On 1st July, the Government published its roadmap for implementing measures from the Employment Rights Bill (the “ERB”). The ERB was introduced in October 2024 and has since then, been making its way through the parliamentary process. Although the ERB has not yet reached Royal Assent, Government has set out its implementation plan in a policy called Implementing the Employment Rights Bill: roadmap.
The purpose of the implementation plan is to allow employers time to plan ahead and to prepare for change. Considering the volume and scale of the proposed reforms, this is clearly necessary and a huge relief for all employers.
The phasing-in approach
Over the coming years from 2025 to 2027, the Government intend to implement various policies on either the 6th April or 1st October of each respective year.
The Fair Work Agency will come into effect on 6th April 2026 with numerous powers to investigate and enforce employment rights, such as those relating to holiday pay, National Minimum Wage, statutory sick pay and modern slavery offences.
Interestingly, measures related to the end of exploitative zero-hours contracts and day 1 unfair dismissal won’t come in until 2027. Although this delay is somewhat surprising, it does co-inside with the Government’s pledge to listen to stakeholders and to ensure the Government’s plans are implemented in the most effective way to bring about the intended changes to the workforce. Or perhaps they’ve simply realised just how complicated these measures are and need more time to plan!
The regulation of Umbrella companies, explained further below, is also pushed back until 2027. This is separate and in addition to the plan to introduce joint and several liability, still scheduled for April 2026. JSL will come into force via tax legislation, whereas Umbrella regulation will be based in employment legislation.
What is JSL?
Industry spokespersons have indicated that the operation of payroll can remain with the Umbrella company. In the event of a tax shortfall however, JSL opens the gate for the agency closest to the end client in the supply chain to be pursued for the liability. In summary, JSL allows HMRC to pursue tax liability from either the Umbrella or agency/end client; and once paid, the liability of both the Umbrella and the agency/end client would be discharged.
It seems as though the Government intend to swiftly close the tax gap caused by non-compliance in the industry, then feed in additional protection to workers via the regulation of Umbrella companies at a later stage.
One point to note is that we still don’t have a legal definition of an Umbrella company and its unclear on how the proposed JSL amends could come into effect without it. The Government’s policy makers will undoubtedly be busy at the moment!
What is the regulation of umbrella companies?
We are expecting to receive a consultation on the regulation of Umbrella companies in Autumn 2025, and so it’s likely we’ll know more about Government’s direction of travel at that point. However, if we think back to March 2025 when the Government responded to the initial “Tackling non-compliance in the umbrella company market” consultation in June 2023, the Government indicated that Umbrella companies should be subject to regulation in the same way that employment businesses are; this suggested they would fall under the Employment Agencies Act and the Conduct of Employment Agencies and Employment Businesses Regulations (“Conduct Regulations”).
There is a statutory duty to consult before amends can be made to the Conduct Regulations, and presumably, the consultation planned in Autumn 2025 is to canvas opinion regarding that approach. They’ll undoubtedly want to consider how the Conduct Regulations can incorporate Umbrella companies and how it will operate in practice.
Once regulation specifically for Umbrella companies (however defined) is established and implemented, a single body will then be designated to enforce these new rules - the Fair Work Agency. Remember though that since Umbrella companies are at their core, employers, then from April 2026 following the introduction of the Fair Work Agency, they will already be subject to increased scrutiny (resource dependent!)
Next steps
Although its fair to say that things are very much in the air, we still believe that liability for tax shortfall (via JSL) will come into effect in April 2026. As and when further details are released, we’ll keep you updated. However, steps you should take now are:
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Revisit your current due diligence policies, controls and procedures (“PCPs”).
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Review and map your supply chain.
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Consolidate your Preferred Supplier List (PSL) to only your most trusted and stable partners.
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Review contractual indemnities weighted against the financial strength of your PSL partners.
As always, our aim is to make the changing legislative landscape as seamless as possible for you. So, if you have any questions or need a helping hand, don’t hesitate to reach out to your Key Account Director.
