As an End Client, your recruitment agencies say they're compliant. But can they prove it?
For organisations that rely on temporary, contingent or agency workers, recruitment agencies are an essential part of the workforce supply chain.
They source candidates, manage onboarding, handle worker documentation and, depending on the arrangement, may be responsible for payroll and other important employment processes.
But there is a growing problem for employers.
You can outsource the work, but you cannot simply outsource the risk.
With increasing regulatory scrutiny and the introduction of Joint and Several Liability (JSL) in April 2026, businesses have even more reason to understand exactly what is happening throughout their labour supply chain. Under JSL, liability for certain unpaid PAYE and National Insurance liabilities can extend beyond the umbrella company to other parties in the supply chain, including recruitment agencies and, in certain circumstances, end clients.
That makes independent compliance auditing more important than ever.
The problem with simply trusting your recruitment agencies
When an organisation works with several recruitment agencies, it is tempting to rely on supplier declarations, compliance questionnaires and certificates.
After all, if an agency confirms that everything is compliant, why would you need to investigate further?
Because compliance is about more than having the right policies in place.
It's about whether those policies are actually being followed.
An agency might have a Right to Work policy, for example, but are the appropriate checks being completed correctly?
It might confirm that workers are paid in accordance with minimum wage legislation, but are timesheets, deductions and payroll calculations being managed properly?
It might have an ‘Umbrella Preferred Supplier’ list, but how assured are you that PAYE and National Insurance are being correctly accounted for further down the supply chain?
These questions cannot always be answered through a standard supplier questionnaire.
Sometimes, you need to look at the evidence.
JSL has changed the compliance conversation
The introduction of Joint and Several Liability (JSL) has significantly increased the importance of supply-chain due diligence.
Since April 2026, the consequences of an umbrella company failing to account correctly for PAYE and National Insurance can extend to other parties in the labour supply chain.
That means recruitment businesses and end clients need to think carefully about who they engage with and how they demonstrate due diligence.
The question is no longer simply:
"Is our recruitment agency compliant?"
It is:
"How do we know?"
And perhaps even more importantly:
"Can we demonstrate that we took reasonable steps to check?"
This is where independent compliance audits can provide significant value.
Why independent really matters
There is a major difference between self-certification and independent verification.
An agency auditing itself naturally has an interest in demonstrating that its processes are working.
An independent third party, however, can take an objective view of the evidence.
An independent compliance audit isn't about trying to catch suppliers out.
It's about identifying potential weaknesses before they turn into expensive problems.
For End Clients that access a significant number of temporary workforces, independent auditing can provide greater visibility across the recruitment supply chain and help establish whether suppliers are meeting expected legal, regulatory and contractual standards.
What should a recruitment agency compliance audit cover?
Effective agency vetting should go beyond a simple tick-box exercise.
Depending on the organisation, industry and workforce model, an independent compliance audit can examine areas including:
Right to Work
Are appropriate checks being carried out to establish whether workers have the legal right to work in the UK?
National Minimum and Living Wage
Are workers being paid correctly, and could payroll practices or deductions create a minimum-wage compliance issue?
IR35 Off Payroll and employment status
For organisations using contractors, employment status can be complex. Auditing processes can help identify potential weaknesses in how IR35 and employment-status decisions are handled.
PAYE and National Insurance
With JSL now in force, understanding how payroll liabilities are managed within the supply chain is increasingly important.
Organisations should consider what evidence their recruitment agencies and payroll or umbrella partners can provide to demonstrate that PAYE and National Insurance obligations are being properly managed.
Umbrella company due diligence
Where workers are engaged through umbrella companies, businesses need greater visibility of who is operating within the supply chain and whether appropriate checks have been carried out.
Modern Slavery
Recruitment supply chains can carry significant risks relating to worker exploitation. Reviewing Modern Slavery policies, processes and controls can help organisations identify potential weaknesses.
GDPR and data protection
Recruitment agencies handle substantial amounts of personal information. Auditing data protection processes can help establish whether candidate and worker information is being managed appropriately.
Compliance audits are about prevention
One of the biggest advantages of independent auditing is that it moves compliance from a reactive exercise to a proactive one.
Waiting for HMRC, another regulator, a worker complaint or an internal investigation to uncover a problem is rarely the ideal strategy.
By conducting independent audits, organisations can identify potential issues earlier.
If a weakness is discovered, corrective action can be taken.
If an agency is operating to a high standard, the organisation has greater evidence and confidence in that supplier.
Either way, the business gains something valuable:
visibility.
Protecting your organisation from supply-chain risk
Compliance failures can create more than financial consequences.
They can damage an organisation's reputation, disrupt workforce operations and undermine relationships with employees, suppliers and customers.
JSL makes this even more important because organisations need to understand the potential tax and payroll risks associated with the businesses operating within their labour supply chain. The Recruitment & Employment Confederation has highlighted the shift towards ongoing visibility, independent verification and evidence-based governance under the new regime.
Independent auditing can therefore become an important part of a wider supplier governance strategy.
How Compliance.One can help
Compliance.One provides independent compliance audit services designed to help organisations gain greater confidence in their recruitment agency supply chains.
Rather than relying entirely on supplier assurances, an independent audit can provide an objective assessment of relevant policies, processes and supporting evidence.
Compliance.One can help organisations review key areas including:
Right to Work
National Minimum and Living Wage
IR35 Off Payroll and employment status
Statement of Work
CIS Self Employed
PAYE and National Insurance
Umbrella company arrangements
Modern Slavery
GDPR and data protection
Worker documentation and recruitment processes
With JSL now changing the risk landscape, independent verification can give organisations greater insight into the businesses operating within their labour supply chain and help them identify potential issues that require attention.
The goal isn't simply to produce another compliance report.
It is to help organisations create a recruitment supply chain that is more transparent, accountable and defensible.
Don't wait until there's a problem
The biggest compliance mistake an organisation can make is assuming that everything is fine because nobody has complained.
No news isn't necessarily good news.
A supplier could have a hidden process failure that has gone undetected for months.
An umbrella company could have weaknesses that aren't immediately visible to the end client.
An agency could have a policy that looks perfect on paper but isn't being consistently followed in practice.
Independent compliance audits can help uncover these issues.
And in the era of JSL, that proactive approach is becoming increasingly important.
The question for End Clients using contract or temporary labour is no longer simply who supplies your workers?
It's:
Who sits behind your supply chain, and how confident are you that every link is compliant?
FAQs
1. What is Joint and Several Liability (JSL)?
Joint and Several Liability is a UK tax regime that came into effect in April 2026 and can make more than one party in a labour supply chain liable for certain unpaid PAYE and National Insurance liabilities. Depending on the circumstances, liability can extend beyond an umbrella company to recruitment agencies and end clients.
2. Why are independent compliance audits becoming more important under JSL?
JSL has increased the importance of knowing who operates within a labour supply chain and how payroll and tax obligations are being managed. Independent audits can provide evidence-based assurance rather than relying solely on supplier declarations, helping organisations identify potential risks and strengthen their due diligence.
3. What can an independent recruitment agency compliance audit cover?
An audit can examine areas such as Right to Work, National Minimum and Living Wage, IR35, PAYE and National Insurance, umbrella company arrangements, Modern Slavery, GDPR, worker documentation and other relevant recruitment processes. The exact scope can be tailored to the organisation's workforce model and risk profile.
4. Why is Compliance.One a leading company offering Independent Compliance Audits?
Compliance.One provides an independent approach to recruitment supply-chain compliance, helping organisations look beyond supplier assurances and assess the evidence behind them. Its broad audit approach can cover multiple areas of workforce compliance, including the issues that have become increasingly important following the introduction of JSL. By identifying potential gaps and providing greater visibility of recruitment suppliers, Compliance.One helps organisations take a proactive approach to compliance and supplier risk management.
The bottom line
The introduction of JSL has changed the recruitment compliance landscape.
Organisations can no longer afford to assume that responsibility stops with the recruitment agency or umbrella company.
Visibility, due diligence and independent verification matter.
For businesses using temporary and contingent workers, independent compliance audits can provide an important layer of protection, helping identify potential problems before they become financial, legal or reputational headaches.
Because when it comes to your recruitment supply chain, trust is important. Evidence is better.
