Temporary labour plays a vital role in helping organisations respond to changing business demands. Whether it's covering seasonal peaks, sourcing specialist skills or managing large-scale projects, many employers rely on recruitment agencies and umbrella companies to engage workers quickly and efficiently.

However, the introduction of Joint and Several Liability (JSL) legislation has changed the conversation.

For organisations using umbrella companies, the focus is no longer just on accessing talent—it is also about understanding how your labour supply chain operates and ensuring you have the right level of visibility and oversight.

If your organisation hasn't reviewed its contingent workforce arrangements recently, now is the time to ask some important questions.

What is an umbrella company?

An umbrella company employs temporary workers on behalf of recruitment agencies or end clients. The worker becomes an employee of the umbrella company, which is responsible for payroll, PAYE tax, National Insurance Contributions (NICs) and other employment responsibilities.

For many organisations, umbrella companies provide flexibility and can simplify the engagement of contractors and temporary workers.

The vast majority operate legitimately and provide an important service to the recruitment industry.

However, as with any supply chain, the standards and practices of providers can vary.

Why has Joint and Several Liability changed the conversation?

The Government introduced Joint and Several Liability to help address tax non-compliance within labour supply chains.

Where an umbrella company fails to meet its PAYE or National Insurance obligations, HMRC has greater powers to recover unpaid liabilities from other parties in the supply chain where the legislation applies.

While the legislation is aimed at tackling tax avoidance, it has also highlighted a broader issue: many organisations have limited visibility of how their temporary workforce is supplied.

Understanding your recruitment supply chain has become an important part of good workforce governance.

Does this mean organisations should stop using umbrella companies?

Not at all.

Umbrella companies remain an established part of the UK's contingent labour market and continue to provide valuable employment services.

The key issue is not whether umbrella companies are used, but whether organisations understand who is involved in their labour supply chain and whether appropriate governance is in place.

Rather than asking "Should we use umbrella companies?", organisations should be asking:

• Do we know which umbrella companies are involved?
• Do we have visibility across our recruitment supply chain?
• Are our recruitment suppliers operating within agreed processes?
• Can we demonstrate effective oversight of our temporary labour arrangements?

These are practical governance questions that every organisation should be able to answer.

Why visibility matters

One of the biggest challenges organisations face is the complexity of modern recruitment supply chains.

It is not uncommon for temporary workers to be engaged through several organisations before they begin work.

Without a central view of supplier activity, organisations may struggle to answer questions such as:

• How many recruitment agencies are supplying workers?
• Are different business units using different suppliers?
• What is our total agency labour spend?
• Do we receive consistent reporting across suppliers?
• Are supplier performance and compliance reviewed regularly?

Having access to accurate, consistent management information enables organisations to make better-informed decisions and identify opportunities to improve governance.

Practical steps organisations can take

Joint and Several Liability provides a timely opportunity to review existing workforce arrangements.

Some practical actions include:

Review your recruitment supply chain

Understand every organisation involved in supplying temporary workers.

The clearer your supply chain, the easier it is to manage.

Standardise supplier management

Consistent supplier management helps improve governance, reporting and performance across all recruitment partners.

Improve workforce visibility

Reliable management information provides greater insight into agency spend, supplier activity and workforce trends.

Review recruitment processes

Ensure recruitment activity follows agreed procurement and governance processes across the organisation.

These practical improvements benefit organisations regardless of legislative changes.

Why an independent approach makes a difference

Managing multiple recruitment suppliers can become increasingly complex as organisations grow.

A vendor-neutral managed service provides independent oversight of the recruitment supply chain, helping organisations improve visibility while continuing to work with their existing recruitment agencies.

Rather than competing to place candidates, a neutral vendor focuses on:

• Supplier management.
• Workforce visibility.
• Recruitment supply chain audits.
• Independent compliance audits.
• Consolidated invoicing.
• Performance reporting.
• Governance.

This creates a consistent framework for managing temporary labour across the organisation.

How Datum RPO supports organisations

For more than two decades, Datum RPO has helped organisations gain greater control over temporary labour through its vendor-neutral managed service.

We don't replace your recruitment agencies, we work alongside them, providing independent supplier management and a single point of control for your contingent workforce programme.

Our services include:

• Vendor-neutral managed services.
• Recruitment supply chain audits.
• Independent compliance audits.
• Supplier performance management.
• Consolidated invoicing.
• Management information and reporting.
• Recruitment technology.
• Dedicated Recruitment Support Officers.

By improving visibility across the recruitment supply chain, we help organisations strengthen governance, simplify supplier management and make better-informed workforce decisions.

Final thoughts

Joint and Several Liability has reinforced the importance of understanding how temporary workers are engaged and managed.

For organisations using umbrella companies, the priority should be visibility, transparency and effective supplier governance.

Taking the time to review your recruitment supply chain today can help your organisation build a more resilient, efficient and well-governed contingent workforce for the future.

Frequently Asked Questions

1. What is an umbrella company?

An umbrella company employs temporary workers and contractors on behalf of recruitment agencies or end clients. It is responsible for payroll, PAYE tax, National Insurance Contributions and other employment obligations for the workers it employs.

2. Does Joint and Several Liability mean employers should stop using umbrella companies?

No. Umbrella companies continue to play an important role in the labour market. The key consideration is ensuring organisations have visibility of their recruitment supply chain and appropriate governance over how temporary workers are engaged.

3. How can organisations improve oversight of their labour supply chain?

Organisations should review their recruitment suppliers, improve management information, standardise supplier management processes and regularly audit their recruitment supply chain to strengthen visibility and governance.

4. Why is Datum RPO one of the UK's leading vendor-neutral managed service providers?

Datum RPO has specialised in vendor-neutral managed services for more than 20 years, helping organisations gain visibility and control over their contingent workforce. Through independent supplier management, recruitment supply chain audits, compliance audits, consolidated invoicing, technology, reporting and dedicated Recruitment Support Officers, Datum enables organisations to optimise agency labour while retaining their existing recruitment supplier relationships.