{"id":41731,"date":"2025-09-03T14:23:18","date_gmt":"2025-09-03T14:23:18","guid":{"rendered":"https:\/\/www.simplybusiness.co.uk\/?post_type=knowledge&p=41731"},"modified":"2025-09-03T14:23:19","modified_gmt":"2025-09-03T14:23:19","slug":"umbrella-company-licensing-authority","status":"publish","type":"knowledge","link":"https:\/\/www.simplybusiness.co.uk\/knowledge\/freelance\/umbrella-company-licensing-authority\/","title":{"rendered":"Employment Rights Bill amendment threatens umbrella companies"},"content":{"rendered":"\n

A new amendment to the Employment Rights Bill could change how umbrella companies operate \u2013 and how freelancers and contractors work with them.<\/p>\n\n\n\n

The Employment Rights Bill is currently in its report stage, with a third reading on 3 September 2025. This recent amendment would see \u2018employment businesses\u2019 (including umbrella companies) be \u2018subject to a licensing authority.\u2019<\/p>\n\n\n\n

The government previously passed an additional clause to the Employment Rights Bill to make sure additional businesses count as \u2018employment businesses\u2019 and be monitored by the Fair Work Agency<\/a>. This includes umbrella companies.<\/p>\n\n\n\n

Potential mandatory licensing system<\/h2>\n\n\n\n

However, a further amendment to the Employment Rights Bill suggests introducing a mandatory licensing system for all umbrella companies. The proposal will see these companies be supervised and accredited by a licensing authority nominated by the government.<\/p>\n\n\n\n

This would effectively bring them under a government-recognised oversight framework, ensuring they meet a certain standard of conduct and compliance.<\/p>\n\n\n\n

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Why it’s important for freelancers<\/h2>\n\n\n\n

This new amendment (known as Amendment 146) is a direct response to concerns that the current legal framework is unable to protect freelancers and small businesses from exploitative umbrella companies<\/a>.<\/p>\n\n\n\n

While the Employment Rights Bill lays out many positive changes for those working with umbrella companies, some industry professionals argue<\/a> that without a formal, enforceable licensing system, the new regulations will be ineffective.<\/p>\n\n\n\n

The proposed licensing system could prevent unethical or non-compliant firms from operating and would provide greater certainty for those who use their services.<\/p>\n<\/div>\n\n\n\n

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A lively debate<\/h2>\n\n\n\n

During the committee stage hearing, the amendment faced scrutiny. Some expressed concerns about the creation of more government bodies to manage the licensing process. They also worried about added costs and a lack of agility.<\/p>\n\n\n\n

However, supporters of the amendment (including the Freelancer and Contractor Services Association) countered these concerns by arguing a new government body wouldn\u2019t be necessary. Instead, they suggest that an existing, industry-led body could be nominated to serve as the licensing authority.<\/p>\n\n\n\n

With the bill\u2019s final reading set to take place from 3 September, we\u2019ll update this article with any further news on this amendment.<\/p>\n\n\n\n

More guides for freelancers<\/h3>\n\n\n\n