Umbrella Company Liability Changes

 29th Apr 2026

Earlier this month, new tax regulations came into effect which may expose businesses to increased risk. This has particular relevance for recruitment agencies, who will be taking on additional responsibility going forward when it comes to payroll and compliance. However, what’s discussed far less is the impact on organisations who hire temporary staff directly, using Umbrella companies to outsource the payroll and compliance process.  

Before the 6th of April, Umbrella companies had full responsibility for processing PAYE and NICs, which has always been one of the benefits of utilising Umbrella companies and temporary staff. In situations where staff are needed on short notice, there often isn’t the time for organisations to go through their ordinarily lengthy recruitment and offer process. For Fixed Term Contracts, this involves producing an offer letter, then a contract, enrolling the candidate onto all of the HR platforms, etc. FTCs operate identically to permanent roles (except for the end date) and come with the associated administrative hassle. Getting a temp in – a temp being paid through an Umbrella company – means you avoid most of the work involved here, and can put more work into training and getting the candidate up to speed. The Umbrella company worries about the administrative hassle. 

With that used to come with the assurance that you wouldn’t be liable for mistakes made by the Umbrella company in relation to payroll, but that’s no longer the case. The End user now shares liability for errors made. The end user in this case, is the organisation the temp is working for. Of course, using an Umbrella is as easy as it’s always been – though there is now the added pressure around being responsible for their errors. Some organisations are working on portals allowing the end user to view all the information they need to ensure accuracy – though this is an additional admin task. 

There is a way to avoid this additional responsibility though. The talk around this change has been largely centred around recruitment agencies – the reason for this, is because when we’re involved in a temporary recruitment process, we take on the responsibilities of the end user. Should there be any issues with PAYE or NICs caused by the Umbrella company, HMRC will pursue us as opposed to the end user. We act as a buffer between the end user and the Umbrella company. 

Of course, the Umbrella companies we work with are FCSA accredited and SafeRec certified to ensure a seamless, secure and confident process for everyone involved – and this is in addition to the compliance standards we hold ourselves accountable to. 

If you’re looking for a temporary option in your finance team at present, we’d be pleased to set up a chat and discuss some of our immediately available candidates. We have specialists across the Central Belt working closely with the interim market, and so are well placed to support if there’s an immediate need within your organisation.