Crawford Temple, CEO and founder of Professional Passport delves into the new world of JSL.
Recruitment has always been a cashflow business. Margins are tight, payment cycles are long, and risk sits uncomfortably between client demands and worker expectations. What has changed is not the existence of risk, but where it finally lands.
From April 2026, Joint and Several Liability (JSL) will fundamentally alter how PAYE risk is distributed across the labour supply chain. In practice, it creates an uncomfortable outcome: well-run agencies can be forced to pay for liabilities they did not create, cannot control, and never priced for.
The question recruiters are now asking is simple: when PAYE goes unpaid, who actually pays? Increasingly, the answer is: whoever is still solvent.
How the Risk Really Flows
The standard labour supply chain still looks straightforward on paper:
Clients pay recruitment agencies. Agencies pay umbrella companies. Umbrellas run payroll and remit PAYE to HMRC.
But JSL exposes a critical flaw in this structure. Liability does not follow fault. It follows cash and solvency.
Once funds are pooled at umbrella level, PAYE becomes a shared exposure. If tax is delayed, misapplied, or consumed by pressure elsewhere in the umbrella’s books, the liability does not stay neatly contained. Under JSL, HMRC is entitled to recover from any party in the chain that benefited from the labour supply, regardless of who caused the shortfall.
One Bad Actor Is Enough
Consider a familiar scenario. Multiple agencies place workers through the same umbrella. Most behave responsibly. One does not.
That agency may push rates that cannot sustain PAYE, delay payments to protect its own cash flow, dispute invoices, or deliberately underfund assignments to win client work. Individually, these look like commercial tactics. Collectively, they create a cash-flow problem for the umbrella.
The umbrella stretches. PAYE payments slip. A temporary gap becomes a permanent deficit. Eventually, the umbrella fails.
The aggressive agency is often gone – insolvent, restructured, or strategically distant. But the PAYE debt remains, and under JSL, it simply shifts.
When Liability Moves Sideways
This is where many compliant agencies are caught off guard. Because their workers were paid by the same umbrella, they participated in the same labour supply chain. They may now be deemed jointly liable for PAYE that was never theirs.
Paradoxically, good behaviour can increase exposure. Agencies that paid on time and remained solvent are precisely the ones HMRC can pursue.
JSL answers one question efficiently: who can HMRC recover from? It avoids the harder one: who caused the problem?
Why Oversight Is No Longer Enough
The industry’s instinctive response has been more compliance checks – payslip audits, margin comparisons, payment screenshots, third-party reviews. These controls feel reassuring, but they all suffer from the same flaw: they operate after the event.
A payslip shows what was calculated, not what was paid. A bank confirmation shows a transaction occurred, not that it related to your workers or wasn’t later offset by another agency’s deficit. In a pooled-funds model, PAYE is collective even if calculations are individual.
The uncomfortable truth is this: you cannot due diligence your way out of pooled liability. You can only remove the pool.
Reframing PAYE as the Primary Liability
JSL forces a conceptual shift. PAYE is no longer an administrative detail delegated to a third party. It is the core liability in the entire chain. Margins, rebates, expenses, and processing all sit downstream of that obligation.
The real question is no longer, “Did the umbrella calculate PAYE correctly?” It is, “Can PAYE fail without affecting us?”
If the answer is no, the risk remains unpriced and uncontrolled.
Paying the Tax Before the Damage Is Done
The only structural solution is direct settlement of PAYE with HMRC, either by the agency or, depending on structure, the end client.
When PAYE is paid directly to HMRC, the liability is quantified, ring-fenced, and irrevocably discharged. Once paid, it cannot be retrospectively reallocated or pooled.
This changes the risk geometry entirely.
First, it removes pooled exposure. Umbrellas can no longer use one agency’s funds to cover another’s liabilities – or fail to cover either.
Second, it neutralises competitor behaviour. An aggressive agency can only damage its own position, not the balance sheets of others using the same provider.
Third, it collapses JSL risk at source. If the tax is paid, there is nothing for JSL to attach to.
Control Without Chaos
Direct settlement does not mean agencies must run payroll. Umbrellas can still calculate PAYE, produce payslips, pay workers, and manage employment administration. What changes is where the tax obligation is settled.
By separating calculation from settlement, agencies regain control over the single most important financial risk in the chain without rebuilding infrastructure or adding operational burden.
A Structural, Not Cosmetic, Fix
Audits, accreditations, and assurances assume risk can be managed through trust and verification. JSL has made clear that trust is not a defence, and verification does not survive insolvency.
Direct settlement works because it does not rely on good behaviour, ongoing solvency, or explanations after the fact. It relies on payment.
In a JSL world, the safest position is no longer choosing the “best” umbrella. It is ensuring that no one else can make you pay their tax bill.
That is the difference between paying for others and paying only what is truly yours. The message is clear – control the payment, control the liability and control the risk.
