April 2026 is a reset point for umbrella minimum rates
April is already a key month for recruitment, payroll and workforce planning and April 2026 is shaping up to be a particularly important one.
Two things are happening in parallel:
- National Minimum Wage / National Living Wage uprating
From 1 April 2026, the National Living Wage (age 21+) increases to £12.71/hour, with increases across other age bands. - Employment Rights Act 2025 changes begin to bite
The Employment Rights Bill received Royal Assent on 18 December 2025 and is now the Employment Rights Act 2025, with changes phased in through 2026–2027.
In April 2026, the first big operational changes include day-one Statutory Sick Pay, removal of the lower earnings limit, and the launch of the Fair Work Agency.
Separately (and highly relevant to supply chain decisions), HMRC’s umbrella market reforms are also scheduled from 6th April 2026, introducing joint and several liability for PAYE amounts in certain umbrella labour supply chains.
Put simply: costs are rising, expectations are rising, and enforcement is increasing.
For agencies, that tends to surface immediately in one place:
“What is the minimum charge rate for an umbrella worker from April?”
Why different umbrellas can quote different “minimum rates”
In a perfect world, minimum rates would be easy to compare. You’d expect the difference between Provider A and Provider B to be mainly:
- Their margin
- Small operational differences (e.g., process, service model)
In reality, umbrellas can produce different minimums because they make different assumptions about:
- how statutory costs are handled,
- how pay is structured on the payslip, and
- what happens when worker behaviour changes (hours, pension opt-in, sickness).
That is why two “minimum rate” quotes can look similar on day one… and behave very differently over a 3–6 month assignment.
The most common pitfalls that distort minimum rates
1. Pension assumptions (and why they can bite mid-assignment)
One of the most common “minimum rate” levers is auto-enrolment pension.
Some providers will model the minimum rate on the assumption that:
- a worker will not be enrolled initially, or
- a worker will opt out and remain out.
The practical issue: the umbrella cannot control whether a worker opts in early (or stops opting out). If pension contributions start unexpectedly, the umbrella has only a few options:
- reduce margin,
- adjust the rate, or
- attempt to recover cost elsewhere.
Any of those outcomes can create:
- mid-assignment rate changes, and/or
- margin erosion for the agency or end hirer.
Good practice is to price for compliance and stability, not the best-case assumption.
2. Hours worked and “minimum rate drift”
Minimum rates are not always linear, especially when you consider:
- thresholds,
- qualifying earnings concepts,
- and statutory cost behaviours.
So if a worker’s hours change week-to-week (common in many sectors), the “minimum rate” can drift.
Agencies should stress-test:
- typical hours,
- minimum/maximum hours scenarios, and
- the impact of overtime or reduced shifts.
3. Payslip structure: NMW + additional pay elements
Some umbrellas may choose to pay National Minimum Wage for all hours, then make up the rest through additional pay elements (for example, a bonus). This can be legitimate, but it must be transparent and correctly taxed, with hours and pay clearly shown.
Where this becomes a pitfall is when:
- the worker experience is poor (“why is my hourly rate showing as NMW?”),
- the explanation is unclear,
- or the structure is used to mask other issues.
As an agency, you want clarity upfront so there are no surprises later (for you or the worker).
4. “Hybrid” / elective deduction models (high risk, long-tail pain)
At the far end of the spectrum are so-called hybrid or elective deduction models.
These models are often promoted as:
- “PAYE taxed”, but
- “self-employed” for other purposes.
Commercially, they can appear “cheaper”. In reality, they can be:
- exploitative for workers (reduced rights/entitlements),
- high risk for agencies (challenge, disputes, reputational damage),
- and a classic example of a short-term saving that can become a long-term problem.
A practical checklist: what to ask before accepting a “minimum rate”
When an umbrella minimum rate lands on your desk, ask:
-
1. Is pension cost included?
• What assumption is used?
• What happens if the worker opts in early? -
2. How is holiday pay is calculated
• Any scenario where assignment costs change later? -
3. What hours are assumed and what happens if hours vary?
• Can they show a sensitivity analysis? -
4. How is pay structured on the payslip?
• Any NMW + other pay elements approach? (If yes, how is it explained to workers?) -
5. Is the model straightforward employment (PAYE) with full worker rights?
• If you hear “hybrid”, “elective deduction”, “self-employed but PAYE taxed” — treat it as a major red flag.
How QPS helps: free minimum rate calculator
To make this easier, we’ve built a free rate calculator designed for recruitment agencies to model the real minimum rate.
You can adjust:
- hours
- umbrella margin
- pension assumptions
…and see what the minimum should look like under a compliant, sustainable approach.
If you want a second pair of eyes on a quote you’ve received, send it over (redact anything sensitive) and we’ll tell you what to probe and where hidden assumptions may be sitting.
Note: this article is for general information only and isn’t legal or tax advice.
