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Key considerations for umbrella companies as 31st December 2020 marks the end of free movement

Written by Brabners LLP

31 December 2020 – important date for settled status applications for non-UK nationals

The pandemic has left us with little headspace for much else, but Brexit is happening and umbrella employers need to be aware of an important deadline coming up on 31 December 2020.

From 1 January 2021, free movement in and out of the UK will come to an end and EU nationals (apart from Irish nationals who are subject to different rules) wishing to work in the UK will be subject to the same visa requirements as their non-EU counterparts.

What does this mean for your employees and contractors?

However, if any EU nationals (and their family members) take up residence in the UK by 31 December 2020, they will have the option to apply for Settled or Pre-Settled Status, under the EU Settlement Scheme. The deadline for applications under the Scheme is 30 June 2021, but the individual must have established residency in the UK by 31 December 2020.

Individuals who apply for (and successfully obtain) Settled or Pre-Settled Status will be able continue living and working in the UK. Broadly speaking, obtaining Settled or Pre-Settled Status preserves the individual’s existing free movement rights, meaning that they will not need to obtain a visa under the new immigration regime which will come into force from 1 January 2020.

This is an important consideration for any umbrella companies that have EU national contractors on their books (or employ EU national staff within their business). If such individuals successfully obtain Settled or Pre-Settled Status then you will be able to continue to employ / supply them next year. However, if they are ineligible or they miss the relevant deadline, they will become undocumented migrants and could face deportation/removal from the UK. They will no longer have the right to work in the UK.

If you employ any EU nationals in your business or you have EU national contractors on your books, actively communicate with them about the Settled Status Scheme. But, be careful not to give immigration advice (this is a regulated activity and giving advice if you are not qualified is potentially a criminal offence).

It is important to be aware that nearly all EU nationals (apart from Irish nationals and those who already have Indefinite Leave to Remain) who wish to continue living and working in the UK after the end of this year must apply for Settled or Pre-Settled Status regardless of how long they have been here, whether they have obtained permanent residence or even if they have married a UK national.

What is the alternative?

From 1 January 2021, most EU nationals who are not eligible for Settled/Pre-Settled Status will require a work permit in order to be employed in the UK. In order to access the work permit visa route for EU national contractors, umbrella companies would first need to obtain a Sponsor Licence. The key route of entry for contractors will be the Skilled Worker route. But, as the name suggests, in order to obtain such a visa, a contractor would need a job offer for a skilled role with minimum salary requirements (and other applicable criteria).

Unfortunately there are two significant hurdles for umbrella companies thinking of going down this route.

Firstly, depending on your business model and sector, you may employ lower skilled/paid EU national contractors who would not be eligible for a work permit under the Skilled Worker route.

Secondly, the immigration rules generally only allow employment agencies (which includes employment businesses and umbrella companies) to apply for a Sponsor Licence to sponsor migrant workers who will be directly employed by them in connection with the running of their business (i.e their own staff). You cannot generally sponsor an individual who will be supplied to work for a third party (end-user client) (although there are some exceptions to this which may apply depending on your specific business model).

Umbrella employers should take note of the deadlines above and carefully evaluate the impact of these changes on their current business model, taking legal advice if required.


This bulletin is for general guidance purposes only and should not be used for any other purpose. Brabners is a Limited Liability Partnership