Today's Spring Statement 2026 promises to be "boring" according to an unnamed minister speaking to the FT, which perhaps could, cynically, be interpreted as 'even more boring than usual.'
And actually, that's no bad thing.
Contractors have had their fill of government policy, which, for the 15-and-a-half years I've been a contractor policy expert, only ever seems to add to rather than reduce the general burden of taxation, red tape and compliance hassle, writes Andy Chamberlain, head of strategic policy and advocacy at the FCSA.
Moreover, there is an awful lot going on for UK contracting already.
What consultation might contractors have missed?
As part of that already pretty full legislative plate for the UK contractor sector, there is something which contractors may have missed, but could have a big impact, especially on those who work through umbrella companies or may do in the future.
I'm referring to the Make Work Pay: Modernising the Agency Work Regulatory Framework consultation, which was published on February 6th 2026.
The consultation sets out a wide-ranging review of the rules governing agency work and, crucially for many contractors, how umbrella companies operate within that regulatory framework.
What is the Make Work Pay consultation?
At the heart of the Make Work Pay consultation are proposals to extend protections that currently apply to employment agencies to cover umbrella intermediaries.
That constitutes a change that, if adopted, could reshape financial and contractual relationships for hundreds of thousands of umbrella company contractors across the UK.
Although the Make Work Pay consultation proposals are not government policy yet (and the document is still open for responses until May 1st), they signal significant potential shifts in:
- the payment mechanics,
- the choice architecture, and
- the compliance burdens of umbrella company work.
What is the key Make Work Pay consultation proposal for contractors?
One of the consultation's most consequential proposals for contractors relates to payment timing and risk in the supply chain.
Under the current Conduct of Employment Agencies and Employment Businesses Regulations 2003, traditional agencies are prohibited from withholding pay to workers for work already done, even if they have not received funds from the hirer.
However, these protections — the Conduct Regs (guidance is available here) — do not presently extend to umbrella companies.
The Make Work Pay consultation aims to change that.
According to the business department's proposals, umbrella companies would be required to pay contractors in full for work performed, regardless of when — or even whether — they have been paid further up the supply chain.
What is the name of the Make Work Pay consultation's key proposal?
This key proposal is being dubbed 'mandatory full payment by umbrella companies.'
Currently, some umbrella companies split contractor pay between National Minimum Wage, which is paid without delay, and additional income, which is paid once the umbrella has cleared receipts upstream.
Under the consultations' proposed changes, that payment model would go.
Is mandatory full payment by umbrella companies a good idea?
Paying workers on time and in full may sound positive. However, this change has wider ramifications. Umbrella companies would need sufficient liquidity or access to finance to cover pay runs even in the absence of upstream receipts.
Smaller umbrella providers, many of which already grapple with thin margins and late payments from agencies, could struggle to meet this obligation. The requirement could increase operating costs or prompt consolidation in the umbrella sector, potentially reducing choice and raising prices for contractors.
What is a second key theme of Make Work Pay?
Another central theme in the consultation that contractors can have their say about until May 1st 2026, is choice.
The government posits that workers should not be forced into being engaged through a specific umbrella company. And perhaps not through an umbrella at all.
The Make Work Pay consultation suggests amending regulations to prevent recruitment agencies from making work conditional on being engaged via a particular umbrella.
What might recruiters not being able to insist on an umbrella look like?
This potentially upending proposal would mean:
- Contractors would be able to choose which umbrella company handles their pay and employment obligations (although that choice would likely still be limited to the agency's Preferred Supplier List); and
- Contractors might (in some cases) even opt out of using an umbrella company entirely, favouring direct agency payroll ('agency PAYE') or other, unspecified models.
Expanding contractor choice
If implemented, this choice could empower contractors to seek out more competitive umbrella providers.
But most agencies already offer a limited choice of umbrella providers, so in most cases, not much would change.
However, this proposal could unlock more avenues to agency PAYE for those who might prefer it, even if many contractors might just see this as a different side of the same coin.
In addition, it may well follow that being on an agency payroll rather than umbrella payroll would change their employment status from employee to 'worker', resulting in diminished employment rights, with little-to-no benefits in terms of take-home pay.
Is it just worker pay and choice that Make Work Pay is set to change?
The Make Work Pay consultation's ambitions go beyond worker pay and choice.
Official impact assessments acknowledge that bringing umbrella companies fully within the Conduct Regulations — a regime originally crafted for agencies — will impose administrative and compliance costs on these businesses.
Umbrella companies will likely face tighter rules on transparency, record-keeping, and conduct — similar to those that recruitment agencies already contend with. While these safeguards rightly aim to reduce hidden fees, opaque deductions, and non-compliance, they will create significant implementation challenges, particularly for smaller operators.
Isn't HMRC already cracking down on umbrella companies?
The regulatory squeeze proposed in Make Work Pay comes at a time when the umbrella sector is already adjusting to Joint and Several Liability (JSL) rules, set to be introduced separately from April 6th 2026.
And JSL will expose agencies and clients to financial liability for any unpaid payroll taxes if an umbrella fails to comply.
What are umbrella companies worried about with JSL-Make Work Pay?
Combined with the newly proposed Conduct Regulations, many in the umbrella company industry fear a dual-squeeze that could:
- destabilise the whole umbrella company sector,
- reduce labour market flexibility, and
- increase costs for employers.
The future
Bigger employment costs usually result in less pay for workers and/or less hiring overall. Clients might even move away from flexible agency roles and towards direct hires or fixed-term contracts.
More optimistically, we could see an increase in 'Outside IR35' roles, which would negate some of the new risk and compliance burden (although the risk of 'old' IR35 would remain).
Make Work Pay is a consultative process, not final policy
Importantly, all of these proposals are just that — proposals.
The Make Work Pay consultation document makes clear that the proposals are not government policy, and they remain subject to revision based on responses from stakeholders across the labour market.
Will FCSA respond to Make Work Pay consultation?
The Freelancer & Contractor Services Association (FCSA) will be responding and is engaging with officials on the proposals.
Your own response can be submitted online, here.
For our part, FCSA has been crying out for years for umbrella company regulation, and we fully agree with many of the objectives around security, transparency and choice.
But these are big, transformative changes.
What do Spring Statement 2026 and Make Work Pay have in common?
Therefore, policymakers informed by industry must proceed carefully to avoid any unforeseen effects and unintended consequences, which, like chancellors getting to their feet with a devil hidden in the detail, I've seen a fair bit of over the years.
Given the potential impact of the Make Work Pay proposals, there is even speculation that the government may extend the consultation period or undertake further rounds of engagement before finalising legislation.
Such an extension is something that we would welcome.
Death by consultation!
For a busy contractor, this unfortunately isn't the only open or recently closed consultation to consider.
The Employment Rights Act continues to spawn numerous policies that workers and the companies that engage them must grapple with, including rules around flexible working, bereavement leave, trade union access — the list goes on.
Will Spring Statement 2026 unveil Labour's employment status review?
Plus, there could still be a consultation shortly on employment status.
Perhaps that's something for contractors to look out for today at Spring Statement 2026, given an employment status review was promised by the end of 2025 but never emerged? That said, we haven't received any indication of when a review of the UK's employment status rules might be published. And for once, with so much on the contractor sector's plate, that's fine by me. So, a "boring" Spring Forecast today actually sounds rather wonderful. The more boring the better, please, chancellor.
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