Umbrella Director Faces Pre-JSL Accreditation Squeeze

A decade-long partnership under strain

A senior director at an anonymous UK umbrella company says a ten-year relationship with a major recruitment agency has been thrown into uncertainty due to the proposed JSL regulation, which is not scheduled to take effect until April 2026. The agency has told the umbrella that, to remain on its panel, it must secure an approved accreditation ahead of the regulation’s start date or face immediate cessation of engagement. The umbrella is already operating within existing legal frameworks and insists it is fully compliant, yet finds itself effectively frozen out prior to the new regime taking effect.

Pressure before the law is live

The agency’s requirement is commercially decisive because every prominent accreditation body cited by the agency - including FCSA, Professional Passport and SafeRec - has stated they are not onboarding new umbrella companies for at least six months. That leaves the director with no realistic route to meet the pre-implementation demand. The impasse creates a de facto barrier to trade, even though the JSL framework has neither commenced nor produced the finalised operational detail that would usually guide accreditors and providers alike.

The immediate risk is a rapid loss of placements as end clients and contractors shift to agency-preferred, already-accredited umbrellas. Revenues could fall suddenly if the agency interrupts flows of new assignments or terminates extensions, while fixed costs remain. Contractors may be forced to novate to alternative providers at short notice (which is also a breach of The Conduct of Employment Agencies and Employment Businesses Regulations 2003), introducing disruption, potential pay delays and administrative friction. The umbrella’s brand equity, built over a decade, may erode as market signalling favours those with existing accreditation capacity over those temporarily unable to apply.

The director describes an impossible position: comply with a timeline that cannot be met, or face exclusion despite operating compliantly under current law. There is also a broader fear that early enforcement by multiple agencies could cascade through the supply chain, constricting choice for contractors and clients while entrenching the largest providers that secured accreditation before intake closures. If replicated across the market, this behaviour could reshape the competitive landscape long before April 2026.

Legal options and commercial realism

Given the potential for abrupt loss of income, the director is considering legal advice on whether there might be grounds related to breach of long-standing commercial understandings, unfair exclusion from the supply chain or loss arising from actions ahead of the law. Legal counsel could explore the wording of existing contracts, any implied duties of good faith, and whether procurement or panel rules are being applied in a discriminatory or unreasonable manner. Competition and consumer law perspectives may also be relevant where market access is restricted in ways that materially disadvantage smaller providers.

However, agencies typically retain wide discretion over supply chain composition. Even if a claim were arguable, litigation may be slow, expensive and commercially risky. A pragmatic route could involve seeking written transitional terms, time-limited waivers or provisional status pending the reopening of accreditation schemes, coupled with independent audits to reassure clients without requiring unavailable certificates.

Market consequences and a narrowing field

Industry insiders now warn that HMRC has effectively engineered a monopoly outcome through the structure and timing of the proposed JSL regulation. By encouraging early enforcement while accreditation bodies remain closed to new applicants, HMRC has created conditions where only a small number of large umbrella companies are able to continue operating. Smaller independent umbrellas are being excluded, not due to non-compliance, but despite having demonstrated full compliance and provided agencies with all requested evidence, because they are unable to access accreditation channels in time. This has raised barriers to entry to a level that makes it extremely difficult for new providers to enter the market at all. The result is a shrinking pool of suppliers, reduced competition, and limited innovation. As choice is stripped away, contractors are likely to face fewer pay model options, weaker service standards, and less flexibility, while end clients and agencies are exposed to higher costs and a lack of specialist alternatives. What was presented as a compliance measure now risks becoming a market-controlling mechanism, with HMRC inadvertently determining winners and losers across the entire umbrella sector.

Contractor News commentary

Based on the facts presented, it is clear that the current pre-implementation landscape is already causing serious harm to smaller and newly established umbrella companies. Accreditation demands are being imposed well ahead of April 2026, in a way that offers no realistic route to compliance for businesses that are otherwise fully compliant. This environment is fundamentally unfair and risks excluding responsible operators purely because of their size or market position. Crucially, the presence of an accreditation does not automatically mean that an umbrella company is compliant or operating correctly. There is no guarantee that larger accredited umbrellas are not engaged in tax avoidance schemes, and accreditation alone does not provide absolute protection for contractors, agencies, or clients. Even Professional Passport has publicly stated that its accreditation does not protect umbrella companies against JSL obligations. Despite this, agencies are treating accreditation as a definitive safeguard, while disregarding clear evidence of compliance from smaller providers. The result is a deeply flawed system, where perception replaces substance and where market access is granted based on badge holding rather than genuine compliance. If left unchallenged, this approach will erode contractor choice, damage competition, and allow risk to persist unchecked, while unfairly locking smaller umbrellas and new entrants out of the market altogether.