Introduction
When joint and several liability (JSL) becomes legislation in the UK in April 2026, it will significantly change the compliance landscape for recruitment agencies working with umbrella/payroll companies.
About Joint and
Several Liability
⚖️ Key Implications for Recruitment Agencies
Full Financial Liability
Agencies could be forced to pay the full amount of unpaid taxes if the umbrella company defaults.
Due Diligence Isn't Enough
Traditional compliance methods like moment-in-time ‘audits’, spot checks, accreditations, or policies won’t suffice. Agencies must be able to prove in real-time, that tax has been correctly calculated, reported, and paid.
Reputational and Legal Risk
Beyond financial penalties, agencies face potential reputational damage and legal consequences if found liable.
Shift in Responsibility
Agencies can no longer assume that tax compliance is solely the umbrella company’s responsibility. They must now actively monitor and verify compliance.
🛡️ How to Prepare
- Implement Real-Time Compliance Tools: Platforms like SafeRec offer real-time, auditable proof of tax compliance.
- Work Only with Verified Umbrella Companies: Prefer those that undergo forensic audits and are certified against their live HMRC data.
- Centralise and Automate Compliance Tracking: Use systems that alert you to risks, reminders for reviews, or changes in an intermediary’s status.
Joint and Several Liability Compliance Checklist (2026)
Review Existing Umbrella Relationships
- Audit all current umbrella companies in your PSL for compliance history, pay models and current processes.
- Terminate relationships with any that lack transparency or have questionable practices.
Implement Real-Time Compliance Monitoring
- Adopt platforms like SafeRec - the best-in-class option for real-time PAYE/NIC verification.
- Do not rely on spot check audits or compliance 'badges' to protect you.
Update Contracts and Agreements
- Include clauses that require umbrella companies to share tax data.
- Add indemnity clauses to protect your agency from non-compliance.
Train Internal Teams
- Educate staff on JSL implications and compliance responsibilities.
- Provide training on using compliance platforms and interpreting reports. Know your data!
Establish a Risk Management Framework
- Create a process for flagging and investigating compliance issues.
- Set up alerts for missing documentation or suspicious activity.
Engage Legal and Financial Advisors
- Consult with legal experts to ensure contracts are watertight.
- Work with accountants to understand tax liabilities and reporting standards.
Communicate with Clients and Contractors
- Inform clients about the new legislation, your compliance measures and supply chains PSL.
- Education contractors on the importance of working with verified umbrellas and payslip compliance tools like PayslipBuddy.
Maintain Documentation and Audit Trails
- Store all compliance records/reports securely and accessibly.
- Schedule regular audits to ensure ongoing adherence.
The upcoming Joint and Several Liability (JSL) legislation, set to take effect in April 2026, will primarily apply to PAYE workers employed via umbrella companies. Here's how it breaks down:
✅ Who Is Caught by the JSL Rules?
PAYE Workers via Umbrella Companies
- Yes caught. These workers are the central focus of the legislation.
- If the umbrella company fails to pay the correct PAYE tax or National Insurance, HMRC can recover the full amount from the recruitment agency or end client.
- Expenses claims will come under more scrutiny, as the agency will also carry liability for unpaid tax/NI, if these are found to have been reimbursed incorrectly.
Self-Employed Contractors or Sole Traders
- No, not directly caught. These individuals are responsible for their own tax affairs and are not directly employed via umbrella companies.
- However, if a disguised remuneration scheme is used to make them appear self-employed while actually working like employees, HMRC may still pursue back taxes from the individual.
Limited Company Contracts (PSC)
- Not affected by JSL, but they remains subject to IR35/off-payroll working rules.
- If a PSC is incorrectly treated as outside IR35, the fee-payer (often the agency) may still be liable for unpaid tax - but this is under existing IR35 rules, not the new JSL framework.
How Orbital Protects Recruitment Agencies from the 2026 Joint and Several Liability Legislation
Understanding the 2026 Legislation Shift
Possibly the most impactful major reform to the recruitment industry: joint and several liability (JSL) between recruitment agencies and umbrella companies – marks a seismic shift in how recruiters must now understand and also see proof that its lower supply chain are operating compliantly for tax purposes. Under this model, if an umbrella company fails to pay the correct PAYE/NICS - the recruitment agency that engaged them can be held fully liable.
This marks a significant departure from the current framework, where agencies are only liable in limited circumstances. The new rules aim to combat tax non-compliance, protect workers, and level the playing field by eliminating rogue umbrella providers.
But there is answer to mitigate any risks….
Why Traditional Due Diligence Falls Short
Historically, agencies have relied on accreditations, policy documents, and occasional audits to assess umbrella compliance. However, these methods are retrospective and static—they don’t provide real-time assurance that taxes are being correctly calculated, reported, and paid. This puts recruitment agencies at risk, especially if you don’t know what is going on in the background e.g. Expense Claims – are these being properly checked, verified and reimbursed? If not, a tax bill awaits.
With JSL, this reactive approach is no longer sufficient. Agencies must now prove ongoing compliance or risk severe financial, legal, and reputational consequences.
The days of a payroll provider saying – ‘we have this accreditation’ or ‘we can prove compliance’ or ‘we are 100% transparent’ – are sadly no longer believable without real-time payroll audits. Cut through the noise….
Enter SafeRec: Real-Time, Auditable Protection
Orbital has been an ‘original’ SafeRec certified member since 2023 – we recognised the great untapped potential of saying we were ‘open-book’ on every payment we made, and proving it. SafeRec offers a compliance automation platform specifically designed to address the challenges posed by the new legislation.
Here's how it protects agencies:
✅ Real-Time Payslip Auditing & HMRC Cross-Referencing
SafeRec integrates directly with our payroll software to audit every payslip in real time. It checks whether:
- PAYE and NICs are correctly calculated.
- The correct amounts are disclosed to HRMC via RTI (Real Time Information).
- The taxes have actually been paid to HMRC.
✅ Ongoing Proof of Compliance
Each audit generates a tamper-proof compliance certificate, which is stored securely and can be accessed by the agency at any time. The monthly reporting provides auditable evidence that the agency has taken all reasonable steps to ensure compliance - critical in the event of an HMRC investigation.
Payroll provider due diligence reports can also be downloaded from www.saferec.co.uk
✅ Automated Alerts and Risk Scoring
If an umbrella company fails to meet compliance standards, SafeRec immediately flags the issue and assigns a risk score, allowing agencies to take swift action before liability arises.
✅ End-to-End Transparency
SafeRec creates a transparent ecosystem where all parties - agencies, umbrellas, and end clients - can see and verify compliance data, if they wish. This builds trust and reduces the risk of working with non-compliant providers.
Why Agencies
Should Act Now
Although the legislation takes effect in April 2026, agencies that delay preparation risk being caught off guard. By working with Orbital now, agencies can:
- Lockdown the PSL to use a trusted SafeRec provider.
- Mitigate liability under the new JSL rules.
- Demonstrate proactive compliance to HMRC.
- Protect their brand and finances from the fallout of umbrella non-compliance.
