With new legislation coming in April 2026 to tackle non-compliance in the umbrella company market, recruitment firms are preparing for their increased legal responsibilities.

It has always been necessary for these firms to carry out thorough due diligence before engaging payroll suppliers, known as umbrella companies, that employ assignment-based workers on behalf of agencies and end clients.

However, the imminent shift will make agencies legally responsible for accounting for PAYE and National Insurance contributions on payments made to these workers. The liability for any shortfall will rest with the agency.

This means it is even more essential for recruitment firms to safeguard themselves from this risk.

How can recruitment firms protect themselves?

There are several steps that recruitment agencies can take to reduce the risk of engaging a non-compliant umbrella company and paying the price down the line. Arguably, the most effective of these is choosing to only work with suppliers that have been accredited by a reputable organisation. This is particularly valuable if the accrediting organisation also has appropriate liability insurance in place.

The Payroll Compliance Authority (PCA) has a unique triple-audit model and an ethical approach that makes it easy to identify compliant providers and eliminate risk. As a not-for-profit accreditor, the focus is entirely on our mission to stamp out non-compliance and worker exploitation in the sector, without any profit-making priorities to compromise integrity.

Through forensic and ongoing audits, the PCA can verify unequivocally that suppliers audited for them by global accounting partners PwC or BDO are in full compliance with all tax and employment laws and that they are running a transparent and ethical operation.

What the PCA can also offer on top of this, is fiscal reassurance of having professional indemnity insurance cover in place.

Paul Newsham, CEO of the PCA and a Chartered Accountant for more than 20 years, explains: "Having professional indemnity insurance is not a legal requirement for accreditors of umbrella companies, but in my years of professional experience, being cautious and putting in place protections for anyone who works with us, or any of our members, is always a prudent step. It provides peace of mind from non-compliance.

"We know that our audit processes are sufficiently thorough and regular that this cover is highly unlikely to ever be required, but it provides reassurance and financial security, which is always desirable and makes the PCA a particularly appealing accreditor to work with."

The PCA's professional liability cover is with international insurance group QBE.

We talk in more detail about how the PCA helps recruitment firms to engage compliant umbrella companies in a previous blog.

If you would like any further information or have any questions about PCA membership or the audit process, please visit our audit page. You can also contact Paul Newsham at paul@payrollcomplianceauthority.co.uk, or any of our other board members.