Joint Liability: Time to Rethink Umbrellas?

For years, umbrella companies have offered recruitment agencies a convenient way to engage temporary workers. But with increasing scrutiny of labour supply chains and the introduction of joint and several liability provisions, many agencies are asking a different question:

Is the convenience still worth the risk?

Where HMRC identifies unpaid tax liabilities within a labour supply chain, agencies face growing pressure to demonstrate they have taken reasonable steps to ensure compliance. Under the Government's proposed umbrella company reforms, joint and several liability allows HMRC to pursue agencies for payroll taxes that a non-compliant umbrella company fails to remit. Read HMRC's guidance on umbrella company non-compliance here.

Even when an agency isn't directly responsible for a failure, the financial and reputational consequences can be significant. This shift is prompting recruiters to reassess how they pay workers and whether traditional umbrella arrangements still provide the right balance between flexibility, compliance and risk.

Considering your options? Rocket Paye can help you assess whether a payroll bureau model could reduce complexity and strengthen compliance confidence.

1. Why More Agencies Are Exploring Payroll Bureau Services

Unlike an umbrella company, a payroll bureau doesn't sit within the employment supply chain. Instead, workers are employed directly by the agency, while payroll administration is outsourced to a specialist provider. The result is a simpler structure with greater visibility and control.

Benefits include:

• Reduced reliance on third-party employment intermediaries
• Greater transparency over PAYE and National Insurance payments
• Improved governance and compliance oversight
• Increased confidence when demonstrating due diligence to clients
• Reduced exposure to risks associated with umbrella company failures

For agencies reviewing their supply chain exposure, HMRC has also published guidance on labour supply chain due diligence and compliance checks.

2. Not Just for Internal Employees

Payroll bureau services aren't limited to permanent staff. Modern bureau solutions can efficiently support:

• Temporary workers
• Contract staff
• Internal employees
• Multiple payroll frequencies
• High-volume recruitment businesses

By managing temporary and internal payroll through a single compliant framework, agencies can streamline operations while maintaining greater control over the worker payment process.

3. A Payroll Decision or a Risk Decision?

The recruitment sector is entering an era where payroll choices are becoming risk-management decisions. Umbrella companies will continue to have a place in the market, but agencies should be asking whether their current model aligns with today's regulatory environment, client expectations and compliance obligations. The question is no longer simply how workers get paid. It's how much supply chain risk your business is prepared to accept.

4. Review Your Payroll Risk Exposure

If you're reviewing your payroll strategy in light of joint liability concerns, Rocket Paye can help you assess whether a payroll bureau solution is the right fit for your temporary workforce and internal employees. A short review of your current payroll model could help identify opportunities to reduce complexity, strengthen compliance oversight and increase confidence in your labour supply chain.

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