Will employers be able to use agency workers going forwards?

In its recently published roadmap for the implementation of the Employment Rights Bill (the Bill), the government confirmed that the proposed reforms affecting agency workers will come into force in 2027.

In our recently published article here we discussed the raft of anticipated changes in relation to zero and low hours workers which are aimed at preventing exploitative contracts. Following a period of consultation and amendments to the original Bill, in March 2025 it was announced that these provisions would be extended to agency workers. This seeks to close a potential loophole that may have encouraged employers to shift from the use of zero and low hour workers to agency models in an attempt to avoid the new measures.

What does the Bill propose?

As with zero and low hour workers, the Bill proposes the following measures relating to agency workers:

• a duty on the end user to offer agency workers guaranteed hours
• right to reasonable notice of shifts, changes and cancellations
• right to compensation for cancelled, moved or curtailed shifts

Failure to comply with the new measures once they take effect or taking avoidance measures could give rise to costly employment tribunal claims (against both hirer and agency). 

Duty to offer guaranteed hours

This duty requires the hirer to offer a guaranteed hours contract which reflects the hours that an agency worker has regularly worked over a particular reference period. This is expected to be a rolling reference period of 12 weeks, starting on the first day of assignment but is yet to be confirmed.

This means that businesses who regularly engage the same agency to supply agency workers during predictable peak trading periods and consistently require those workers to perform a set number of hours may become obliged to offer those workers a guaranteed hours contract reflecting their working pattern during the reference period after 12 weeks.

The obligation to offer guaranteed hours will rest with the hirer not the supplying agency which is certainly going to cause headaches for workforce planning and potentially create issues with overstaffing as the hirer could end up directly employing the agency worker. Employers typically pay fees to agencies where they directly employ a worker supplied via an agency, so these changes could mean the hirer has to offer an agency worker a permanent contract and possibly pay compensation to the agency as a result. As with the proposed changes to zero and low hour contracts, limited exceptions to the rules are expected. For instance, the hirer may be able to offer a fixed-term contract where it is reasonable to consider that the agency worker is only needed to perform a specific task, or they are needed until a specific event occurs (e.g. until another worker returns from leave).

It is expected that additional regulations will specify that such contracts must also mirror the precise shift structure worked, although this is not yet confirmed. Regulations will also be required to specify how an offer must be made, the window in which it must be made, and when it must be accepted by before it can be withdrawn.

Reasonable notice and curtailment of shifts

Agency workers will also be entitled to reasonable notice of shifts, the amount of notice to be set out in regulations. This responsibility will be shared by both the agency and the hirer (and likewise, liability for failure will be shared too).

The agency worker will also be entitled to reasonable notice to shift changes. Where an agency worker has agreed to work a shift and it is cancelled, the shift start time is changed or otherwise the shift is curtailed at short notice, that agency worker will be entitled to compensation for any financial loss attributable to the unreasonable notice. Liability for any compensation will be apportioned to reflect the party responsible for providing unreasonable notice, so if the decision was made solely by the hirer, the hirer will bear the brunt.

This particular duty may result in hirers thinking twice about curtailing or cancelling shifts at all, particularly if doing so will result in much more than the cost of a few hours work. Both hirers and agencies will want to consider whose responsibility it will be to provide notice of any changes to shifts, or whether arrangements want to be agreed in advance to compensate the agency worker and limit the risk of litigation.

Recent proposed amends to the Bill

On 8 July 2025, Parliament published further proposed amendments to the Bill. The amendments propose that where an agency worker is offered a guaranteed hours contract, the pay offered must meet one of two thresholds:

(a) Match the highest rate of pay the worker received during the applicable reference period; or

(b) In limited circumstances, a lower rate of pay can be offered but only if it can be objectively justified as a “proportionate means of achieving a legitimate aim”.

Employers may also be required to consider what comparable permanent employees are paid.

The House of Lords Report Stage began on 14 July 2025, and the proposed amendments are already being reviewed and debated; some of the amendments above have already been agreed and made to the Bill. However, after the Report Stage, the Bill will proceed to its third reading in the House of Commons before being given royal assent. As the above amendments relating to agency workers lack government backing, they are unlikely to be passed and should therefore be treated with caution.

Will Umbrella Companies be caught by these measures?

Yes. The Bill is set to change the definition of an ‘employment business’ to ensure that umbrella companies fall within the regulatory sphere of the employment business conduct legislation. It will also extend the definition of a ‘work-finding agency’ which could bring an umbrella company within scope of the agency regulations. As such, umbrella companies will also be subject to the same duties and liabilities as employment agencies.

What to do next

Whilst we wait for the final regulations to be drawn up, there are steps that can be taken now to prepare for the changes:

• audit - carry out an internal audit to understand how agency workers are currently being used and the extent to which these changes might impact the business
• review contracts – consider how existing commercial terms will need to be updated to reflect the new obligations, including potential liabilities for offering permanent roles or paying compensation
• track hours – implement systems to monitor hours worked and calculate average working hours
• training – Prepare managers, recruitment and procurement teams for the changes

Our advisers are on hand to provide expert advice and insight into the upcoming changes and the impact on your business. If you would like advice or assistance with any of the above, please do get in touch.