Is an Umbrella Company in the UK the same as an Employer of Record (EOR)? And more importantly‚ why does it matter?
Most EORs in the UK operate as umbrella companies, whether they like the label or not. The distinctions? Commercial only and subtle at best:
EORs typically deal directly with the end-client, who expects to employ the worker long-term.
Umbrella Companies typically deal via recruitment agencies or MSPs, engaging workers temporarily.
And because EORs also engage workers temporarily and often work with MSPs or agencies, and because the reverse is also true, umbrella companies may work directly with the end client and employ workers long-term, EOR and umbrella companies are interchangeable concepts in the UK
TL;DR: they both act as intermediaries by engaging workers for third parties.
Why does it matter?
If you've been thinking your EOR isn't an umbrella company, or were simply unaware of the term, we've got news for you.
The UK government is about to reshape the umbrella industry. New regulations are coming, and they WILL impact EORs too:
- Intermediaries and end-clients will be liable - if an umbrella company fails to pay taxes, intermediaries or clients must cover the shortfall. Compliance checks will become critical.
- Umbrella scrutiny will increase - expect more due diligence, audits, and contract reviews as businesses try to avoid financial risk. Clients may rethink umbrella partnerships (or EORs) and move payroll in-house.
- Expect shifts in pay models - with tighter regulations, some umbrellas may increase fees, restructure payment models, or exit the market entirely.
Time to pay attention.
For many years, the Netherlands has been one of the more accessible European markets for flexible labour supply models. But that is now changing - quickly. EORs and staffing agencies will need a permit to provide labour supply.
Here's a regulatory update that deserves immediate attention - especially if your business employs or places foreign workers in Poland. Poland has introduced a new law on the labour market and employment services, bringing significant changes for both existing and new EORs and employment agencies. While some updates apply only to those working with foreign nationals, others are general requirements that affect all providers.
