At Zebra People, we specialise in helping clients, candidates and contractors navigate the ever-changing world of digital recruitment. One area undergoing significant regulatory change is the use of umbrella companies within contractor supply chains.
Whether you’re a contractor working through an umbrella company or an end-client engaging temporary tech or digital talent, it’s crucial to understand what’s changing – and how to prepare ahead of 2026.
What is an umbrella company?
An umbrella company employs contractors on behalf of recruitment agencies or end-clients and manages PAYE, National Insurance, payroll and statutory employment rights such as holiday pay. Umbrella models became more common after the IR35 reforms in 2021, particularly across digital, engineering, product, UX and design contracting.
Key legislative changes affecting umbrella companies (2025 to 2027)
1. Joint and several liability from 6 April 2026
If an umbrella company fails to pay the correct PAYE or National Insurance, HMRC may hold other parties in the supply chain fully liable. This can include the recruitment agency or the end-client depending on the structure of the supply chain.
2. Umbrellas to be regulated as employment businesses (expected 2027)
Under the Employment Rights Bill, umbrella companies will fall under the Employment Agencies Act 1973. This will lead to tighter regulation, stronger oversight and improved worker protections.
3. Revised PAYE and NIC rules from 6 April 2026
Following the government’s 2025 measure titled Umbrella companies: tackling non-compliance, the relevant party, either the agency or the client, will be responsible for ensuring that the correct tax is paid.
4. Strengthened worker rights
Reforms will strengthen fair work rules, protections for zero hours workers, entitlement to guaranteed hours and clarity around holiday pay. These changes will impact contractors across digital, tech, engineering, UX, product and design.
What this means for contractors, agencies and end-clients
For contractors
Choose a transparent and reputable umbrella company. Understand the structure of your supply chain. Expect tighter compliance and more consistent payroll approaches. Ask your recruiter how the 2026 changes may affect your take home pay.
For end-clients and hirers
You may become liable for unpaid tax or National Insurance in the supply chain. Review how contractors are engaged and which umbrellas are being used. Work with agencies that can demonstrate strong compliance processes. Assess whether alternative engagement models may reduce risk.
Zebra People’s advice: what you should do now
1. Review your supply chain
Map out the full chain: contractor to umbrella to agency to client. Identify risk points and clarify the relevant party under the new rules.
2. Work only with accredited umbrella partners
Choose umbrella companies with FCSA accreditation, commitments to SafeRec or VeriPAYE, transparent payroll models and strong audit processes.
3. Update your contracts and terms
Ensure contracts clearly define liability, audit rights, reporting obligations and the ability to request payroll information.
4. Educate internal teams and contractors
Make sure everyone understands joint and several liability from 2026, revised PAYE and NIC rules and the future 2027 regulations.
5. Monitor upcoming regulation
The landscape will continue to evolve throughout 2026 and 2027, so remain alert to further updates.
Why this matters
The umbrella company market has expanded rapidly, especially in digital and tech contracting. With growth have come challenges such as non-compliance, disguised remuneration schemes, payroll manipulation and unclear deductions. The government aims to increase fairness, transparency and worker protection while ensuring tax compliance. For contractors, agencies and end-clients, this means higher standards, more accountability and a need to prepare early.
Conclusion
If you are a contractor working through an umbrella company or an end-client engaging contractors, these changes will affect you. At Zebra People, we are here to help you navigate the evolving landscape, ensure you work with compliant partners and protect your business while maintaining access to exceptional digital talent.
All our current umbrella partners are FCSA registered and are progressing towards SafeRec or VeriPAYE accreditation ahead of April 2026. If you would like us to review your contractor or umbrella arrangements, run a supply chain health check or discuss how the upcoming changes may impact your organisation, please contact our compliance specialist at compliance@zebrapeople.com.
