Contractors’ Questions: What if my recruitment agency won’t use my umbrella company?

Contractor’s Question: My recruitment agency will not let me use my umbrella company. What can I do?

Expert’s Answer: Firstly, it’s important to point out that we can outline the ethical approaches recruitment agencies should take to umbrella companies until we’re blue in the face! However, the final decision comes down to the specific recruitment agency you are dealing with.

Get clued up on your brolly, understand why from the agency

So, instead, I would stress the importance for contractors of being clued up on their umbrella of choice, and then to understand the reasons why a recruitment agency might reject their chosen umbrella company, with a view to the contractor responding accordingly.

Every recruitment agency worth its salt will have a couple of favoured umbrella companies that they work with on a regular basis. The agency will recommend these umbrellas to their contractors. Just as an aside for you, to convey how this works, the current umbrella companies that our staffing business partners with came from a careful tendering exercise, in which their positions are evaluated annually. We go through everything in this exercise from credit checks to us acting as ‘mystery shoppers’!

No legislation here, but there are Third Party Debt Transfer Orders

My suggestion to you and other contractors is that you choose an agency that recommends an umbrella company based on the individual contractor’s requirements. We do this ourselves, but we are also happy for a contractor to go through an alternative umbrella company, on the condition that the umbrella company passes our compliance and financial standards.

From our perspective as an agency, the challenge comes when a contractor comes to us with an umbrella which we know won’t pass our checks! In this situation, we advise the contractor why we are not willing to use this umbrella. But be aware, unfortunately there are no legalities or otherwise, which require or even just oblige other agencies to provide this information to contractors whose umbrella are blocked.

It is important to be conscious of the Third Party Debt Transfer Orders. So, depending on the situation, we might offer the contractor to sign an indemnity clause. However, this offering is considered on a case-by-case basis and comes down to whether the individual situation warrants it.


Personally, I never really want to say ‘No’ to a contractor and similarly, good agencies will try to be accommodating! However, if there is evidence that the engagement would be unlawful and not compliant (due to the ‘umbrella’ put forward), we would have to act in the best interest of all involved parties and not proceed.

Generally speaking, if you want to use an umbrella company but your recruitment agency is saying ‘No,’ firstly consider why they might be blocking the brolly. A few quick starter questions:

  • Is the agency motivated by their own agenda?
  • Are they receiving a kick back or reward for introducing contractors to certain umbrellas? And do those certain umbrellas not include your umbrella?

Although the usage of kick-backs is not technically illegal, it is most definitely ethically wrong, if the agency is rejecting an alternative umbrella purely because they won’t receive a kick back from that alternative umbrella!

Contractors can step in

Then, as mentioned, contractors should also wonder if the issue is with the umbrella.

Perhaps the umbrella company you’ve signed up with and want to use despite the agency’s objection has not provided adequate information to the agency?

We have seen it before where the agency has rejected an umbrella because the umbrella has worryingly little information on their website and then, when asked, are not forthcoming with information. If you think this might be the case with your umbrella, I’d recommend you step into the middle, by bringing the recruiter together with the umbrella to discuss. Remember, this is meant to be a partnership!

Get it in writing but ultimately, decide

However, if you’ve considered the potential reasons and are still confident that there is no solid reason for the agency to reject the umbrella, put it beyond doubt by requesting the reason in writing from the agency. So in effect you’re asking the agency to provide just cause.

Remember – ultimately, it’s down to the agency. I would say in the spirit of good service and partnership, the agency should always use the umbrella if they are compliant OR provide the reason why they will not engage the umbrella. However, there is no legal standing to require an agency to make this provision – unfortunately, it can be a case of if you want the contract, and have done everything mentioned above, consider using an alternative umbrella or lose the contract altogether. It’s an age-old issue in the contractor market and with no legal basis to resolve it, unfortunately it threatens to remain one going forward.

The expert was Matt Collingwood, managing director of IT recruitment agency VIQU.

Wednesday 9th Feb 2022
Profile picture for user Matt Collingwood

Written by Matt Collingwood

Matt Collingwood is the Managing Director of VIQU Ltd. an IT recruitment and project-based consultancy company with offices in Birmingham and Southampton. Matt is also the co-founder of the Recruitment Canaries, a network of West Midlands based recruitment agencies who encourage collaboration, best practice and upholding the standards and ethics of the recruitment industry.

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