More than a quarter of FCSA Members report that workforce use of day-one sick pay rights has risen by at least 25% since the reforms took effect in April 2026. Statutory sick pay is good for the worker. The cost, however, lands on the umbrella company.
That finding comes from a short survey of FCSA Members conducted this month. It confirms what many in the sector expected once statutory sick pay (SSP) became payable from the first day of illness, with the lower earnings limit removed. The protection is real and welcome. So is the financial burden it creates for compliant umbrella employers.
What Changed with Day-One Sick Pay?
From April 2026, statutory sick pay is paid from day one of absence, with no waiting days and no lower earnings limit. That widened eligibility considerably for low-paid, part-time and short-assignment temporary workers who were previously excluded.
The policy sits alongside a wider enforcement shift. The Fair Work Agency, operational since 6 April 2026, now treats SSP breaches with the same seriousness as national minimum wage failures. Underpaying or wrongly withholding sick pay is no longer a low-risk oversight.
For contractors and temporary workers, this is straightforward protection. Fall ill, get paid from the first day, regardless of earnings. For the umbrella company that employs them, it is a new and rising cost line.
Why the Umbrella Carries the Cost
An umbrella company is the employer. That is the point of the model, and it is where the statutory obligations sit. When a worker takes sick leave, the umbrella pays the SSP. It also carries the associated employment costs that accrue whether the worker is at their desk or off sick.
Those costs include:
- Statutory sick pay itself, now from day one
- Employer pension contributions under auto-enrolment
- Accrued holiday pay, which continues to build during sickness absence
- Employer National Insurance on relevant payments
SSP is not reclaimable from HMRC. The old Percentage Threshold Scheme, which once let employers recover a portion of high sickness costs, was abolished years ago. What the umbrella pays out, it absorbs.
When day-one absence rises by a quarter or more across a workforce, the aggregate effect is significant, particularly for umbrellas operating on thin, transparent margins. The FCSA survey suggests this is not a marginal accounting adjustment. It is a structural change in the cost of employing temporary workers.
What This Means for Assignment Rates and the Supply Chain
Employment costs do not vanish because they are inconvenient. They are funded from the assignment rate paid into the supply chain. When SSP, pension and holiday costs climb, the arithmetic of the assignment rate has to reflect it.
This is where transparency matters most. A compliant FCSA Member sets out deductions and employment costs clearly, so the worker understands what comes from the assignment rate and what reaches their pay packet. A less scrupulous operator faces a temptation: absorb rising sick pay costs by cutting corners elsewhere, whether through unlawful deductions, holiday pay that quietly disappears, or rates that drift below the national living wage of £12.71 per hour.
That is precisely the behaviour the Fair Work Agency is now resourced to catch. In March 2026 alone, 385 employers were named for £7.3m in arrears owed to 60,000 workers. Deductions remain the primary breach vector in the umbrella sector.
Recruitment agencies should note their own exposure. Under the joint and several liability rules in force since 6 April 2026, agencies and end clients share liability with umbrellas for unpaid PAYE and NICs. An umbrella cutting corners to cover rising sick pay costs is an agency’s problem too.
FCSA’s Position
Workers gaining protection they should always have had is the right outcome. The reforms deliver that. But the cost is real, it falls on the employer, and pretending otherwise helps no one. The correct response is to fund employment costs properly and account for them openly, not to bury them in opaque deductions.
FCSA Accreditation exists to give recruiters and end clients confidence that the umbrella in their supply chain does exactly that. FCSA Members are assessed against standards covering pay transparency, statutory payments and lawful deductions. When sick pay costs rise, those standards are what separate a compliant employer from one heading for a Fair Work Agency letter.
Recruiters weighing supply-chain risk in this environment should check the FCSA Members register to confirm the umbrellas they work with are accredited, and read more about how FCSA Accreditation protects the supply chain before their next compliance check.
