In our final article on the proposed changes to zero and low hours contracts, in particular the impact on agency workers, we consider the potential exemptions that might apply.
Published: 3 February 2026
Author: Steph Pye
Excluded workers
There will be certain agency workers who are explicitly exempted from the provisions under the Employment Rights Act 2025 (ERA). However, the meaning of “excluded worker” and "excluded agency worker" will be specified in regulations yet to be published so it is not yet clear how extensive or useful this exemption will be.
Fixed term contracts
Although not strictly an exemption, when it comes to a hirer’s obligation to offer a guaranteed hours contract, there are circumstances where it will be reasonable for that contract to be for a fixed term rather than a permanent contract. This will be the case if one of the following applies:
- it is reasonable for the hirer to consider that the agency worker is only needed to perform a specific task and the contract provides for termination when the task has been performed
- it is reasonable for the hirer to consider that the agency worker is only needed until the occurrence (or failure) of an event and the contract provides for termination on the occurrence (or failure) of the event. An example of this would be where an agency worker is providing cover for another worker's leave, and the worker on leave returns
- it is reasonable for the hirer to consider that there is only a temporary need of a specified description (to be specified in regulations) for the qualifying worker to do work under the contract and the contract is to expire at a time when it is reasonable for the hirer to consider that the temporary need will come to an end
As can be seen, there is much reliance on what is considered reasonable when it comes to this provision. In their written evidence, the CBI expresses concern about the body of case law that will build up around what is "reasonable" in this context, and that the uncertainty will deter the use of fixed-term contracts to avoid the risk of litigation.
Intervening events
The duty to make a guaranteed hours offer will also not apply if there is a relevant termination of the worker's contract, or a termination of the arrangement under which they have been working, during the relevant reference period or offer period. Essentially, this means the worker resigns, otherwise than in circumstances giving rise to a constructive dismissal, the worker is fairly dismissed or the fixed term contract comes to an end.
In the case of a qualifying agency worker, the duty will not apply if the worker stops working for and under the supervision and direction of the hirer in relevant circumstances during the same relevant reference period or offer period. This essentially means where the agency worker declines to work under the hirer, other than because of the hirer’s conduct, or the hirer asks the agency to stop supplying the agency worker where it is fair for them to do so.
Collective agreements
The rights to guaranteed hours, reasonable notice of shifts and compensation for cancelled, curtailed or moved shifts for zero hours, low hours and agency workers can also be excluded by a relevant collective agreement, as the result of government amendments approved at the Commons Report Stage.
A relevant collective agreement is one which is in writing and made by or on behalf of one or more independent trade unions and the worker's employer. Contracting out on this basis can occur where the relevant terms of the collective agreement are incorporated into the contract, provided that the worker or agency worker has been notified in writing of the incorporation and effect of those terms.
The option to contract out in this way would seem a sensible and pragmatic approach, and an acknowledgement of employers' concerns about the workability of these provisions, which will allow an employer and trade union to reach agreement on arrangements that will make sense for all parties and avoid the need to follow the complicated new provisions.
This is the only basis upon which it is currently possible to contract out of these provisions, but how will it work for agency workers?
Typically, agency workers are not accounted for in collective agreements which are intended to set out arrangements between employers and employees that fall within the relevant ‘bargaining unit’. That bargaining unit should be clearly defined by the trade union and set out which group of workers or employees it includes. It is rare for such bargaining units to include agency workers but in order for an agency worker to benefit from the terms of a collective agreement, agency workers will need to be incorporated into that bargaining unit. If there are insufficient agency worker members of that particular union, the union may not be willing to start negotiating terms on their behalf.
If they do agree to include agency workers in the bargaining unit, there is still a further complication. The collective agreement would have limited power as an agreement between the hirer and the trade union, and which the agency (who would likely be the agency worker’s employer) would not be a party. There is a requirement to state in each employment contract whether or not a collective agreement impacts the terms of employment of an employee. If the employment contract is between the agency and the agency worker, can the collective agreement even take effect? If the collective agreement does not take effect, then any contracting out clause will not be applicable. At this time, it seems like an unreliable method until further information hopefully becomes available.
On a more positive point, if an agency worker accepts a guaranteed hours offer and as a result becomes an employee of the hirer, any collective agreement which contracts out of future guaranteed hours offers will then apply to that employee.
Of course, the above will only apply if there is a trade union to make a collective agreement with. The increased trade union powers that are to be granted by the ERA could mean this becomes more commonplace over the next couple of years.
To be continued…
Our series of articles has highlighted the complexity of the proposed measures in relation to zero and low hours contracts, in particular the impact they will have on the use of agency workers. It is hoped that the implementing regulations will provide much needed clarity on at least some of the problem areas identified. We will continue to provide updates as the details become available.