A new ContractorCalculator survey reveals that problems in the umbrella company market have not only persisted but, in some areas, worsened, reinforcing the case for urgent regulatory reform under the government’s Make Work Pay consultation.
The findings highlight continued risks for contractors, growing compliance exposure for clients, and a widening gap between how the labour market operates and how it is regulated.
Non-compliance concerns remain deeply embedded
Despite years of scrutiny, the latest survey shows that many contractors still face unclear pay, unexpected deductions, and inconsistent treatment.
- 50% discovered unexpected deductions
- 39% report being paid late
- Only 30% can confirm their payslip is correct
- Just 37% received a Key Information Document
These figures mirror concerns raised in the 2023 survey, which already highlighted widespread confusion and lack of transparency across the umbrella market.
What has changed is not the direction of travel, but the confirmation that the issues are persistent.
While most contractors report no problems with holiday pay or pensions, a consistent number continue to experience issues.
Clients face growing JSL tax risk
One of the most important, but often overlooked, consequences of umbrella non-compliance is the risk transferred up the supply chain.
Under emerging proposals and enforcement trends, the new umbrella tax rules which introduces joint and several liability (JSL) means that agencies and clients can be held responsible for unpaid tax where non-compliant umbrellas are used.
The survey highlights why this risk is so difficult to manage in practice:
- 69% of contractors say they cannot determine whether an umbrella is tax-compliant
- Complex payslips and unclear deductions remain widespread
- Contractors often select umbrellas based on net pay rather than compliance
If contractors cannot identify non-compliance and agencies are incentivised to maximise margins, non-compliant operators can gain a competitive advantage, increasing the likelihood of tax risk flowing up the chain.
For clients, it is an exposure that requires a strong process to eliminate any risk of JSL liability.
Blanket umbrella use is restricting access to talent
Perhaps the most striking finding is the extent to which contractors are being pushed into umbrella arrangements, often with little or no choice.
- 85% are told they must use an umbrella for certain roles
- 71% report roles conditional on umbrella use
- 88% say umbrella was the only option in their most recent engagement
At the same time:
- Only 5% say they are happy to use an umbrella
- 25% say they will never use one
- 39% will only use one if forced
When contractors are forced into a model they do not want:
- Some will decline roles
- Others will increase rates to compensate
- Some will exit the market entirely
For hiring firms and agencies, this creates a hidden cost by reducing access to top talent – a narrowing of the talent pool available to agencies and end hirers that adopt blanket policies.
IR35 is distorting how the market operates
Alongside ongoing umbrella concerns, the survey highlights a deeper structural issue due to the way IR35/off-payroll has reshaped hiring behaviour and driven increased umbrella use.
The data shows that genuine independent contracting remains widespread:
- 82% of contractors have secured “Outside IR35” work
- 78% of Status Determination Statements (SDS) result in Outside IR35 outcomes
- 81% of workers increase their rates when working inside IR35
The survey demonstrates that many engagements can operate legitimately outside IR35. However, hiring practices do not always reflect this reality.
- 85% of contractors are told they must use an umbrella because their role is “Inside IR35”
- 71% report roles conditional on umbrella use
- 88% say umbrella was the only option in their most recent engagement
There appears to be a disconnect between how roles are assessed and how they are delivered in practice. Many organisations appear to be still adopting a risk-averse approach, requiring umbrella engagement as the standard model. The practice drives contractors into umbrella arrangements not by choice, but as a by-product of IR35 decision-making.
The interaction between IR35 decision-making and umbrella-only engagement reinforces the narrowing of the contractor talent pool. Where organisations default to Inside IR35 and mandate umbrella working, they risk excluding experienced contractors who either require Outside IR35 engagements or are unwilling to work via umbrellas.
Transparency gaps remain a core problem
The Make Work Pay consultation identifies transparency as a key pillar of reform, and the survey strongly supports this focus.
Key findings include:
- Only 54% understand assignment vs PAYE rates
- Only 35% can calculate gross pay from an assignment rate
- Only 30% can verify the pay slip accuracy
While there has been a slight improvement in some areas since 2023, other indicators have worsened, particularly in the understanding and documentation of payslips. Transparency is about whether workers can understand their pay. At present, a significant proportion cannot.
A “race to the bottom” dynamic has emerged
The combination of limited choice, poor transparency, and uneven compliance creates a behavioural effect. When contractors are forced into umbrellas, 34% say they will choose whichever option offers the highest pay.
At the same time, the majority of workers cannot assess compliance, and pay structures are opaque. This backdrop creates conditions in which compliant providers are undercut, non-compliant models appear more attractive, and agencies and intermediaries may prioritise margin.
It is a classic “race to the bottom” scenario that fuels non-compliance, and led to the new Umbrella JSL tax avoidance rules introduced in April 2026.
Survey reinforces the case for reform
The government’s consultation focuses on three core areas:
Payment assurance:
Workers should be paid in full, regardless of supply chain failures. Survey evidence:
- 39% report late payment
- 50% report unexpected deductions
The statistics suggest current protections are not consistently effective.
Clarity of pay:
Workers should receive clear PAYE rates and understand their pay. Survey evidence:
- low understanding of payslips
- limited awareness of deductions
- Incomplete delivery of Key Information Documents
These findings indicate existing measures are not delivering sufficient clarity.
Freedom of engagement model:
Workers should not be forced to use umbrella companies. Survey evidence:
- Widespread umbrella-only hiring
- Strong contractor preference against umbrella use
The findings suggest that choice is currently constrained in practice, not just in theory.
What this means for contractors and clients
For contractors, the message is clear:
- You may be operating in a system where transparency is limited
- Your ability to assess compliance is restricted
- Your choice of engagement model may be constrained
For clients and agencies:
- Blanket umbrella policies may reduce access to talent
- Supply chain risk is increasing, particularly under JSL
- Reliance on opaque pay structures creates exposure
Reform is no longer optional
The latest survey does not reveal new problems. It confirms that existing problems have not been resolved. The combination of persistent non-compliance risks, limited transparency and constrained choice leads to a market that is not functioning effectively.
The Make Work Pay consultation is therefore timely and necessary. For contractors, agencies, and clients alike, the direction of travel is clear:
- greater transparency
- stronger protections
- genuine choice in how work is structured
Those who adapt early will be better positioned as the regulatory landscape evolves.