What Is a Preferred Supplier List (PSL)?

Understanding the Preferred Supplier List (PSL)

If you’ve worked with recruitment agencies in the UK contracting scene, you might have come across the term “Preferred Supplier List” – or PSL for short. But what exactly does it mean, and how does it affect agency workers and their choice of umbrella companies?

What Is a Preferred Supplier List?

A Preferred Supplier List is essentially a curated group of businesses or organisations that a company, often a recruitment agency or end-client, has selected to supply specific services. In recruitment, this typically means a set of umbrella companies that have been vetted and deemed suitable partners for payroll and compliance services.

Think of it as a shortlist: the recruitment agency says, “We trust these companies, and we’ll work with them first before looking elsewhere.” This tends to happen for several reasons:

• Quality Assurance: Agencies want their contractors receiving consistent, reliable service.
• Efficiency: Fewer suppliers usually means smoother administration and easier communication.

"A PSL isn’t about limiting choice—it’s about managing risk and fostering trusted relationships between agencies, suppliers, and contractors."

How Does a PSL Work in Practice?

When you join an agency that’s adopted a PSL, you’ll be handed a list of recommended umbrella companies. In some cases, you may be told these are the only companies the agency will work with on a standard basis.

Can I Still Choose My Own Umbrella?

Here’s the crucial bit: Yes, you can! Legally, no recruitment agency or end-client can force you to use a particular umbrella company. As a worker, you have the legal right to choose the umbrella provider that’s right for you, even if it isn’t on the agency’s PSL.

This is backed by key guidance from employment law and the Conduct of Employment Agencies and Employment Businesses Regulations 2003. Agencies can recommend or restrict their PSL for legitimate reasons, but ultimately, you’re free to make your own choice. If you’re ever pressured or told you have no choice—it’s worth flagging this as a potential compliance issue. We recently published an article that provides a detailed explanation of the Conduct Regulations—click on the link below to learn more.

https://www.contractor.news/articles/understanding-the-2003-conduct-regulations

"Transparency and choice go hand in hand—don’t be afraid to ask about your options and push for what works for your unique financial situation."

Why Do PSLs Exist – and What Are the Downsides?

The primary goal of a PSL is to reduce risk for the agency and the worker. However, they’re not without their controversy, often due to:

• Potential for restricted competition (sometimes leading to higher costs for workers)
• Risk of commercial bias (where agencies may benefit financially from PSL referrals)

Key takeaway: A PSL is about managing relationships and quality, but agencies should always be transparent about why certain umbrella companies are included—and it’s your right to shop around.

What Should Workers Do?

• Request a copy of the PSL so you can compare umbrella companies.
• Ask why each company is on the list: Is it compliance? Service? Something else?
• Don’t hesitate to consider umbrellas outside the PSL if you’ve done your homework and found a better fit.
• Know your rights: Agencies cannot withhold work based on your umbrella choice, provided that choice is legally compliant.

Take control of your working arrangements, ask questions, and remember—your pay and compliance are too important to leave to chance. If you’ve found an umbrella company you trust, you’re within your rights to request they be considered by the agency.

Want more practical advice about payroll, contracting, or choosing the right company for you? Explore our guides for the latest insights and tips.