As we approach the end of 2024, a lot has happened but has much changed in the umbrella company market?

The Payroll Compliance Authority (PCA) first launched in November 2023, which means that this December completes our first full year. Here, we reflect back on 'year one' and do a whistlestop through the past twelve months for the sector.

Regulation

Throughout 2024, the PCA has campaigned for official regulation of the umbrella company market to tackle the number of fraudulent schemes and activities by a minority of payroll suppliers. These activities include incorrect tax deductions, pay skimming, and withholding of holiday pay, among other practices.

Following several consultations and a change in government, this long-awaited regulation is now on its way, as announced in the Autumn Budget, with implementation starting in April 2026.

However, will it serve the purpose it is being designed for? PCA Director Olivia Spruce explains her reasons for believing the proposal so far will not significantly change the status quo, here.  

Throughout 2024 we have engaged with HMRC and other key organisations and individuals in the contracting and outsourced payroll space and will continue to do so as the regulation takes shape and the industry responds.

Snapshot of sector developments

The year began with a change to holiday pay and entitlements, followed in April by the ending of IR35 double taxation. Aside from a newly elected government and the impact and implications that come with this, a particularly significant development is a sweep of new measures incorporated into the Employment Rights Bill, which is currently making its way through Parliament. We have reflected on some of its implications, including potential risks associated with a zero hours ban. We expect that the Bill, and the version of it that becomes law, will be the subject of much discussion and many column inches in 2025.

In March, Companies House inherited greater powers that may enable it to catch out some unscrupulous payroll suppliers. Billed as the greatest shake-up at Companies House in its 180-year history, the powers have been introduced under the Economic Crime and Corporate Transparency Act. The keeper of the UK's public register of companies now has greater enforcement powers to verify the identity of company directors, remove fraudulent organisations and invalid office addresses, and share information with law enforcement agencies, which will support the crackdown on unscrupulous operators. PCA CEO Paul Newsham shares his views on these new powers here.

New board member

In the Spring, the PCA welcomed a new board member Martin Innes, whose extensive background in the healthcare sector, including data-led senior leadership roles at various private and NHS organisations, has given him invaluable insights into how the growing volume of agency staff operate in the UK and the sector's reliance on umbrella companies to handle the payroll function. Martin decided to join the PCA to lend his expertise to the outsourced payroll accreditor, which is seeking to protect workers and recruiters from unscrupulous suppliers.

Martin's expertise complements the existing board, who can be viewed here.

Spotlight on the 'blacklist'

Throughout the year, the PCA has provided insights on the sector and signposted guidance and resources to help workers and recruitment firms navigate the umbrella market and support compliant umbrella companies. One such resource is HMRC's list of known tax avoidance schemes, promoters, enablers and suppliers. The PCA has provided regular updates when new names have been added every month, with the number of known tax avoidance schemes and promoters on the list both well exceeding 100 in 2024.

The list is a good place to start the due diligence process for any recruitment companies and temporary workers that arrange or receive pay through umbrella companies, to help them steer clear of non-compliant operators. However, it is an incomplete list, which we have written about in greater detail, here. 

Looking ahead to 2025

Going into the new year, an important focus for the PCA will be engaging with HMRC and the wider industry on regulation as it takes shape. As a not-for-profit accreditor of compliant umbrella companies, we will also continue to do all we can to stamp out worker exploitation and protect recruitment firms from serious financial and reputational risks through a rigorous audit process and repeat checks of our member umbrella companies.