How to manage your Preferred Supplier List of Umbrella Companies

How to manage your Preferred Supplier List of Umbrella Companies

Managing your Preferred Supplier Lists (PSLs) is a vital part of any Managing Director’s role in a recruitment agency. Your clients, contractors and staff rely on your judgement and the decisions you take when you partner with outside entities. Here we look at what you can do to make sure that your preferred suppliers offer you not only the best value for money but also enhance your professional reputation, and keep you compliant within all the relevant laws. 


What’s a PSL?

A PSL is not only a list of suppliers that your company uses and can recommend to contractors and clients alike, but also the best way to ensure that your business stays compliant.

Your PSL should be based on solid research, your own strict guidelines, and thorough audit procedures which enable you to build a ‘directory’ of suppliers, of everything from where you source your office equipment to to the umbrella companies you recommend. 

PSLs help you deal with suppliers that not only offer you the levels of service you’d expect, but are also financially stable as well as compliant. There is no ideal number of suppliers that should be on your PSL but limiting the number to two or three carefully-vetted umbrella companies can help you reduce your risk of exposure to non-compliance.


Why set a PSL up?

When you’re dealing with the umbrella companies that your agents recommend to contractors it’s even more important to understand the risks your company faces if it recommends umbrella companies that don’t hold compliance standards as highly as others. Under the Criminal Finances Act (2017) recruitment agencies are responsible for the referrals they make to their contractors, and if they recommend a non-compliant umbrella company they can be held directly responsible. This can result in substantial fines for the agency, and potential criminal prosecution for directors and senior management, even if they were unaware of the referral. 

What’s more, if the contractor uses a non-compliant umbrella company and later receives a tax bill they may feel that levels of professionalism shown by the agency were not up to standard, and that they have failed in their duty of care. And as word of mouth is one of the most important ways in which companies’ successes or failures are measured, being bad-mouthed in contractor forums is certainly not going to enhance your reputation. 


How to manage your PSL

There are certain fundamentals you must consider when you’re managing your PSL. Let’s take a look at them.

Background checks

All the companies you deal with will be registered at Companies House. When you’re researching them, make sure you take time to check them out there. You’ll find a list of company directors (whom you can check out individually to ensure that they haven’t been involved in dubious dealings previously), as well as details of their accounts filing history (so you can see how long they’re been in existence and to ensure they’re not a fly-by-night organisation), and where they’re based (if they’re listed as being based offshore that’s a sure sign that they may be a disguised remuneration scheme). It’s important to gauge an umbrella company’s financial health before putting them on your PSL to ensure that they can meet the financial obligations they’ve committed to over the course of your contract with them. 


You should make sure that the umbrella companies that you deal with have strict policies in place in respect of IR35 Legislation, Tax and National Insurance Contributions and Agency Workers Regulations Legislation. 


What services do the umbrella companies on your PSL offer? As well as services for your candidates you may also want to see if they offer services you can use directly, such as payroll provision. If you’re in a period of expansion and are unsure how your own payroll department will cope with the extra work, it makes sense to partner with an umbrella that can relieve you of your burden so you can concentrate on your core activities. 


Contractor services should include: 

  • Quick and accurate payments – preferably the same day as the timesheet is submitted
  • Simple registration process – supported by apps by which contractors can check payslips, submit timesheets, request holiday pay and view P60s
  • Dedicated account manager
  • Record of continuous employment
  • Entitlement to full UK statutory rights
  • Contributions to workplace pension scheme


Agency services should include:

  • Cost-effective payroll services
  • A proven track record of partnering with and assisting recruitment agencies (here at i4, for example, we’ve helped over 11,500 agencies, employed 39,000 contractors and have processed over 730,000 payments since 2005)
  • Dedicated support team
  • Quick and easy registration process for contractors
  • Compliance with all employment and tax legislation
  • Tailored Key Information Documents (KIDs)
  • RTI payment reports
  • Quarterly Employment Intermediary Reporting
  • Streamlined and automated invoicing process


When you’re making important decisions about the future of your recruitment agency it’s crucial that you get the fundamentals right. The choices you make about your PSL can have an impact not only on your business performance but also on the financial health of both your agency and your contractors. Make sure that you partner with an umbrella that will work both for you and with you to help your business grow. If you’d like more information about how i4 can help you achieve compliant success call us on 0203 603 1290, email us at or fill in the contact form here.