worried construction business owners with heads in hands facing compliance issues

Compliance Nightmares in Construction Recruitment: How to avoid costly mistakes

Advice Centre

The ‘umbrella market’ is causing chaos for construction recruitment companies, and the government knows that something has to give.

From April 2026, legislation will change who has responsibility for PAYE (Pay As You Earn) where an umbrella company is used to engage a worker. The new legislation could mean that PAYE responsibility falls to you, and we are determined to make sure that none of our clients are caught out.

The compliance landscape is changing – here’s everything you need to know

At P.I.E.R. we have always taken compliance seriously, and in 2014 we invested time and money to ensure our payroll process was as safe and compliant as possible. As a construction recruitment company we’re sadly well aware that not every agency cares enough to do the same. For many, being compliant is at odds with maximising profit – often at the expense of their clients and workers.

New guidelines coming in on compliance

Ultimately, the new guidelines aim to improve standards within the temporary recruitment market. Even though change is never welcome, in this instance it is definitely necessary. To summarise the new guidelines, the responsibility for PAYE, where an umbrella company is used to engage a worker within a labour supply, is changing.

The responsibility will no longer fall on the umbrella company and will instead be felt by the recruitment agency that supplies the worker to the client. If there is no agency in the labour supply chain, the responsibility falls to you, the client.

The government are going after companies that avoid tax

The new legislation was announced in the Budget on 30th October 2024, and follows the previous governments’ consultation to reduce non-compliance in the umbrella company market in 2023. Back in 2023, we shared why tax compliance is so important and explored the risks you take by ignoring the guidance.

Not all umbrella companies are non-compliant, but sadly too many umbrella companies encourage tax avoidance and tax fraud through their lack of compliance. This lack of compliance can lead to huge tax bills for unsuspecting workers – and has the knock-on effect of damaging the market for other compliant companies.

Understanding the essentials

HMRC does attempt to warn workers of the dangers of tax avoidance schemes, and they will often contact workers directly when tax activity looks suspicious. However, even once a non-compliant umbrella company has been caught out, it’s too easy for the same people to create a new umbrella company under a different name and begin the charade again.

Why do construction compliance issues relating to umbrella companies affect you?

Many of our clients (if not all) use umbrella companies through their partner construction recruitment agencies. But not all of our clients understand their own labour supply chain.

At P.I.E.R. we are transparent in our use of umbrella companies, and our chosen payroll partners strictly adhere to all regulatory changes. We only collaborate with Freelancer & Contractor Services Association (FCSA) or Saferec accredited providers, and can give each of our clients a complete breakdown of the intermediary companies we use.

If you are working with an agency who uses an umbrella company, you must find out whether they are FSCA or Saferec accredited. If you have a direct relationship with an umbrella company, you must find out if they are compliant.

architects and engineer discussing project of building

The importance of using FCSA and Saferec umbrella companies

FCSA and Saferec umbrella companies are our chosen payroll partners because they ensure we maintain full compliance. Saferec enables us to conduct thorough due diligence on our partners, making sure that we provide a 100% compliant payroll service to our workers and clients. Our partners are also proactive in seeking information regarding new legislation changes, so we are always ahead of the game.

Aren’t they all FCSA accredited?

In short, no. It’s far too easy for umbrella companies to pop up out of the woodwork, and not every umbrella company is FCSA accredited. If you’re concerned about your connection with an umbrella company, you can search for FSCA accredited members on their website.

‘HMRC analysis suggests that around 40 per cent of the 700,000 workers paid by umbrella companies in the UK were engaged by non-compliant umbrella companies at some point in 2022 to 2023.’

How are recruitment agencies avoiding compliance?

According to the 2023 consultation, ‘many workers do not fully understand how their umbrella company engagements work, including which employment rights they’re entitled to and the correct tax treatment of payments received’. When you consider that the worker themselves is unaware of the purpose or responsibilities of an umbrella company, it’s easier to understand how some recruitment agencies can choose to use non-compliant umbrella companies, regardless of the impact it has on their workers.

Why do I need to keep track of this?

In April 2026 the new legislation will be in place, but by then, you will already need to know that the umbrella companies you engage with are compliant. If you engage workers through umbrella companies without the use of a recruitment agency, the responsibility to ensure compliance will fall to you.

electrician working on wiring installation

How do I reduce my risk of falling foul of the new compliance guidelines?

The easiest way to ensure you’re within the new compliance guidelines, is to make sure you are fully aware of the complete labour supply chain. Once you have the details of any umbrella companies you are connected to, you can check them out yourself and make sure they are compliant.

Know what the ‘bad’ recruitment agencies are doing

If an umbrella company has recently been replaced with a new one, or the same team seems to be running more than one umbrella company, it’s worth being cautious. It might feel uncomfortable to question a recruitment agency you’ve formed a good working relationship with, but if they’re compliant and on top of the new legislation, they’ll understand why it’s so important for you to know exactly how they operate.

Understand why recruitment agencies are doing this

A good way to spot a non-compliant umbrella company would be if an agency forces a worker to use one payroll company. Although not illegal, it’s not good practice as workers should be given a choice of umbrella companies to use. If this is the case, it often means the agency owns the umbrella company they have chosen for their workers, and are financially gaining from the arrangement.

Ask your recruitment company to prove they are compliant

Whether or not you choose to use P.I.E.R. as your construction recruitment company, we would urge you to actively ask if the recruitment company you use is compliant. 


Check that the umbrella companies engaged by your recruitment company are either members of FCSA or Saferec accredited. When you do this, you’ll reduce the risk to your supply chain, and know that your recruitment company has carried out due diligence on their payroll companies to ensure they follow HMRC guidelines.

man in safety gear inspecting overhead pipes in industrial building

What are P.I.E.R. doing differently from other recruitment agencies?

Our team has spent extensive time creating a preferred supplier list of approved FCSA and Saferec accredited payroll partners (umbrella companies). We want to save our clients the embarrassment of costly fines or reputational damage and ensure that they can have complete faith in every stage of our process.

P.I.E.R. prioritise safeguarding workers and clients

It has always been our goal to provide a service to our clients and workers that will ensure we develop long-lasting relationships. Our aim is to take the hassle out of sourcing your construction workforce – not to make your life complicated. Our approach to compliance is top tier, and will always be a priority for our team.

Due diligence and continual monitoring of compliance changes

We create a Due Diligence pack for each of our payroll partners (umbrella companies) that clearly lists everything you need to know about each company and is easily accessible on our website. Our clients deserve to feel confident in their supply chain. 

Recruitment agencies that fail to conduct due diligence checks on umbrella companies can face serious reputational, financial and legal implications. To avoid repercussions for your business, you must make sure the recruitment companies you use are acting appropriately.

At P.I.E.R. we prefer to be proactive rather than reactive, and we constantly monitor compliance changes to make sure we know everything there is to know, before our clients realise anything has changed.

The umbrella companies used by P.I.E.R. are:

  • Quest: an FCSA Member, and they are also working towards Saferec accreditation
  • Crest Plus: an FCSA Member, and they are also working towards Saferec accreditation
  • JMK: an FCSA Member
  • Sandbeck: Saferec accredited

If the umbrella companies used by your construction recruitment agency aren’t FCSA members or Saferec accredited, you need to ask why not – and if possible, you need to change your recruitment agency. A quick search on professional networks such as LinkedIn is already highlighting the risks of using non-compliant umbrella companies.

HMRC won’t hesitate to take action, and you don’t want to be caught out.

P.I.E.R. only use approved FCSA and Saferec accredited payroll partners

Rather than take chances, we only use FSCA approved and Saferec accredited payroll partners (umbrella companies), and you can find out more about each of the companies on our website. Our workers can choose which company they would like to use, and our clients know that whoever they choose will be compliant and secure.

Need help navigating a compliance nightmare? Contact P.I.E.R. today to ensure your business uses a compliant workforce.

Book a Call

Reference

Similar Posts