Employment Rights Bill

The Employment Rights Bill will be amended to define umbrella companies, introduce a regulatory framework, and bring them within the remit of the Employment Agency Standards Inspectorate (EAS).

Instead of adopting either of the two original consultation proposals proposed by the previous government, the new definition will focus on the following two key indicators:

• An umbrella company is an entity that employs individuals with the purpose of supplying them to a hirer
• An umbrella company is an entity that manages payment for services performed by individuals supplied to a hirer

The regulation of umbrella companies will align with the Conduct of Employment Agencies and Employment Businesses Regulations 2003, ensuring consistency with existing rules governing employment agencies and businesses. A statutory consultation will be required before implementing any amendments to these regulations.

The EAS will oversee the enforcement of umbrella company regulations. However, its responsibilities will later transfer to the Fair Work Agency.

Separately, as announced in the Autumn Budget 2024, the government will introduce legislative changes from April 2026 to address tax non-compliance in labour supply chains. Under the new rules, when an umbrella company is used to engage a worker, responsibility for PAYE compliance will shift from the umbrella company to the recruitment agency supplying the worker. If no agency is involved, this responsibility will fall to the end client.