Vaughan Hart are coming under increased regulation and, from April 2026, new PAYE rules have already increased the potential exposure of agencies and, in some circumstances, end clients where umbrella arrangements are used.
Further employment reforms will continue that direction of travel, and for construction businesses, therefore, this should not simply be viewed as an HR issue, it is a businessmodelling issue.
Main contractors and subcontractors should understand who is actually providing labour on their projects, through which contractual arrangements, who employs them and where responsibility sits for tax, employment rights and compliance. The longer the labour supply chain becomes, the more important that due diligence becomes.
Labour supply and Worker Preference
Another factor influencing labour models within construction is the ongoing challenge of labour supply. Many businesses report that some operatives will only agree to work on a self-employed CIS basis, often because they perceive that arrangement as offering a higher rate of pay or greater flexibility. In a competitive labour market, contractors can therefore feel under pressure to engage individuals on those terms simply to secure the skills they need.
That commercial reality is understandable, but it does not determine employment status. An individual cannot simply choose to be self-employed if, in practice, the relationship has the characteristics of employment or worker status. Equally, an employer cannot avoid those obligations simply because the individual has requested to be paid through CIS. The status of the relationship will ultimately depend on how the arrangement operates in practice.
This creates a genuine challenge for our sector as businesses may find themselves competing for labour against organisations willing to offer higher CIS rates, whilst seeking to adopt a more compliant employment model. That makes workforce planning, pay structures and the overall approach to labour engagement increasingly important commercial considerations, rather than issues that can be dealt with purely through contractual wording.
A more deliberate approach to workforce planning
None of this means that every construction operative should become
Vaughan Hart, NFB Director of Employment Affairs
Where a genuinely independent tradesperson or specialist business is being engaged to deliver a defined piece of work, subcontracting may be entirely appropriate.”
an employee, there remains an entirely legitimate place for genuine subcontracting, specialist contractors, temporary labour and agency workers. The challenge is to use the right model for the right circumstances.
Businesses should stop starting with the question:“ How do we want to pay this individual?” They should instead ask:“ What is the relationship we actually need?”
If the requirement is for somebody to work continuously within the business, under its management and control, personally undertaking work as part of the organisation, employment may be the more appropriate and ultimately safer model. Where a genuinely independent tradesperson or specialist business is being engaged to deliver a defined piece of work, subcontracting may be entirely appropriate.
Agency labour may be appropriate for genuine short-term fluctuations or project demands. The important point is that the commercial requirement should determine the employment model, not the other way around.
Construction has always required flexibility, and that will not change, but flexibility and compliance are not mutually exclusive. As employment regulation continues to evolve, businesses that understand their labour model, properly assess employment status and ensure that their contracts reflect what actually happens on site will be in a considerably stronger position than those relying on the assumption that“ this is how construction has always done it”.
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