Following the recent Budget and with major legislative changes on the horizon, this exclusive Chris Bryce FCSA Interview explores the critical shifts currently affecting the contractor sector. We caught up with the CEO of the Freelancer & Contractor Services Association (FCSA) to discuss the impact of the new Joint and Several Liability (JSL) rules, the Chancellor’s “black economy” unit, and why the reduction in salary sacrifice is a “huge mistake” for the temporary labour market.
For our audience who may be new to the contracting space, can you start by explaining exactly what FCSA is, what its core mission is, and what practical functions it performs within the temporary staffing sector? Crucially, why is it so important for both contractors and recruitment agencies to insist on using an FCSA-accredited umbrella company?
FCSA is a trade association, a membership organisation, and we were formed about 16 years ago to basically promote good practise within the industry. We have a series of codes of conduct, what we call our assessment codes and every member of FCSA has to pass that rigorous assessment process, both on joining FCSA and every year thereafter. Those codes are unlike anybody else’s, published publicly on our website, and they are examined by professional service companies such as Ernst & Young LLP, BDO, Saffery, JMW Solicitor, Brabners and Pinsent Masons who recently we added to the list. So they’re not actually assessed directly by FCSA, they’re assessed independently on FCSA’s behalf by those independent professional service companies and that means that we have the gold standard of accreditation and assessment in the industry, unlike anybody else.
In that respect, FCSA itself is a not-for-profit. We have no commercial interest in our Members, and our Members don’t have a commercial interest in FCSA. As I say, we are a not-for-profit, which again stands us out from anybody else in this sector and it does mean that we can maintain our rigorous standards and ensure that our members are operating in the best interest of both agencies and their workers.
Regarding the Budget, the Chancellor announced HMRC will be handed new powers to tackle tax avoidance schemes. What new powers do you think they will be handed?
I’m not entirely sure that she has given them new powers. I think what she’s done is set up a dark economy or black economy unit within the Fair Work Agency. When that comes into being next April, it will be focusing, to begin with at least, on areas which the government regards as high risk for both employment rights and tax avoidance. I understand that the first particular target that the Chancellor mentioned was hand car washes.
With the Joint and Several Liability (JSL) legislation coming into place in April 2026, do you think there should be something the government can do to punish end clients or agencies using tax avoidance schemes before it gets to the stage of unpaid taxes?
In fact, the legislation already exists to enable HMRC to go after organizations facilitating tax avoidance. It relatively recently came into force at the beginning of September. There are two particular sections—the Criminal Finances Act and the legislation regarding enabling or promoting tax avoidance schemes. As yet, I’m unaware of any agency or end client that has been investigated under that new legislation, but I would hope that HMRC, where it finds good cause, utilizes the legislation and does pursue the promoters of tax avoidance schemes very rigorously.
Given the constant threat posed by non-compliant schemes, what specific due diligence steps should every contractor take before choosing an umbrella company?
The first thing they should look for is FCSA accreditation—that’s crucial. However, I think contractors do need to take some of the due diligence steps on their own part. The most obvious one is, if you have an umbrella that’s offering you substantially more take-home pay than any other umbrella, then that umbrella is likely doing something wrong and you as a contractor could potentially end up in trouble with HMRC.
The second red flag is where the umbrella offers “false self-employment” or “disguised employment,” where they claim they can pay you gross because they have a scheme. An umbrella being able to pay gross to a worker is very rare and can only really take place under very specific circumstances.
The third red flag is if you start out as a regular employee with proper deductions, and then after a few weeks, they suggest a scheme to pay you slightly differently—perhaps as a sole trader, slightly offshore, or via a loan scheme. All of those things are big red flags and you should walk away immediately.
With JSL transferring liability for unpaid PAYE to agencies, do you anticipate a mass exodus of recruitment companies bringing payroll operations entirely in-house?
I’m quite sure that some agencies will consider that, but I think very few of them will actually do that for a number of reasons. Chief amongst them is that if you take all PAYE and NICs in-house, it’s the end client who will be liable for any unpaid PAYE or NICs, and that exposes the end client to a risk they will not be happy about. I suspect the opposite is true: Agencies already run their own PAYE, and their own clients will begin to ask them to move umbrellas into the supply chain.
Industry concern often centres on financial accounts being historical. Is the FCSA exploring more rigorous, dynamic financial monitoring?
Yes, we’ve already introduced a system where we get proofs on a monthly basis of good standing with HMRC and also balance sheet snapshots every month. We can then share these with agencies using our diligence hub to show the liquidity situation on an ongoing basis.
Post-Budget Analysis
Following the Chancellor’s recent statement, we continued our conversation with Chris, to get his reaction to the Budget
So it was a pretty do nothing budget except make sure that Rachel Reeves keeps her job. I think that’s a fair characterization of it.
We were slightly, I don’t suppose we can say we’re even disappointed because we weren’t expecting anything of major specifically for this sector in this budget. But there is no package for growth or business competitive.
There’s no incentive for business at all, really. In some ways, the freezing of the tax thresholds is, in effect, a tax increase for us all.
But there’s nothing specifically aimed at umbrella companies, which is a bit disappointing because we are, after all, in the business of keeping people in work and paying them on time. And we collect a lot of tax and revenue in that process.
I don’t think that it was a particularly strong budget for growth in any way. I do think that it probably came more as an appeasement for Labour backbenchers who want to see the growth of the welfare state at the cost of the growth of Britain’s GDP and productivity.
One of the things that surprised myself was the salary sacrifice allowance reduction. Was not only the reduction but it reducing so much from £60,000 to £2000 a year. We know that salary sacrifice pensions is something that contractors do use as security for their future as the contracting roles you never know when they’re going to stop and you want to secure your future, what effect you think that will have on contractors and your thoughts on not only a reduction, but such a massive drop in the allowance.
Yeah. I think many contractors especially high earning contractors were able to save for retirement quite freely through salary sacrifice and that has been or will be limited from I think she said April 29.
I think that’s frankly is a big blow not only to contractors but to other workers, regular PAYE workers who save for the retirement.
Doing that, by the means of salary sacrifice, I think it’s a huge mistake. I think that the incentive to save for your retirement has been diminished and governments of all blue and red, have been banging on about increasing the individual’s responsibility to save for their own retirement. For years, this does nothing to help that.
I suppose it has contractors thinking that they wish outside IR35 contracts were a bigger thing as that would give them the ability to pay into their pension pots through their Limited company, and get the corporation tax saving, but at the moment the outsider IR35 contracts aren’t particularly a big business for them to be able to take advantage of the pension through their limited company.
That’s true. And I don’t think that that’s helpful for limited company contractors at all. But I think in in the bigger picture, the wider picture, I don’t think that limiting salary sacrifice thresholds in the way that the Chancellor has chosen to do is a good idea. I think everything possible should be done to encourage people to save for the retirement and this is a discouragement.
There is the increase regards to national minimum wage coming into place as well. So I guess that will mean the FCSA minimum hourly wage it requires its accredited companies to process will also be increasing as well in line with the national minimum wage increase.
Yes, and agencies are going to have to expect demand from umbrella companies to go back to their own clients and get that reflected. That increase in minimum wage reflected in pay rates, assignment rates from the end clients.
Too often, agencies expect umbrellas to absorb these costs without passing them on to their own client. That is no longer possible, and agencies need to be sanguine about that and do something about it for a change.
Finally, what does the future hold for contractors and temporary workers regarding the changes coming in April 2026?
Overall, FCSA’s view is that the sector was long overdue for regulation. We’ve seen the first step in that through the Joint and Several Liability legislation, which is a reasonable first start. I think the introduction of the Fair Work Agency and umbrella regulation by the Employment Agency Standards Inspectorate will be the next step. We will work very closely with the Department for Business and Trade (DBT) to make sure that the legislation they bring forward is fit for purpose. I’m hopeful that whatever regulation they introduce will help get rid of the “payroll pirates” and secure the lot of temporary workers.
