Employers using contractors and / or temporary workers are required take a closer look at how their supply chains are set up.

At Auxo’s recent event, Future-Proofing Your Workforce and Understanding the Employment Rights Act, umbrella reform came up repeatedly, particularly how Joint and Several Liability (JSL) is set to become one of the most significant changes to the UK labour supply chain in decades. 

For many businesses, confidence in the full supply chain is now a key concern.

Watch the highlights reel for a quick recap of the event.

If you’d like a broader view on how the Employment Rights Act is affecting workforce planning, you can read the first blog in this series here.

What are employers concerned about with umbrella company reforms?

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From April 2026, JSL extends liability for unpaid employment taxes across the labour supply chain, including umbrella companies, agencies, and in some cases end clients. This makes it harder to distance your business from how contractors are engaged and paid.

The concerns raised ahead of the event include:

• Limited visibility across umbrella arrangements

• Uncertainty around PAYE responsibility

• Exposure to non-compliant providers

• The impact of JSL on existing supplier models

Perspective from a compliant provider?

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Part of the discussion focused on how these changes are affecting the umbrella market, with input from Alex Moore.

Alex is Chief Sales Officer at Sapphire, where she works with contractors, recruitment agencies, MSPs, and end clients to navigate umbrella legislation and compliance requirements. 

At the event, she highlighted that:

• More organisations are introducing approved, audited umbrella supplier lists

• There is greater emphasis on PAYE-compliant engagement

• Supply chains are being reviewed in more detail

 As JSL increases accountability, businesses are moving towards fewer, more reliable providers and away from arrangements that do not meet PAYE and compliance standards.

Key takeaways for employers

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Alex also shared more on how JSL is influencing behaviour across the sector, particularly how businesses select suppliers and manage compliance risk.

• Compliance requirements are increasing across umbrella supply chains
  JSL is driving further compliance, with businesses reviewing their supply chains more closely and implementing tighter, audited umbrella supplier lists.

• Non-compliant arrangements are being phased out
  As businesses reduce JSL PAYE risk, tax avoidance schemes and non-compliant solutions are being removed.

• The umbrella market is becoming more concentrated
  Businesses are moving towards fewer, larger providers with stronger financial stability and sustainability.

• Ownership structures need attention
  Under “material interest” rules, if a recruitment agency or vendor has ownership in an umbrella company, or a shareholder holds 5% or more across both, PAYE liability for contractors engaged through that umbrella can move to the end client.

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What should employers do next?

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Umbrella reform is increasing scrutiny across contractor supply chains, making visibility critical for managing risk.

If you are working with umbrella providers, now is the time to review:

• Who you work with

• How those providers operate

• Whether your current model exposes you to unnecessary risk

Auxo works with businesses to assess supply chain structures, supplier models, and compliance risk, helping bring clarity to how contractors are engaged and managed.

If you want to sense-check your current approach or understand what others in your market are doing, get in touch.

You can also follow Auxo on LinkedIn and join one of our upcoming events.

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