What is Joint and Several Liability?
Joint and Several Liability (JSL) within the temporary labour supply chain means that where umbrella companies are engaged, other parties within the supply chain will have joint responsibility for those umbrella companies’ PAYE tax and NIC liabilities.
This could be a recruitment agency, managed service provider (MSP), or an end client organisation, dependent on the contractual chain.
How Does JSL operate in Practice?
Where a recruitment agency has a direct contract with a client and engages an umbrella company, the recruitment agency will become liable for any incorrect or unpaid tax and NICs.
Where there are multiple agencies in the chain, it will be the agency closest to the end client, such as an MSP that will become liable.
Where there is no agency in the chain and the end client engages the umbrella company directly, the end client will become liable.
What Does JSL Mean for Recruitment Agencies and MSPs?
The introduction of JSL in April 2026, means that recruitment agencies and MSPs will inherit a significant financial risk if they engage with non-compliant umbrella companies.
If an agency or MSP engages with an umbrella company that is found to be non-compliant or fails to pay its PAYE obligations, HMRC will be able to recoup the entire liability from the agency or MSP.
Agencies and MSPs will have no statutory excuse, and they will be held liable even if they were unaware of any wrongdoing.
Due Diligence and Supply Chain Management
The move to JSL and its resultant change in responsibilities mean that recruitment agencies and MSPs need to review their attitudes to due diligence and compliance.
Agencies and MSPs cannot afford to assume that their umbrella providers are compliant; the risk of doing so has become far too high.
Agencies and MSPs must conduct thorough, robust and regular due diligence to ensure that their umbrella providers operate compliantly.
How to Manage & Mitigate JSL Risk
Recruitment agencies, MSPs, and end clients must have a clear understanding of the suppliers within their supply chain. Robust and regular due diligence is key.
They should conduct thorough due diligence on those suppliers. Crucially, they must verify company status, assess financial stability, review accreditations, evaluate performance and reputation, and audit processes and payslips.
At the end of the process, agencies and MSP’s should formulate a list of preferred or assured suppliers that meet and exceed all due diligence measures and requirements.
Going forward, it will be essential to maintain a consistent and regular audit process with the suppliers on respective PSL’s. Once a year is unlikely to be regular enough to confidently mitigate risk.
Agencies and MSP’s should also educate and train their teams to ensure they understand the risks associated with JSL.
Compliance is Key
Only engaging with compliant umbrella companies that are in their operations will give recruitment agencies, MSPs, and end clients the peace of mind to continue enjoying the benefits of a risk-free, flexible workforce.
Independent accreditations such as FCSA accreditation and SafeRec certification are recognised as the gold standards of compliance and quality within the umbrella payroll sector.
FCSA and SafeRec independently interrogate, assess, and audit umbrella company members to ensure compliance with legislation, such as JSL.
Champion is proud to have been FCSA Accredited since 2018 and SafeRec Certified since 2023.
For more in-depth information about JSL, please do not hesitate to contact a Champion advisor on 0161 703 2549.