Six years since umbrella industry regulation was promised – and with a lack of action in the government’s response to the umbrella company consultation earlier this month – umbrella companies and recruitment agencies have been urged to increase their own compliance efforts.

The rallying call comes from ex-FCSA chief executive, Julia Kermode, who became CEO of the umbrella company compliance specialist, PayePass, earlier this month. 

Kermode’s recent appointment coincided with the government’s response to the umbrella company consultation, which arrived on 6th June – some 18 months after the consultation was launched. 

The government’s proposals included: mandating the due diligence of umbrella companies, transferring debt up the supply chain in the event of non-compliance and regulating umbrella companies. Impacted parties were asked to respond to them by August.

Umbrella companies and recruitment agencies should act now

But in the absence of the government committing to introducing changes that tackle tax avoidance and other key issues in the sector, PayePass has encouraged umbrella companies and recruitment agencies to act now. 

According to HMRC, 99 percent of the tax avoidance market involves disguised remuneration schemes, targeting contractors and agency workers. These schemes claim to be umbrella companies, with at least £400m in tax avoided in 2020/21 alone. 

The government’s own figures also suggest that over 500,000 people now work through umbrella companies in the UK – a 400 percent increase from 2007/08 to 2022/21.

Kermode, of PayePass:  commented:

“The government has failed to deliver on its promises to tackle the key issues impacting the umbrella industry, which forms a key component of the UK’s temporary labour market. While a number of the latest raft of proposals are long overdue, who knows how long we could be left waiting for them to materialise? 

“Whether it’s widescale tax avoidance or umbrella companies unlawfully skimming millions from workers’ payslips, misconduct seems to be on the rise and going unchallenged in this sector. The government is yet to flex its muscles and you can’t help but wonder when Westminster will act, if ever.

“In the meantime, action must be taken. Umbrella companies themselves have an opportunity to stand out and demonstrate their compliance. Recruitment agencies have a duty of care to their workers, so they must ensure that any umbrellas they engage are genuinely doing everything by the book. This is the very reason that the PayePass Compliance Awards exist – ensuring flexible working is fair, compliant and transparent is the cornerstone of everything we do.”





Amelia Brand is the Editor for HRreview, and host of the HR in Review podcast series. With a Master’s degree in Legal and Political Theory, her particular interests within HR include employment law, DE&I, and wellbeing within the workplace. Prior to working with HRreview, Amelia was Sub-Editor of a magazine, and Editor of the Environmental Justice Project at the University College London, writing and overseeing articles into UCL’s weekly newsletter. Her previous academic work has focused on philosophy, politics and law, with a special focus on how artificial intelligence will feature in the future.