In today’s ever-evolving recruitment industry, compliance is a critical risk-management strategy. The 2026 umbrella legislation changes will likely place liability and responsibility for unpaid PAYE tax on recruitment agencies if their umbrella company partners fail to comply.
At the heart of this challenge lies your choice of umbrella companies. While compliant and trusted umbrella providers protect your agency, non-compliant ones pose serious financial, reputational, and legal risks
This blog explores the benefits of working with trusted umbrella companies while helping you identify red flags to avoid when assessing partners for your Preferred Supplier List (PSL).
What is a non-compliant umbrella company?
A non-compliant umbrella company fails to meet HMRC regulations, often prioritising short-term profits at the expense of compliance.
Warning signs of non-compliance include:
- Lack of transparency: No clear breakdowns of pay, deductions, or fees.
- Worker misclassification: Misclassifying employees as self-employed to avoid tax obligations.
- Unrealistic promises: Offering higher take-home pay than compliant providers – often a sign of tax avoidance schemes.
- Lack of accreditation: No independent audits or recognition from industry bodies like the FCSA or SafeRec.
Working with non-compliant providers could leave your agency exposed to financial penalties, reputational damage, and HMRC investigations.
Why partnering with trusted umbrella companies matters
Once you’ve identified non-compliant umbrella companies to avoid, the next step is to prioritise trusted partners that meet the highest compliance standards.
1. Minimising compliance risks
- Ensures accurate PAYE & NIC deductions – protecting your agency from liability risks.
- Provides full transparency in processes.
- Shields your agency from the financial consequences of non-compliance.
2. Streamlining PSL management
- Offers consistent, compliant service, reducing the need for constant vetting.
- Saves time – trusted FCSA-accredited and/or SafeRec providers simplify due diligence.
- Proactively updates agencies on legislative changes.
3. Protecting your reputation
- Ensures contractors are paid correctly and on time – boosting satisfaction & retention.
- Strengthens your agency’s credibility with clients & regulators.
- Avoids PR crises linked to compliance failures.
Why agencies choose Sapphire
When building or reviewing a PSL it’s essential to remember that compliance, while critical, is just one part of the equation. The overall experience of your contractors should also play a significant role in choosing the right umbrella partners.
Contractors who feel valued and supported are more likely to stay engaged, perform well, and recommend your agency to others. At Sapphire, we focus on delivering a seamless, rewarding experience for contractors:
- FCSA accredited service: Transparency and compliance guaranteed, providing peace of mind for contractors and agencies alike.
- Employee ownership bonuses: Contractors benefit from profit-sharing bonuses as part of our employee-owned structure.
- Same-day payments: We ensure contractors are paid the same day without any delays and offer advance payments for agencies until 4.30pm every Friday.
- Smart rewards: Access to unlimited retail discounts, saving £100s across popular brands.
- Independent financial and mortgage advice: Free access to expert advice on tax planning, pensions, wealth management, and mortgages.
- Comprehensive insurance cover: Full coverage including £10m Employer’s Liability, £10m Public Liability, and £5m Professional Indemnity.
- Top-tier customer experience: Our support team is available via WhatsApp Live Chat, phone, and same day email response for the best possible service. For more information on our customer experience SLAs, just ask.
- Quick and easy registration: Contractors can sign up with us in less than five minutes.
- Pension options: Contributory Workplace Pension Scheme and the ability to make private pension (SIPP) contributions.
- Exclusive benefits with Umbrella Platinum: Including a private cash health plan, personal accident cover and free sub payments.
- Agency training sessions – free training support for your recruiters on the various pieces of legislation that impact the contractor market, as well as the payroll offerings such as umbrella, PAYE, PEO and the processes involved.
Contact us today to discuss how Sapphire can support your agency’s journey toward a stronger, more secure future.
