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The Pros and Cons of Using an Umbrella Company PSL

If your recruitment agency engages contractors, there’s a good chance that it also works with umbrella companies on a regular basis and you may have considered using a Preferred Supplier List (PSL) help you streamline the management of your umbrella contractors. In this article we’ll look at the issues surrounding umbrella company PSLs, to help you decide if you should be using one.

What is an umbrella company PSL?

Your PSL is a list of umbrella companies that you already know you’re happy to work with. This could mean that you’re not willing to working with umbrellas who are not on your PSL, or it could simply be a list of recommended companies that you’d prefer your contractors to use.

Reasons to use an umbrella company PSL

The main reason for using a PSL is that they make it easier to control your supply chain. You can pre-vet all the umbrella companies on your list. As a minimum you can ensure there are no compliance risks and you’re happy with the service you and your contractors will get from them. You might take this further, and ensure that each spot on your PSL goes to a company with proven expertise in employing and supporting contractors.

A PSL can also smooth out the interface between your staff and processes and the umbrella company. By working with fewer umbrella companies and having a closer relationship with each one, you can align your processes, improve communication and make day to day tasks run more smoothly. This in turn will reduce operational errors and make issues easier to resolve, because you have a closer relationship with the umbrella and your staff have fewer queries to deal with. 

If you choose your umbrella company partners carefully, those close relationships will also give you access to specialist expertise. If you have a question about changing legislation or a detail of employment practice, there will be someone in your contacts list who is able and happy to help. Given how complex regulations in the recruitment industry can be, and how often major changes are announced, this effect can be very important.

So, is there a downside?

The main issue is in “selling” your PSL to your contractors. Many contractors will want to use their own choice of umbrella company, and won’t enjoy being told they have to change even when you’re pointing them towards a better, safer, more responsible umbrella.

This means you have to be very sure the companies on your PSL know what they’re doing and your contractors will have a good experience while employed by them because they’ll hold you responsible if this is not the case.

Should you use an umbrella company PSL?

On balance, we would advise most recruitment agencies who hire contractors to have an umbrella company PSL in place, and to only work with their chosen umbrella partners. The one caveat is that those partners must be carefully chosen, for their compliance record, service levels and their offering to your contractors.

This can be a lot of work, but it allows you to improve your contractors’ experience of working for you, while reducing the risks to them and your business and improving efficiency for your staff.

If you have questions or if we can help in any way, please call our expert team on 01296 468483 or email

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