As the countdown to the April 2026 regulatory shift continues, this week has seen a major joint intervention from HMRC and Acas. The two bodies have released a critical set of notes clarifying the “Day One” protections guaranteed under the Employment Rights Act 2025.
For thousands of contractors, the introduction of Umbrella Company Day One Rights represents the most significant improvement in job security and benefits in years. However, for the umbrella companies themselves, these new obligations are already creating friction—and HMRC is watching how they respond.
What are the ‘Day One’ Rights?
The Employment Rights Act 2025 removes the historical barriers that prevented many temporary workers from accessing essential benefits. Under the new guidance, the following become Umbrella Company Day One Rights for all employees:
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Statutory Sick Pay (SSP): The three-day “waiting period” is abolished. If you are sick, you are entitled to SSP from your first day of absence. Furthermore, the Lower Earnings Limit (LEL) has been removed, ensuring even those on lower-hour contracts are covered.
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Paternity & Parental Leave: Previously requiring 26 weeks of service, these are now accessible from your first day of employment with the umbrella company.
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Unfair Dismissal Protections: While the qualifying period was settled at six months (down from two years), the Act introduces immediate protections against dismissal for those asserting their statutory rights.
HMRC Warning: The End of ‘SSP Surcharges’
Perhaps the most significant part of this week’s joint statement is the warning regarding funding. HMRC has noted a trend of umbrella companies attempting to “pass the buck” by adding new fees to covers these costs.
HMRC has made it clear: Umbrella Company Day One Rights are a cost of employment. They cannot be funded by deducting a “sick pay levy” or “admin surcharge” from your gross pay. Any provider found to be “surcharging” workers to cover the cost of SSP or parental leave will be a primary target for the Fair Work Agency (FWA) audits launching this April.
HMRC has explicitly stated that any attempt to deduct an “SSP Contribution,” “Statutory Fund fee,” or “Admin Surcharge” from a worker’s Gross Pay is a breach of the law.
HMRC Official Statement: “Statutory benefits are a cost of employment. They must be factored into the Assignment Rate agreed with the agency. Any umbrella company deducting these costs directly from a worker’s earned wages will be subject to an immediate audit by the Fair Work Agency.”
The Fair Work Agency (FWA): Enforcement with Teeth
Starting April 7, 2026, the newly formed Fair Work Agency will take over enforcement. Unlike previous regimes, the FWA has the power to:
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Issue Fines: Penalties of up to £20,000 per worker for non-compliance.
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Publicly Name & Shame: Listing non-compliant providers and the agencies that use them.
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Recover Costs: Forcing umbrellas to pay back every penny of illegal “admin fees” deducted from contractors.
February 2026 Compliance Checklist
With the Joint and Several Liability (JSL) framework also looming for April 2026, agencies and contractors must act now. Based on this week’s updates, here is your compliance to-do list:
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Check the Blacklist: HMRC updated its Named Promoters list on February 12. Ensure your provider is not on it.
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Verify Your KID: Ensure your Key Information Document (KID) from your agency correctly reflects the “Day One” SSP and parental rights.
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Audit Your Payslip: Look for any new or “variable” administration fees. A compliant umbrella margin should be a fixed, transparent amount.
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Request RTI Proof: Ask your umbrella for a copy of their Real Time Information (RTI) submissions to ensure the tax you see on your payslip is actually reaching HMRC.
- Switching to a Compliant Provider: If you are unsure about your current setup, consult our Top 10 umbrella companies.
Looking Ahead
The shift in 2026 is designed to move the financial risk away from you, the contractor, and onto the recruitment agencies and end-clients. This “self-policing” of the supply chain is intended to force out non-compliant players.
As always, UmbrellaCompanies.org.uk recommends working only with providers who hold recognised industry accreditations, such as the FCSA, to ensure you are protected as these new laws take flight.
