The Freelancer and Contractor Services Association (FCSA) has welcomed the Government’s consultation on modernising the agency work regulatory framework—but its response makes one thing clear: good intentions alone won’t guarantee good outcomes.
At a high level, the FCSA is firmly aligned with the consultation’s core aims. Improving worker protections, increasing transparency, and creating a fairer labour market are all goals it has long supported. In fact, many of these principles are already embedded in the standards FCSA requires of its accredited members. But the organisation is also urging policymakers to look carefully at how some of the proposals would work in practice, warning that a number of them could create serious knock-on effects across the labour supply chain.
Paying workers in full – compliant umbrellas already do it
One of the most pressing concerns is the proposal to require umbrella companies to pay workers in full—even in situations where the umbrella itself hasn’t yet been paid by the agency or end client. On the surface, this might seem like a straightforward way to protect workers. But in reality, the FCSA argues, it risks putting unsustainable pressure on the very businesses responsible for ensuring workers are paid correctly and compliantly.
Umbrella companies don’t sit at the top of the payment chain—they’re in the middle. Money flows from the end client, through agencies, and then to the umbrella, which processes payroll, deducts tax, and pays the worker. If that flow is interrupted upstream, umbrellas can be left without the funds needed to pay wages.
According to FCSA data, this kind of upstream delay isn’t uncommon. In fact, late or missing payments from agencies happen far more frequently than any issues with workers receiving their pay. And yet, despite those challenges, umbrellas almost always ensure workers are paid in full and on time. It’s a system that, broadly speaking, already works.
Forcing umbrellas to pay regardless of whether they’ve been paid would fundamentally change that dynamic. It would effectively turn them into lenders—fronting wages without any guarantee of when, or even if, they’ll be reimbursed. That kind of financial exposure isn’t something most businesses can live with indefinitely.
The likely result? Increased cash flow strain, a higher risk of insolvencies, and potential disruption across the entire supply chain. And because of joint and several liability rules, those problems wouldn’t stop with umbrellas—they could quickly spread to agencies as well.
There’s also a risk of creating the wrong incentives. If agencies know umbrellas are legally required to pay workers no matter what, the pressure to pay umbrellas promptly could weaken. That’s clearly not the outcome the policy is aiming for.
Rather than placing all the responsibility on one link in the chain, the FCSA is calling for a more balanced approach—one that addresses payment practices from top to bottom. That includes tighter payment terms for end clients, faster movement of funds through the chain, and a statutory right of recovery for umbrellas when payments are withheld.
Protecting workers from non-compliant umbrellas
Another key issue raised in the response is worker choice—specifically, the proposal to allow workers to choose any umbrella company, or to opt out of using one altogether. Again, the FCSA supports the principle here. Workers should absolutely have a say in how they’re engaged and paid. But completely unrestricted choice could create more problems than it solves.
In today’s market, most agencies operate with Preferred Supplier Lists (PSLs)—carefully vetted groups of umbrella companies that meet compliance and regulatory standards. This isn’t about limiting choice for the sake of it; it’s about managing risk. Under current tax rules, agencies can be held liable for non-compliance by the umbrella companies they work with. That makes oversight essential.
If workers were free to pick any provider, including those outside these vetted lists, agencies would have little control over compliance risks. That opens the door to non-compliant operators—particularly those offering unrealistically high take-home pay figures that can be appealing but ultimately problematic.
There are also practical considerations. Many recruitment agencies, especially smaller ones, rely on umbrella companies to handle payroll and employment responsibilities. If workers choose not to use umbrellas at all, those responsibilities don’t disappear—they shift back to agencies, many of which aren’t set up to manage them. That could lead to increased administrative burden or, worse, a move toward less secure working arrangements with fewer employment rights.
The FCSA’s view is that there’s a sensible middle ground. Workers should be given real, meaningful choice—but within a framework of compliant, pre-approved providers. Expanding and standardising PSLs could achieve this balance, giving workers options while maintaining the integrity of the system.
Transparency is key
Alongside these concerns, the FCSA is also keen to emphasise something it strongly agrees with: the need for greater transparency for workers. This is an area where it believes the consultation is on the right track—and one where its members are already leading by example.
FCSA-accredited umbrella companies are required to provide clear, detailed information to workers about how their pay is calculated. This includes net pay illustrations that break down all deductions—tax, National Insurance, pension contributions, and fees—so workers know exactly what they’ll take home and why. It’s a level of clarity that helps build trust and enables workers to make informed decisions.
The organisation is strongly supportive of making this kind of transparency a standard requirement across the sector. Better enforcement of Key Information Documents and wider use of tailored pay illustrations would, in its view, make a real difference to worker understanding and confidence.
Ultimately, the FCSA’s message is a constructive one. It supports the direction of travel and shares the Government’s ambition to improve standards. But it also stresses that reforms need to be grounded in the realities of how the labour market operates.
Getting that balance right—between protection and practicality, choice and compliance—will be key. And with the right adjustments, the framework can deliver better outcomes not just for workers, but for businesses and the wider economy too.
The full response to the consultation can be found here
