Mastering Compliance: Tips and Best Practices for Staying Compliant With Umbrella Companies

Mastering Compliance: Tips and Best Practices for Staying Compliant With Umbrella Companies

Staying compliant when dealing with umbrella companies is one of the most pressing issues facing recruitment professionals today. With hard-working recruiters already dealing with multiple examples of legislation regarding their own professional conduct and standards, ensuring compliance when dealing with umbrella companies can add an onerous burden to their workload. Here we offer some practical advice on how recruitment agents can maintain compliance when working with an umbrella company.

Current laws

Recruitment agents already operate under strict legislation to ensure the safe and fair treatment of workers in the UK. Examples of this include The Conduct of Employment Agencies and Employment Businesses Regulations 2003, The Employment Agencies Act 1973, and The Agency Workers Regulations 2010, to name but some. 

However, when they factor in the plethora of legislation relating to compliance too, attempting to abide by these constantly-changing laws can prove time consuming, complicated and frustrating. Many recruiters now tell us that they spend a disproportionate amount of time ensuring that they’re on top of this bureaucracy when they’d prefer to be helping people get jobs. So how can they master compliance?

Look for Accreditation

In the absence of any formal legislation relating to the conduct of umbrella companies, recruiters must rely on accreditation credentials provided by either of the two top professional conduct bodies that deal with umbrella companies in the UK. It’s a simple matter to check whether any umbrella company that approaches a recruiter is either Freelancer & Contractor Services Association (FCSA) or Professional Passport approved, by searching the databases they hold for members who have gone through a strict accreditation process. This process proves that the companies in question demonstrate complete transparency as well as best practice.

Recruiters should note that any umbrella company claiming to be HMRC Approved is being dishonest. HMRC does not approve umbrella companies and such claims are misleading. 

Disguised remuneration

Non-compliant umbrellas will promise contractors higher-than-normal take-home pay – often in excess of 80%. A simple calculation of current tax rates and NI contributions should be enough to alert recruiters to the fact that this is not legal and is certainly not compliant. Umbrellas who offer such illegal schemes will also invariably be involved in trying to persuade contractors to get involved with other illegal activities by offering them ‘non-taxable’ payments. These will include loans, salary advances, grants, credit facilities, annuities, profit shares, or shares and bonuses paid on part of their salary (where a small proportion of the amount they earn is legitimately PAYE) thereby trying to avoid paying the tax which they are legally obliged to do. 

Points of contact

We hear a lot about the aggressive sales tactics used by some umbrella companies in order to get recruitment agents to partner with them. Here at i4 we don’t like bullies or coercion and would certainly never countenance some of the strategies used by other, less reputable, umbrellas, which may indicate a high degree of non-compliance. 

Our reputation is built on a positive and healthy working relationship with both the recruitment agents who we partner with and the contractors who we serve and that’s why we always offer a friendly, helpful and experienced voice at the end of the phone if recruiters or contractors need help or information and can promise no aggressive sales tactics. That’s also why we consistently receive higher-than-average reviews on sites such as Trust Pilot and why our Testimonials are honest and can be relied upon.

It’s easy to be swayed by underhand tactics or persuaded by glib promises of too-good-to-be-true returns, especially if a recruiter is unaware of the complexities of staying compliant. The facts that the risks always outweigh the rewards should lead recruiters to ensure that they do their due diligence, investigate each and every one of the umbrellas they’re considering partnering with, and only work with compliant, knowledgeable and experienced umbrella companies who hold compliance standards as the bedrock of all they do.

If you’d like more information about how we can help you maintain compliance for your agency and for your contractors, as well as ensuring they get paid on time, every time, call us on  0800 084 3058, email us at or drop us a message here.