing:
Holiday pay accrual
Sick pay entitlements
Pension continuity
Protection against unfair dismissal
In short, the system designed to “protect workers” is already being implemented in ways that undermine them.
No defence, no flexibility
One of the most controversial aspects of JSL is that it’s effectively a strict liability regime.
If an agency engages a non-compliant umbrella, it has no real defence — regardless of intent or effort.
That has led to predictable behaviour:
Agencies defaulting to large, well-capitalised umbrellas
Avoidance of smaller or newer providers (regardless of quality)
Risk decisions based on perception, not actual compliance
The uncomfortable truth about agency behaviour
While agencies claim to be prioritising compliance, there are signs that something else is going on beneath the surface.
Some are reportedly selecting umbrellas based on:
Balance sheet strength (to absorb potential tax risk)
Favourable credit terms
Commercial incentives and rebates
Yes — even now.
So while contractors are told changes are about “safety” and “compliance,” parts of the market still appear driven by the same commercial interests as before — just with higher stakes.
A market drifting toward consolidation
JSL is likely to accelerate a trend that was already underway:
Fewer umbrella companies
Bigger players dominating
MSP’s controlling access
The end result could be a quasi-oligopoly, where a small number of large umbrellas operate under agency-approved frameworks — and contractors have little say in the matter.
Bigger doesn’t mean better
There’s a growing assumption that larger umbrella companies are “safer.”
That’s not necessarily true.
Size may offer financial reassurance to agencies, but it doesn’t automatically guarantee:
Better compliance
Better contractor experience
Better employment practices
Yet under JSL, perception is quickly becoming more important than reality.
The bottom line
Joint and Several Liability was meant to clean up the umbrella market — and it may well succeed in making tax recovery easier for HMRC.
But in practice, it’s also:
Concentrating power with agencies and MSPs
Reducing contractor choice
Encouraging risk-averse, box-ticking behaviour
Potentially sidelining smaller, compliant providers
The hope is that genuine compliance wins out in the long term.
The reality, at least for now, is that the market is reacting exactly how you’d expect — by protecting itself first, and worrying about contractors second.
