How Rail SMEs Can Navigate Umbrella Reform and Employment Law Changes
New employment legislation is reshaping how businesses across the rail supply chain recruit, pay, and manage their workforces. With umbrella company reform and the introduction of joint and several liability (JSL) arriving alongside changes under the Employment Rights Act, SMEs are strengthening controls to stay compliant while continuing to deliver.
Rail Industry Connect spoke with Bianca Molloy, Managing Director, and Susan Powell, Finance Director, of TES 2000 (TES) about the practical steps they have taken (such as a preferred supplier model, increased pay transparency, and strengthened audit processes) and what would help the industry embed consistent, proportionate assurance.
Managing Multiple Changes at Once
For TES, the challenge has been less about any single change and more about how several requirements are landing at the same time. As Bianca explained, this has accelerated cross-functional planning, making sure payroll, HR, procurement, and supplier management remain aligned as the regulatory landscape evolves.
“If it was just the employment legislation, or just the umbrella reform, or just the industry standard changes, this would be more manageable,” she said. “The fact that it’s all landing at once, and not always in a joined-up way, means we’ve brought the right people together across payroll, HR, procurement, and supplier management. That coordination is essential so that strengthening controls in one area supports, rather than conflicts with, another.”
Susan pointed to the resource burden this can place on smaller businesses further down the supply chain. TES has faced detailed audits from tier one contractors, reflecting the assurance obligations they are working to meet, while SMEs must implement the same expectations with more limited resource.
“We are an SME, so we have to be proportionate and focused in how we invest in compliance,” she said. “For businesses lower down the supply chain, it can be a lot to absorb at once, so clarity and consistency really matter.”
What Joint and Several Liability Actually Means for Suppliers
Under the new Joint and Several Liability (JSL) provisions, in some circumstances, if an umbrella company fails to remit PAYE or National Insurance to HMRC, the liability can pass up the supply chain to the agency and, in some circumstances, to the end client. Susan outlined the issue and why strong assurance matters.
“In its simplest form, if an umbrella company fails and PAYE hasn’t been remitted to HMRC, liability can, in certain circumstances, move up the chain, even where the funds have already been paid over,” she explained. “That’s why we’ve strengthened our assurance: it’s about having practical, proportionate audit processes so workers, clients, and suppliers are protected.”
In response, TES has moved to a preferred supplier model, reducing the number of umbrella companies it works with and seeking appropriate access to payment records to support legitimate audit and assurance activity. Where information is shared, it is requested on a lawful, proportionate basis, using suitable agreements and minimising personal data, so checks can be completed while respecting confidentiality and data protection obligations.
Bianca said the work has improved visibility across the wider supply chain and strengthened due diligence on how labour is engaged and paid further down. “We’ve used the changes as a prompt to ask better questions and ensure arrangements align to specific framework requirements,” she said. “It has driven constructive conversations about assurance and helped us tighten alignment to contractual expectations.”
The Search for Guidance
Both Bianca and Susan said that clearer, consistent guidance for the supply chain would be helpful as the new legislation beds in. Tier one contractors have been active in auditing downwards; aligning expectations across clients, contractors, and suppliers would help reduce duplication and drive consistency.
“We’d welcome clear communication on expectations and acceptable payroll mechanisms across the supply chain,” said Susan. “Where organisations run their own payroll, it helps everyone if assurance requirements are understood consistently from end client through to supplier.”
Bianca echoed that view, noting that businesses are looking for consistent expectations that are easy to access and apply across the supply chain.
“It would be useful to see consistent expectations set out and shared widely,” she said. “In the meantime, many businesses are putting their own controls in place and learning quickly.”
With the industry going through wider structural change, including the Great British Railways transition, guidance and assurance approaches are evolving. From a supply chain perspective, widely shared expectations on acceptable payroll mechanisms and proportionate assurance would help businesses align quickly, reduce duplication, and maintain consistent standards.
The Employment Rights Act: Sick Pay and Operational Pressure
Alongside the umbrella reform, TES is also adapting to changes under the Employment Rights Act, particularly the revision to statutory sick pay, which now applies from day one of absence, without a fit note requirement. For a business relying heavily on shift-based call-off workers, this has meant updating absence processes to ensure they remain fair, consistent, and workable in practice.
“It’s not that we don’t want to pay for genuine sickness,” Bianca said. “It’s about making sure the process is consistent and fair. When sick pay applies from day one and a fit note isn’t required, we’ve had to strengthen reporting and review steps so we can support people who are unwell, while also managing operational resilience.”
The business has responded with clearer reporting procedures, consistent check-ins, and practical guidance to managers so absence is handled fairly and consistently. Both Bianca and Susan acknowledged the intent behind the legislation is sound. Workers in short-term and zero-hours roles have historically had limited protection, and the principle of day-one security is a fair one. The operational challenge is putting the right safeguards in place so the system works for businesses and workers alike.
The sentiment is echoed at industry level. RICA, the Rail Industry Contractors Association, warned that whilst the Employment Rights Act 2025 was introduced with good intentions, the Government “still lacks understanding as to how the temporary labour and professional contractor market underpins the infrastructure maintenance and construction industry.” RICA cautioned that rather than addressing skills gaps, the reforms risk creating ‘stagnant delivery and a downturn in productivity as contracting companies become unable to hire flexibly.’
What Has Improved
Despite the pressure, both Bianca and Susan were clear that the compliance process has delivered some genuine positives. Greater transparency around pay has been one of the most significant.
“Our teams understand more about their pay now than they’ve ever done,” said Bianca. “We do a lot of modelling so that people understand exactly what their net pay will be. We don’t get queries about remittances or payslips the way I used to. The conversation has changed.”
Susan added that the volume of worker queries over the past year had given the team an opportunity to demonstrate responsiveness, which had in turn strengthened trust.
“We’ve had lots of queries since the last National Minimum Wage increase and it’s given us the chance to show how quickly we can react when someone comes to us directly,” she said. “I think it’s shown people that we actually care.”
The compliance process has also sharpened TES’s supplier relationships, prompted a more rigorous approved supplier framework, and improved supply chain visibility and assurance.
Supporting Smaller Suppliers
One of the most encouraging aspects of TES’s approach has been its willingness to actively support smaller businesses in its supply chain rather than simply applying pressure.
At a recent industry event, Bianca presented on the legislation and found that many smaller operators had limited capacity to track fast-moving changes. Some had minimal in-house HR support and limited access to specialist employment advice.
“We’re not saying we won’t work with you because you don’t know what you’re doing,” said Bianca. “We’ve offered to work with smaller companies on a retainer basis and give them access to our head office support, including HR, payroll, finance, SHEQ, and fleet. We’re in a better place now and we want to bring our supply chain with us.”
What Needs to Happen Next
The conversation with Bianca and Susan pointed to three clear priorities for the industry. First, clearer and more consistent communication of shared expectations, including what payroll mechanisms are acceptable across the supply chain, would help businesses implement proportionate controls with confidence. Without that clarity, organisations can be left making individual interpretations, which can slow implementation and lead to avoidable variation.
Second, the audit burden needs to be streamlined. Bianca made the case for a centralised compliance audit that businesses could complete once and share across client relationships, rather than the current situation of repeated, duplicative processes.
Third, greater consistency in framework contracts would help at a structural level. As Bianca noted, different contracts with different clients can specify different payment mechanisms and working hour structures. Bringing more alignment across frameworks would make it easier for suppliers to implement controls once, apply them confidently across client relationships, and maintain a more consistent experience across the supply chain.
Susan summed up the broader principle simply: “I absolutely believe the legislation is the right thing to do. I just want to see it applied consistently, so that everyone is working on a level playing field.”
RICA also welcomed the overdue umbrella reforms, noting they “should be welcomed by all companies that already use this payment option in a compliant manner,” adding that more prompt and targeted enforcement was needed — including a whistleblowing mechanism to ensure a genuinely even playing field
The new compliance landscape is navigable and TES has shown how a practical, proportionate approach can raise standards while supporting delivery. Continued progress will depend on clear expectations, coordination across the industry, and a shared commitment to bringing the whole supply chain along on the journey.
For TES, the experience has also reinforced a number of long-term positives: clearer and more transparent pay conversations with workers; stronger, more consistent assurance across suppliers; better internal coordination across HR, payroll and procurement; and a more robust operating model that is well placed to adapt as further guidance and reforms emerge.
TES provides workforce and compliance solutions to the rail and infrastructure sector. For further information, visit www.tes2000.co.uk
