Umbrella Companies

Our Approach to Umbrella Companies: A Commitment to Ethical Recruitment 

Recent media coverage has brought renewed scrutiny to the use of umbrella companies in the recruitment sector, with concerns raised around tax compliance and the use of questionable payment schemes.  

In fact, it is such a hot topic that in October’s budget the UK Government announced plans to clean up the umbrella company industry in a bid to recoup tax due to the HMRC.  

At The Best Connection, we understand that clients may have questions or concerns considering these reports. We want to take this opportunity to clearly outline our position and reaffirm our commitment to transparency and ethical working practices. 

Umbrella Companies Defined  

To put it simply – umbrella companies process the payroll of workers (PAYE) and are responsible for deducting the correct tax and National Insurance Contributions (NICs). These are sent to HMRC directly. They are often used in the management of temporary workers.  

Unfortunately, while most umbrella companies are compliant and abide by UK tax law, some rogue companies do not.  If one of your workers engages with a non-compliant umbrella company, you will put yourself, your colleagues and your business at risk of:  

• Tax Compliance Checks  

• Penalties  

• Tax Liabilities  

• Reputational Damage 

Government Proposals 

It is estimated that half a million workers are engaged by umbrella companies in the UK, and non-compliance has significant revenue losses for the Government – which was why the launch of a new policy, ‘Tackling Non-Compliance in the Umbrella Company Market’, was announced last year.  

Aimed at eradicating non-compliant companies, the policy legislates that from April 2026 agencies that outsource payroll operations to umbrella companies will bear full responsibility for any unpaid PAYE tax liabilities if they are found to be working with rogue providers. The puts the onus firmly on business-owners to do due-diligence on the companies they work with and take responsibility for non-compliance. 

Our Position on Umbrella Companies 

At The Best Connection, we want to reassure you that we are committed to ethical practices and always putting your best interests first. Our stance is simple: we are committed to doing things the right way—for our clients, our workers, and our stakeholders. 

We only work with a very small number of umbrella companies—and only when absolutely necessary.   

In fact, less than 1% of our workers are paid through umbrella companies. When we do use them, we make sure they’re FCSA-accredited, which means they’ve been independently audited and meet high standards in areas like pay, tax and employment rights.  

We never work with any umbrella company that uses loan schemes or non-compliant tax models. These are risky and could expose workers facing to unexpected tax bills later.  

A Focus on Fair, Legal Pay 

Our top priority is to ensure that every worker we place is paid fairly, legally, and in a timely manner. We take pride in our PAYE processes, which are designed to be transparent and reliable, while giving clients peace of mind that workers are treated with respect and in full compliance with current regulations. 

If you’re a client with specific questions or concerns about umbrella company use, we encourage you to speak directly with your branch or account manager. We’re here to provide reassurance and ensure complete confidence in our processes. 

Find out more about umbrella companies here: Working through an umbrella company – GOV.UK  

To find more information about our range of recruitment solutions please visit our website: Staffing Solutions | The Best Connection