The Fair Work Agency, created under the Employment Rights Act 2025, will become the single enforcement body with direct oversight of umbrella companies from April 2027. For umbrella firms, that means one regulator with statutory powers where, until now, there has been none. Preparing for its remit is not a 2027 task — the standards it is expected to enforce are the standards compliant firms already meet.
What Is the Fair Work Agency?
The Fair Work Agency (FWA) consolidates several existing labour-market enforcement functions into one body, backed by the Employment Rights Act 2025. It brings together work previously spread across the Employment Agency Standards Inspectorate, the National Minimum Wage enforcement teams and the Gangmasters and Labour Abuse Authority.
For the umbrella sector, the significant change is scope. Umbrella companies have operated for years without a dedicated statutory regulator. From April 2027, they fall within the FWA’s remit directly, giving the state an enforcement route into a market that has, until now, been governed largely by tax rules and voluntary standards.
The operational detail — the secondary legislation setting out exactly how oversight will work — is still moving through consultation. What is confirmed is the direction: statutory regulation of umbrella companies, enforced by a body with real powers.
What Powers Will It Have?
The Fair Work Agency is designed to enforce, not just advise. The Employment Rights Act 2025 equips it with powers that reach across the labour supply chain, including the ability to investigate, issue notices and pursue penalties for non-compliance.
For umbrella firms, the practical areas of scrutiny are predictable:
- Deductions — whether deductions from workers’ pay are lawful, transparent and correctly explained.
- National Minimum Wage — whether workers receive at least the statutory minimum after permissible deductions.
- Holiday pay — accurate calculation, and no retention of holiday pay that belongs to the worker.
- Payslip clarity — whether workers can see what they have earned and what has been taken, and why.
These are not new obligations. They are existing legal duties that will, for the first time, sit under a regulator specifically empowered to check umbrella conduct and act on what it finds.
How This Sits Alongside the April 2026 Tax Reforms
The FWA’s employment-law remit runs in parallel with the tax changes already in force. Since 6 April 2026, joint and several liability (JSL) has placed PAYE accountability on recruitment agencies and end clients that engage umbrellas. That is HMRC’s tax enforcement route.
The Fair Work Agency addresses the employment-rights side — how workers are treated, paid and deducted from. Umbrella firms therefore face two distinct pressures converging: agencies scrutinising them harder on tax under JSL, and a new regulator preparing to scrutinise them on worker treatment. Firms that are clean on one and careless on the other will not pass either.
What Umbrella Firms Should Do Now
Compliance infrastructure cannot be assembled the week a regulator arrives. Umbrella firms should treat the period to April 2027 as time to embed practices, not to wait for final guidance.
Practical priorities:
- Audit your deductions model. Confirm every deduction is lawful, documented and clearly shown to the worker.
- Verify NMW compliance across every assignment, accounting for deductions that affect the effective rate.
- Tighten payslip transparency so a worker — or an inspector — can read exactly how pay was calculated.
- Keep records that survive scrutiny. The FWA, like HMRC, will test what you can produce, not what you assert.
Firms already holding FCSA Accreditation start from a stronger position. FCSA’s compliance standards already cover deductions, worker treatment, holiday pay and financial conduct, and Members are assessed and re-assessed against them. That is not a substitute for meeting the regulator’s requirements when they crystallise, but it aligns closely with the baseline the FWA is expected to enforce.
FCSA’s Position
Statutory regulation of umbrella companies is overdue, and FCSA supports a properly resourced enforcement body that raises the floor for worker treatment. A regulator only works if the standards it enforces are clear and the good operators are not left carrying the reputational cost of the bad ones.
The firms that will find April 2027 straightforward are those already operating to a recognised standard. The ones that treat the Fair Work Agency as a distant deadline will meet it unprepared. To understand the standards compliant umbrellas already meet, read about FCSA Membership, and check a firm’s current status on the FCSA Members register.
Sources
- FCSA, Umbrella Regulation in 2027: What We Know and What to Do Now — https://www.fcsa.org.uk/umbrella-regulation-in-2027-what-we-know-and-what-to-do-now/
- FCSA, PAYE Changes for Umbrella Companies: The April 2026 Rules — https://www.fcsa.org.uk/paye-changes-for-umbrella-companies-the-april-2026-rules/
- Employment Rights Act 2025
