Preparing for Umbrella Regulation 2027

Recruitment agencies have already had plenty to get to grips with in 2026. From the phasing in of measures in the Employment Rights Act 2025, the introduction of Joint and Several Liability (JSL) in April and tabled changes to Right to Work checks from October, there’s been a lot to keep on top of. 

With more to come on the regulatory horizon, there’s no time for anyone to take their eye off the ball. A date to keep on the radar is April 2027, when umbrella companies are due to come under formal statutory regulation, a timeline confirmed in a gov.uk update published at the end of August.  

What’s changing?

The Employment Rights Act 2025 extends the definition of an “employment business” to include umbrella companies. This brings umbrella companies into the Employment Agency Standards framework and under the oversight of the new Fair Work Agency.

The intention is to create greater accountability around how umbrella companies employ and pay workers. Areas expected to fall within the framework include pay and employment transparency, holiday pay, SSP, record keeping and unlawful deductions. The Fair Work Agency will also have powers to inspect and enforce compliance. 

There is still detail to be confirmed through secondary legislation and guidance, so agencies shouldn’t expect to have the full rule book just yet. 

How does this sit alongside JSL?

Umbrella regulation is separate from the Joint and Several Liability that came in back in April. But it sits alongside JSL with a shared end goal of increasing accountability in umbrella company supply chains.

JSL primarily focuses on tax compliance. Where an umbrella company fails to account correctly for PAYE and National Insurance, agencies (or, in certain circumstances, end clients) can now be liable for the shortfall.

The focus of umbrella regulation is around employment rights, worker protections and operational stands.

Put simply, JSL asks whether tax is being paid correctly, whereas the 2027 framework asks whether workers are being employed and treated correctly.

For recruitment agencies, both reinforce the importance of knowing who is in your supply chain and having confidence in the umbrella partners you work with.

Agency actions for Q3-4 2026

With further ERA 2025 measures coming into play, along with other changes such as RTW requirements, agencies have an increasingly broad compliance picture to manage.

While this is no reason to panic, now is a sensible time to look at your umbrella PSL and understand how providers are preparing for 2027.
For the remainder (Q3-4) of 2026, these three agency actions are a good starting point:

1. Review your umbrella panel
Check who you work with, the strength of their compliance processes and what they are doing to prepare for 2027.

2. Review your contracts and processes
Make sure your agreements, due diligence and record-keeping processes are fit for an increasingly regulated supply chain.

3. Talk to your umbrella partners
Ask them directly how they are set for the new requirements, what technology and processes they have in place, and how they will keep you informed as the detail develops. 

How we’re preparing

At Liquid Friday, we’re investing in technology, processes and transparency to make compliance easier and give agencies greater visibility across the worker journey.

Our technology is leaping ahead to connect agencies, workers and payroll, while providing clear information and audit trails. Combined with our experienced team, this means agencies have a partner that is already thinking beyond the next deadline.

2027 might still feel a way off, but umbrella regulation is one more change worth keeping in your sights. If you’d like to talk to us about your umbrella supply chain or how Liquid Friday can support your agency, just get in touch.