Why off-payroll worker compliance becomes the next board test when unfair dismissal protection moves to six months.

May 26, 2026

When a workforce survey published by RSM UK on 21 May 2026 indicated that a third of UK employers will respond to the Employment Rights Act's new six-month unfair dismissal threshold by using more off-payroll workers and contractors, the question for board directors at end-hirers and recruitment agencies stops being whether the contingent labour book grows and starts being whether off-payroll worker compliance can grow with it.

Off-payroll worker compliance sharply comes into focus for UK end-hirers and recruitment agencies after a workforce survey published by RSM UK on 21 May 2026 indicated that a third of UK employers will respond to the Employment Rights Act’s new six-month unfair dismissal threshold by using more off-payroll workers and contractors.

For board directors, the planning question is no longer whether the contingent labour book will grow. It is whether off-payroll worker compliance can grow with it.

A third of UK employers plan to lean further on off-payroll workers from January

The Employment Rights Act 2025 makes day-one and short-service unfair dismissal claims viable from January 2027, subject to commencement order. RSM UK suggests this is already reshaping employer behaviour. The workforce survey, published on 21 May 2026, indicates 44% of employers will recruit more cautiously, 34% expect to use more off-payroll workers and contractors to keep flexibility, and 19% have put hiring on temporary hold. RSM UK warns the unintended consequence may be higher unemployment in the permanent market, against an ONS labour market backdrop already showing a worrying rise.

For board directors at end-hirers and at recruitment agencies, the figure that matters is the 34%.

A third of UK employers are signalling that the next twelve months will see more temporary, interim, contractor and umbrella-routed work entering their supply chains. That is a structural shift, not a cyclical one. It brings off-payroll worker compliance into sharper focus, because the controls that govern a permanent payroll are not the same as the controls that govern a contingent one.

Why off-payroll worker compliance becomes the supply-chain question

A larger contingent book means a wider labour supply chain: more agencies, more umbrellas, more contractor personal-service companies and more individual workers passing through in any given month.

Off-payroll worker compliance applies on two tracks. The first is contract: written particulars under section 1 of the Employment Rights Act 1996, and Construction Industry Scheme contracts where subcontractors are used. The second is tax: Joint and Several Liability under Chapter 11 of the Income Tax (Earnings and Pensions) Act 2003, which sits across the same supplier base.

Both tracks need evidence.

Asking is not assurance

When a recruitment director or HR lead is told to onboard a larger contingent workforce in a tighter window, the first reflex is usually to ask the supplier for confirmation that everything is in order: a signed code-of-conduct, an audit certificate, a one-off Right to Work check at onboarding. That is supplier reassurance.

Asking is a process step.

Assurance requires evidence.

There is no statutory safe harbour under JSL, and on OPRaaS’s reading of HMRC’s GfC12 guidance, the standard the chain is interpreted against is assurance, not performance. The difference matters at the point HMRC, the Fair Work Agency or a major customer asks for the file, and it matters six months earlier, when the contingent book started growing and no-one captured the evidence in a structured form.

What a continuous, audit-ready evidence file actually captures

Off-payroll worker compliance is not a single check. It is a set of dated, structured records that, taken together, evidence what was done across the chain, organised into named accountability, dated evidence and regulator-ready control:

Identity and Right to Work. Captured at onboarding, re-checked on contract renewal and on any material change.
Contractor status determination. Stored alongside the contemporaneous SDS and re-tested on the next engagement.
PAYE, National Insurance and RTI submissions. Sampled at the chain tier so duplicate National Insurance numbers and mismatched bank details surface early.
CIS deduction status. Reconciled monthly against HMRC verification for every subcontractor on a construction project.
Umbrella audit cycle. Preferred-supplier-list umbrellas re-audited at defined intervals, with each cycle producing a dated, hash-stamped evidence entry.

That turns supplier reassurance into supplier assurance, and a paper trail into the evidence file the board can hand over on demand.

How the OPRaaS Virtual Compliance Director supports off-payroll worker compliance

The OPRaaS Virtual Compliance Director (OPRaaS VCD) platform embeds senior governance leadership into the business and runs the controls above as one continuous record, rather than as a series of disconnected reports. Right to Work, identity and bank-detail checks are captured at onboarding and re-run on every material change, with exceptions flagged into the evidence file. RTI and payslip data are sampled for duplicate National Insurance numbers and mismatched bank details, with findings written into the same record.

This is the same ground the OPRaaS LSCA Self-Certification Course covers in Module 9, on contract compliance for temporary workers.

In a contingent book that is about to grow, evidence is what turns a balance-sheet contingent liability into a balance-sheet asset.

From two years to six months: what board directors should ask before January

Preparation is a competitive edge for end-hirers and recruitment agencies alike. The organisations that treat off-payroll worker compliance as an admin issue will ask suppliers for reassurance. The organisations that treat it as a board-level control will build evidence.

The window between today and the January commencement, subject to secondary legislation, is the time to name the senior responsible owner, set the supplier review cycle and stand up the evidence record, so the first contingent worker onboarded under the new rules is captured in the same file as the hundredth.

Your next step is a thirty-minute scoping call to see how the OPRaaS VCD platform can carry the load.

Compliance is your asset. Evidenced continuously.

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Acronym	Full Term	Definition
CFA 2017	Criminal Finances Act 2017	UK legislation introducing Corporate Criminal Offence (sections 45/46): failure to prevent the facilitation of tax evasion. Requires businesses to implement 'reasonable prevention procedures' (RPP). The only defence is having adequate RPP or showing it was not reasonable to expect such procedures.
MSA 2015	Modern Slavery Act 2015	UK legislation mandating supply chain transparency and worker safeguarding. Section 54 requires commercial organisations with ≥£36m turnover to publish annual modern slavery statements (board-approved, signed by director, published on website with prominent homepage link).
IR35	Off-Payroll Working Rules	Tax legislation determining whether a contractor should be treated as employed or self-employed for tax purposes. Since April 2021, medium and large private sector clients must determine contractor status and deduct employment taxes if inside IR35. Requires Status Determination Statement (SDS).
JSL	Joint & Several Liability	2026 legislation imposing strict liability on agencies and end-hirers for umbrella company tax debts, even where due diligence checks have been undertaken. Makes supply chain participants jointly responsible for unpaid PAYE taxes.
AWR	Agency Workers Regulations 2010	UK regulations giving agency workers the right to the same basic working and employment conditions as permanent employees after 12 weeks in a qualifying assignment (12-week parity rule).
Good Work Plan	Good Work Plan 2020	UK employment law reforms requiring written 'section 1 statement' of employment particulars to be given to employees and workers on or before day 1 of engagement (effective 6 April 2020). Sets out key terms but is not itself the contract.
Construction Act	Housing Grants, Construction and Regeneration Act 1996	UK legislation governing payment practices in construction contracts. Section 113 renders "pay when paid" clauses ineffective (except where upstream payer is insolvent). Requires clear due dates, final dates for payment, and compliant payment/pay less notices.
Pensions Act 2008	Pensions Act 2008	UK legislation establishing workplace pension auto-enrolment requirements. Employers must automatically enrol eligible workers into qualifying pension schemes and make minimum contributions.

Acronym	Full Term	Definition
HMRC	HM Revenue & Customs	UK government department responsible for tax collection, payment of tax credits and benefits, and enforcement of tax law. Operates PAYE, CIS, RTI systems and conducts compliance audits. Business Tax Account provides reconciliation data.
GLAA	Gangmasters and Labour Abuse Authority	UK government body regulating labour providers in certain sectors (agriculture, horticulture, shellfish gathering, food processing/packaging) and investigating worker exploitation. Operates licensing regime and has criminal investigation powers. Hotline: 0800 432 0804 (03000 718234 out of hours).
ICO	Information Commissioner's Office	UK independent authority upholding information rights. Enforces UK GDPR and Data Protection Act 2018. Personal data breaches must be reported to ICO within 72 hours where there's risk to individuals' rights. Provides guidance on lawful bases, DSARs, and data-sharing.
CITB	Construction Industry Training Board	Industry body that collects levy from construction employers (payroll ≥£80k in PAYE in last tax year, or ≥£80k net CIS payments) and provides training grants. CITB levy compliance is audited in construction-focused compliance audits.

Acronym	Full Term	Definition
PAYE	Pay As You Earn	HMRC's system for collecting Income Tax and National Insurance Contributions from employees' wages. Employers deduct tax before paying employees, then remit to HMRC. Operates under Real Time Information (RTI) reporting requirements.
CIS	Construction Industry Scheme	Tax deduction scheme for payments to subcontractors in construction industry. Contractors must verify subcontractors with HMRC before first payment and make deductions (20% for verified, 30% for unverified) on labour element only (excluding VAT and allowable materials). CIS300 returns due by 19th following tax month.
GPS	Gross Payment Status	CIS status allowing subcontractors to be paid without deductions. Must apply to HMRC and meet compliance tests (business test, turnover test, compliance test). Contractors must verify GPS and keep evidence; continue to file CIS300 but make no deduction.
CIS300	CIS Monthly Return	HMRC return submitted by contractors detailing total payments made to each subcontractor and CIS tax deductions applied. Must be filed by the 19th following the tax month (6th–5th). Should reconcile to subcontractor statements and bank payments.
CIS340	CIS340 Guidance	HMRC's official guidance document defining what constitutes 'construction operations' for CIS purposes. Only work qualifying under CIS340 can legitimately be paid through the Construction Industry Scheme. Includes site preparation, construction, alteration, repairs, demolition.
RTI	Real Time Information	HMRC system requiring employers to report PAYE information at or before each pay run. Consists of Full Payment Submission (FPS) for regular pay data and Employer Payment Summary (EPS) for adjustments/recoveries. Must reconcile to payslips and Business Tax Account.
FPS	Full Payment Submission	RTI submission reporting gross taxable pay, Income Tax, and NICs for each employee on each payday. FPS values must match payslips. Should not be used to mask under-deductions.
EPS	Employer Payment Summary	RTI submission used only for adjustments, such as recoveries, statutory payments, employment allowance claims, or apprenticeship levy. Should not be used to mask PAYE under-deductions.
Bacs	Bankers' Automated Clearing Services	UK electronic payment system used for direct debits and credits, including salary payments. Net pay on payslip must match Bacs transfer to worker's bank account. Never use "BACS" (incorrect).
UTR	Unique Taxpayer Reference	10-digit number issued by HMRC to identify individuals and businesses for tax purposes. Required for CIS verification and self-assessment tax returns. Note: UTR alone isn't proof of CIS verification; contractor must verify with HMRC before first payment.
NIC / NICs	National Insurance Contributions	UK social security tax paid by employees (via PAYE), employers (as on-costs), and the self-employed (Class 2/4 via self-assessment). Funds state benefits including state pension, statutory sick pay, and maternity allowance. CIS deductions are payments on account of Income Tax and Class 4 NICs.
NMW	National Minimum Wage	Legal minimum hourly rate employers must pay workers in the UK. Rates vary by age band. Post-deduction pay (after deductions for employer's own use/benefit) must not fall below NMW. Records must be kept for 6 years.
NLW	National Living Wage	Higher rate of National Minimum Wage for workers aged 21 and over. Often referred to together as "NMW/NLW". Different from voluntary Real Living Wage calculated by Living Wage Foundation.
AE	Auto-Enrolment (Pensions)	Workplace pension scheme where employers must automatically enrol eligible workers (aged 22+ to state pension age, earning ≥£10k annually) into a qualifying pension. Minimum contributions, opt-out rights, and re-enrolment (every 3 years) required.
P45	P45 (Leaving Employment)	HMRC form given to employees when they leave employment, showing pay and tax details for the year to date. New employer uses P45 to operate correct tax code. Emergency codes (e.g., 1257L W1/M1) apply without P45/P6.

Acronym	Full Term	Definition
DRC	Domestic Reverse Charge (VAT)	VAT mechanism for construction services where the customer accounts for VAT instead of the supplier. Applies to most construction services under CIS340. Designed to combat missing trader fraud in construction supply chains.
Kittel	Kittel Principle	EU/UK legal principle that a taxpayer who knew or should have known their transaction was connected to VAT fraud may be denied the right to deduct input VAT. Creates due diligence obligations for supply chain participants.
DR	Disguised Remuneration	Tax avoidance arrangements designed to pay individuals while avoiding income tax and NICs, often involving loans, offshore entities, or trusts. HMRC actively targets such schemes. Loan charge applies to outstanding loans.

Acronym	Full Term	Definition
SDC	Supervision, Direction or Control	Key factor in determining employment status under agency rules (ITEPA 2003 s44). If a worker is under supervision, direction or control by any person (client, agency, end-hirer) over how they work, PAYE must be operated. SDC alone is not the general CIS status test—apply usual status tests (control, substitution, mutuality).
MOO	Mutuality of Obligation	Employment status indicator examining whether the employer is obliged to provide work and the worker is obliged to accept it. Absence of MOO suggests self-employment; presence suggests employment.
SDS	Status Determination Statement	Document required under IR35 reforms (April 2021) where medium/large clients must provide written reasons for their determination of a contractor's employment status for tax purposes. Must be given before contract starts or worker begins work.
CEST	Check Employment Status for Tax	HMRC's online tool for determining whether a worker should be classified as employed or self-employed for tax purposes. Results are binding on HMRC if information provided is accurate and not relating to highly complex arrangements.
PSC	Personal Service Company	Limited company through which a contractor provides their services. Often used by contractors working outside IR35, but subject to IR35 rules if the underlying relationship is one of employment. Requires SDS from medium/large clients.
KID	Key Information Document	Plain-English factsheet (not a contract) that agencies must give to workers before they agree to an assignment (Conduct of Employment Agencies and Employment Businesses Regulations 2003). Includes worked pay illustration, deductions, who pays the worker, benefits. Must be updated within 5 working days of any change.
ITEPA 2003	Income Tax (Earnings and Pensions) Act 2003	UK tax legislation governing employment income. Section 44 contains agency rules requiring PAYE where worker is under SDC. Section 61N–61R cover off-payroll working (IR35) for public sector and (from 2021) medium/large private sector.
DBS	Disclosure and Barring Service	UK government service providing criminal record checks for employment purposes (particularly roles working with children or vulnerable adults). Processing DBS data requires DPA 2018 Schedule 1 condition and appropriate policy document.