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The Impact of New UK Government Legislation on Compliance within Construction Recruitment

Advice Centre

The new UK government legislation will have a significant impact on compliance within construction recruitment. With the introduction of the Finance Bill 2025 – 2026 and the anticipated creation of the Fair Work Agency (FWA), enforcement is more targeted, proactive, and unforgiving of non-compliance. From 6th April 2026, the government is tightening the reins on construction recruitment and aiming to improve expectations and standards for our sector.

At P.I.E.R, we are already committed to the standards the government is now demanding. Our approach to construction recruitment has always, and will always include:

  • Transparent supply chains
  • Responsible umbrella partnerships
  • Clean records
  • Strong worker protections

There’s no need for us to react to the new legislation, but it’s the perfect time for us to demonstrate how we deliver an exceptional construction recruitment solution that safeguards our clients and workers.

Metaphor for umbrella company recruitment compliance

Umbrella Company Regulation and Transparency

The government intends to legally define and regulate umbrella companies. Once established, the Fair Work Agency (FWA) will be responsible for enforcing the regulation of umbrella companies, however the exact remit of the FWA has not yet been decided. At the moment, we expect the areas covered by the FWA to include National Minimum Wage (NMW) and employment agency standards.

From April 2026, joint and several liability will be introduced. To echo an analogy used by SafeRec, you can think of joint and several liability like going out to eat with friends. If the person who orders the food disappears before the bill arrives, when the bill comes to the table, it’ll be handed to whoever is left. In the same vein, if an umbrella company fails to meet their tax obligations, such as PAYE or NIC, HMRC will be able to collect the tax and NIC due from the agency or umbrella company themselves. This new power will allow HMRC to pursue a ‘Relevant Person’, even if the umbrella company has not formally failed to make the payment.

Crucially, ignorance will not be seen as a suitable defence. 

Instead, a ‘Relevant Person’ can be jointly and severally liable. A client becomes a ‘Relevant Person’ if they have direct contact with the umbrella company, or if the agency the client is working with is connected to the umbrella company or is not a resident of the UK.

While it may change in the future, it’s worth being aware that current draft legislation primarily focuses on umbrella companies who employ workers – CIS remains under existing Chapter 7 legislation, which places liability on agencies.

Be Sure of the Umbrella Companies in your Construction Recruitment Supply Chain

At P.I.E.R, our approach to construction recruitment already focuses on ensuring independent choice and oversight from our clients. Our workers are given a choice of umbrella companies and we encourage them to choose for themselves rather than being guided by our team. F

If connections exist between umbrella companies and construction recruitment agencies such as through shared ownership or significant financial ties, independent choice is impossible. Instead, the risk of non-compliance for all parties in the chain – including the client – increases dramatically.

At P.I.E.R, all of the umbrella companies we work with are either SafeRec or FCSA accredited, and we use SafeRec to monitor compliance and audit payslips in real time. Every worker is supplied with a Key Information Document (KID) and we maintain full audit trails to shield clients from future joint and several liability enforcement.

Looking through a pipe at a foreman and work on a factory site checkup

False Self-Employment and Worker Misclassification

Sadly, abuse of employment categories are all too common, and the government plans to tackle abuse of CIS, Limited Companies, and false self employment models. To this end, the FWA will be empowered to investigate the status of workers within construction recruitment, and the responsibility of proof of employment type will shift to recruitment agencies and end clients. The aim is to prevent the misclassification of workers for monetary gain, and construction recruitment has been labelled as a high-risk enforcement sector.

Be Clear about Worker Classification within your Supply Chain

As a responsible construction recruitment agency, we are already aware of the importance of worker classification. We use Lawspeed to issue compliant contracts and assignment documentation. We ensure we receive Supervision, Direction and Control (SDC) declarations from clients, and SDC questionnaires from all self-employed workers.

We also have IR35 assessments for Limited Company workers, and conduct trade checks to confirm which roles are eligible for CIS engagement. CIS workers are paid only after successful completion of SDC testing with both P.I.E.R and our umbrella partners. 

Once we have evidence of the category in which our workers are taking on work, we retain documented evidence of each worker’s self-employment status and eligibility.

Our clients can be assured that we document and evidence the status of all of our workers. Every CIS and Limited Company worker is risk assessed, trade verified, and audit ready.

Payslip Accuracy, Deductions and Worker Classification

As well as the misclassification of workers, the government proposes to give the FWA the powers to enforce the correct process for payment. The FWA will have the ability to call out unlawful or hidden deductions and misleading payslips. If umbrella companies fail to apply the correct PAYE or NIC deductions, the FWA will also be able to apply joint and several liability to recruitment agencies and clients.

Trusted Partners for Payslips

At P.I.E.R, we value our workers as much as our clients, and when it comes to payslips and payroll, we don’t take any chances. We use SafeRec to validate payslips in real time and ensure the correct PAYE and NIC calculations. SafeRec will also detect unlawful or confusing deductions.

By partnering with only SafeRec of FCSA accredited umbrella companies, we know they undergo monthly compliance audits, which acts as yet another layer of protection for our business and our construction recruitment clients.

Before any workers are paid or even engaged by P.I.E.R, we use SDC assessments and trade eligibility checks to confirm that all workers have the right classification, be that CIS, PAYE or Limited Company.

Our PAYE payroll is outsourced to a professional payroll provider: Back Office Nationwide Ltd. On behalf of P.I.E.R, Back Office Nationwide administers accurate worker pay, holiday pay, and sick pay. They apply AWR flags and ensure National Minimum Wage is always applied so that our clients always know that their workers are paid the right amount, and in the right way. Our payroll partner ensures correct deductions and entitlements are applied to each worker correctly, and provides full transparency for audits or queries.

Key Information Documents (KIDs) are provided for all workers, which confirm pay details and deductions directly. KIDs are essential for our workers and our clients, and act as a clear audit trail to make sure everyone is on the same page. 

Our payroll is professionally managed, real-time verified and fully compliant. When you work with P.I.E.R, you’ll never face hidden liabilities or misclassified workers.

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Labour Supply Chain Transparency

Clarity over who places, employs and pays each worker in construction recruitment seems like a basic requirement. But that hasn’t always been the case. The government proposes to crack down on illicit labour reselling and non-transparents subcontracted chains that might include mini umbrella companies or tax avoidance schemes. Instead, the government will build transparency to support joint and several liability enforcement and enforce Quarterly Intermediary Reports (QIRs).

By only working alongside fully vetted, accredited umbrella organisations, we are already avoiding the pitfalls that some construction recruitment agencies may face without even realising they’re in trouble. We already submit QIRs to HMRC and maintain a non-subcontracted, simply-supplier chain. 

All of our clients know exactly who pays their workers, and we’ve got the documentation to prove it. Transparency from P.I.E.R, means no hidden risks for our clients.

Worker Support, Transparency and Preventative Culture

As well as ensuring clients understand how their workers are paid, the government rightly believes that workers should understand how they’re paid and how they can raise any issues regarding their pay. Hopefully, this measure will result in successfully preventing exploitation through better onboarding and improved access to support for workers.

At P.I.E.R, the KIDs we provide are as beneficial to our workers as our clients. Alongside their KIDs, our workers receive clear contracts, pay explanations, and holiday pay forms (if they are PAYE). We have a structured registration and compliance process for our workers, and maintain clear lines of communication with all construction workers who are on our books. We value our workers, and in turn, they are productive and loyal. Fair treatment of our workers is a cornerstone of our approach to construction recruitment.

Sector-Specific Enforcement Pilots

In sectors including construction recruitment and car washes, the government plans to begin trial licensing, joint inspections and targeted compliance. Construction is expected to be a key focus, with the data the government collects being used to inform future regulatory reforms such as licensing of public procurement restrictions for non-compliance.

The new plans will mean testing new models of multi-agency enforcement and informing how the FWA could operate across sectors in the future. It will also include conducting on-site inspections and assessing how labour providers and subcontractors operate. Importantly, the government will also gather evidence on worker exploitation, underpayment, or illegal supply chains. 

At P.I.E.R, our approach has always been to operate with enforcement-ready standards. Through our partnership with SafeRec, emphasis on the importance of documentation, and good practice of maintaining full records to be ready for any on-site audit, we are already able to produce anything the new standards require.

With that in mind, if enforcement teams arrive on your site tomorrow, we’re ready. All documents are in order, our chain is clean, and your risk is mitigated.

Construction worker examines blueprint

Construction Sector Enforcement Planning

The government has recognised construction recruitment as a high risk sector for areas including:

  • False self-employment 
  • CIS misuse
  • Umbrella and labour supply chain abuse.

For that reason, there are plans to develop sector-specific engagement and intelligence gathering plans that will enable the government to:

  • Identify poor practice by contractors and labour providers
  • Gather real-time data on worker exploitation, misclassification, and illegal deductions
  • Expand multi-agency enforcement such as HMRC, HSE, Gangmasters and FWA, so that construction sites can be inspected and reviewed for:
    • Contracts 
    • Worker status evidence
    • Payslips
    • Employer records.

It’s inevitable that this information gathering will feed into a long-term compliance roadmap that might include mandatory licensing of labour suppliers, along with increased penalties or public procurement restrictions for non-compliant hirers.

While at first glance this might seem like a headache for those working within construction recruitment, at P.I.E.R, we’re already aligned with all of the enforcement expectations. Our processes cover:

  • Mandatory SDC declarations
  • IR35 assessments
  • SDC questionnaires
  • Full assignment and work order documentation for each CIS, PAYE, or Limited Company worker
  • Quarterly Intermediary Reports (QIRs) submitted to HMRC
  • Real-time audit capabilities using SafeRec
  • Non-subcontracted, transparent chains so every worker and payment is traceable.

The construction sector is under the microscope, yet we don’t need to make any changes to ensure we’re ready to be examined.

The Future of Labour Market Enforcement

In the future, the FWA will become a national enforcement body. Compliance will be embedded into licensing, procurement, and risk registers, and joint and several liability enforcement will be scaled up.

With P.I.E.R, we can guarantee that you’re ready for the legal changes before they end up on your doorstep. Thanks to our use of high quality partners such as Lawspeed, SafeRec, FCSA, and accredited payroll partners, we’re already ticking all of the boxes – and you’re already protected.

Electricians examining wiring and writing a checklist on an iPad

Your Client Compliance Checklist for Construction Recruitment

The UK government’s new found focus on the construction recruitment market means you need to have a similar renewed focus on your own supply chain. 

Below, we have outlined the key compliance areas you need to be aware of, and the information you should find out from your recruitment agency and broader supply chain. Making use of this checklist will mean you’ll have robust protection against emerging liabilities and risks.

Umbrella Company Due Diligence and Choice

  • Only work with agencies that provide a genuine choice of FCSA or SafeRec accredited umbrella companies.
  • If you suspect any shared connections between an agency and the umbrella company they recommend, find out more information. Restricting or limited umbrella company choice due to a connection with the agency itself can often be a sign of non-compliance. 
  • Your construction recruitment agency should provide you with audit packs and proof of real-time payslip checks. 
  • Contracts between you and an umbrella company should be robust, including director guarantees (where appropriate), and due diligence provider terms should be fully transparent regarding liability exclusions.

Worker Status (IR35 and SDC)

  • If you are the end-hirer, you need to undertake IR35 assessments, and be involved in assessment of SDC.
  • It is up to you to confirm workers status before CIS or Limited Company engagement.

Payslip Accuracy, Deductions and PAYE

  • Your construction recruitment agency should ensure payslips are validated in real time.
  • Accurate PAYE and NIC deductions must be applied.
  • Holiday pay must also be applied.
  • Any CIS use needs to be supported by trade and SDC eligibility.
  • In some cases, as with P.I.E.R, your agency may take ownership of these vital checks on your behalf, but don’t assume that’s the case – receive confirmation.

Supply Chain Transparency

  • Your agency must provide clear records regarding who employs and pays each construction worker within the supply chain.
  • Even when umbrella companies are used, all parties should be clearly identified, compliant, and operate without untraceably subcontracting layers.

Worker Documentation and Support

  • Your agency must provide all workers with:
    • Contracts
    • KIDs
    • Onboarding guidance
    • Access to clear support channels where they can raise any issues relating to pay or general complaints.

Quarterly Intermediary Reporting (QIR)

  • It is a legal requirement in construction that your agency submits QIR reports to HMRC for all non-PAYE engagement. Check that this is the case.

Joint and Several Liability Risk

  • Be aware that you may be equally liable for tax failures if supply chains aren’t monitored. For example, if you engage directly with an umbrella company where no agency exists, you might be directly liable for incorrect taxes.
  • Choose to work with agencies that provide audited and accredited umbrella and payroll controls and mitigate this risk. 

Audit-Readiness and Record Keeping

  • The ability to instantly provide an audit trail of payslips, work orders, status declarations, contracts and CIS checks is not a bonus, it’s an essential and vital in the event of a compliance inspection.

Keep your Construction Site Prepared

  • Ensure your site is always prepared for an inspection.
  • Paperwork should always be ready for presentation and if in doubt, make sure your supplier is already operating to enforcement-pilot standards for compliance including robust and transparent single-supplier chains.

At P.I.E.R, we don’t need to change our process to abide by the new legislation: we’re already committed. If you want to safeguard your construction firm, book a call with us today and we’ll fulfil all of your construction recruitment needs.

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