Aimed at addressing “one sided flexibility” for workers, the Employment Rights Bill introduced a raft of detailed and complicated provisions on guaranteed hours and the right to reasonable notice of shifts and shift changes. We discuss the proposals for guaranteed hours here and the proposals for notice of shift changes here.

Under the original Bill, these rights would apply to workers with zero hours or “low hours” contracts. Now, following consultation, amendments to the Bill tabled on 4 March 2025, extend this protection to agency workers working under these types of contracts. Our response to the government’s consultation can be viewed here. The Bill amendments seek to close any possible loophole which would encourage businesses to move to an agency model to evade the new guaranteed hours regime. 

Agency workers are very often employed on zero hours contracts. In a survey published by the government alongside its consultation response, around 75% of agency workers enjoyed the flexibility their jobs offered, but less than half were happy about their job security. The aim of extending these provisions is to provide agency workers with greater security and predictability in their employment, ensuring that every worker can access a contract that reflects the hours they regularly work and addressing the issue of one-sided flexibility.

Extending these provisions to agency workers is not without its challenges. Agency worker arrangements are more complicated than when workers are engaged directly by a business. It’s a tripartite relationship under which an agency worker’s contractual relationship is with the agency, but their services are ultimately provided to an end client (sometimes also referred to as an “end user” or “hirer”). Agency workers may work across multiple agencies and/or for multiple end clients. Agency workers usually provide temporary resource, but the length of any assignment can vary. The government has recognised that, when considering the zero-hour reforms, agency workers need to be treated differently. However, the government’s priority is to provide all workers (including agency workers) with greater security. 

We take a look at what the government has proposed, and the practical difficulties end clients and agencies may face.

Guaranteed Hours

Extending the guaranteed hours regime to agency workers is not an easy feat. The proposals are already complicated, and this is heightened when considering how they could apply to an agency arrangement. On the one hand, the end client will not have (or want) a contractual relationship with the worker but, on the other hand, agencies have little control over what resource end clients will need and when. Requiring either the employment agency or the end client to guarantee hours could therefore undermine the flexibility that is central to the agency work model.

Nevertheless, the government has now confirmed that agency workers should be entitled to a contract reflecting the hours they regularly work. We explain how this would operate under the proposed legislation. However, as key details of the guaranteed hours regime are yet to be consulted on and set out in secondary legislation, it is difficult to assess the full impact these changes will have.

Who will need to make an offer of guaranteed hours?

The end client. The government’s consultation response explains that the end client is best placed to forecast and manage future work demands.

What happens if the agency worker accepts an offer?

Where an offer has been made, it’s up to the agency worker whether or not they would like to accept it before the end of the response period (which will not be less than a week).

If the agency worker accepts, the agency worker and end client enter into a direct contract together from the day after the worker has responded (or any later date agreed between the parties).

This will not automatically bring an agency worker’s contract with the agency to an end. It’s possible the agency worker could continue working through the agency for the same or different end clients. Or they may prefer to issue notice under that contract.

What happens if the agency worker rejects an offer?

Agency workers can reject (or not respond) to the offer within the response period. The arrangements will then continue as they were, with the worker fulfilling their assignment via the agency.

The underlying guaranteed hours regime means that the end client would still be obliged to keep making offers at the end of each subsequent review period.

What if the end client would only need an agency worker on a temporary basis?

• where the agency worker decides not to continue working for the end client (unless they are entitled to do so because of the end client’s conduct); and
• where the end client, acting reasonably, asks the agency to stop supplying the worker for a “qualifying reason”. This includes reasons relating to the worker’s capability or conduct.

The notice must be provided to the worker by the end client (not the agency) setting out why an offer has not been made (or is treated as withdrawn). Regulations will set out what details should be included in the notice. However, it’s still uncertain how much evidence, if any, will be needed to support the qualifying reason, and what ”acting reasonably” will entail in terms of highlighting performance or conduct issues in advance.

Complications aside, this also marks a significant change from the current situation where an end client requires no justification for terminating an agency worker arrangement.  That degree of flexibility is often why businesses want to engage agency workers. This could result in a scenario where the services of agency workers who are already on a regular hours contract (and outside of the guaranteed hours regime) could be dispensed with more easily. In that situation there is no comparable need for the end client to give a qualifying reason when the relationship comes to an end.

The exceptions to the guaranteed hours regime more generally are still unclear and will be fleshed out in future regulations. These are already eagerly awaited by many businesses, but are even more critical when considering the impact these changes will have on agencies and end clients. 

What about collective agreements?

The most recent amendments to the Bill introduce provisions which allow a collective agreement to contract out from the rights to guaranteed hours (and reasonable notice of shifts). Any such collective agreement must be incorporated into an employee’s contract of employment.

As an agency worker’s contract will be with the agency, any collective agreement will presumably need to be with them too. See more on this below. But this results in a peculiar situation for the end client who would not have any control over the collective agreement but the ultimate responsibility for making guaranteed hours offers will fall to them. It is possible we could see this becoming a point of discussion and negotiation between end clients and agencies. For example, end clients may be more likely to use agencies who have collective agreements in place which contract out of the new rights.

How will this impact end clients?

The inclusion of agency workers in the guaranteed hours regime will be a significant change for end clients, who currently have no contractual relationship with the agency worker. Requiring the end client to make any offer would dilute the appeal of agency model for businesses. Currently, a benefit of using agency workers is the flexibility and agility it offers, allowing businesses to react quickly to changes in needs whilst avoiding the admin involved with recruiting staff directly.

There are a number of issues facing end clients:

• Transfer fees: End clients could be stung twice under these proposals. In its consultation response, the government has confirmed that it is not proposing any changes to the transfer fees systems. This is significant. It means that end clients will need to both make an offer of guaranteed hours and, if the offer is accepted, possibly pay a transfer fee to the agency (depending on the contractual terms with the agency).
   
• Length of assignments: Although the duration of the initial reference period has not been confirmed, it has been suggested it will be 12 weeks. End clients will need to more carefully assess the resourcing need to determine if an agency worker is needed for longer than this period.
   
• Overstaffing: If the end client is obliged to make an offer but, after the worker accepts, the work need reduces or ends (e.g. the end of a seasonal rush), the end client will still be required to fulfil the hours offered. This will leave the employer needing to consider redundancies.
  
  The underlying regime includes a partial exception to allow employers to offer a limited term contract. Limited term contracts could be utilised by end clients if there is a clear and genuine temporary need for the work. In its response, the government also says it is “keen to discuss other ways in which it believes the legislation can cater for seasonal work”. Many end clients will be hoping this results in some more meaningful exceptions, particularly given the additional complexities with needing to make permanent offers to agency workers.
   
• Less favourable terms: The Bill does not allow guaranteed hours to be offered on less favourable terms. As agency workers are often better paid than those directly engaged by the end client, an agency worker that moves onto a guaranteed hours contract with the end user would most likely need to remain on those more generous terms. Notably the current wording of the Bill refers to the terms ‘taken as a whole’ being no less favourable. That could potentially provide some scope for a reduced hourly rate being offset by the security of being moved onto a permanent guaranteed hours contract and the additional benefits that could be offered. However, with no suggestion that additional exceptions on this point are being considered, a tiered workforce seems a real risk.

These changes will no doubt cause many businesses to reflect on their operating models and take steps to avoid overstaffing arising from guaranteed hours offers.

How will this impact agencies?

Agencies are not completely off the hook. Where it is reasonable to think that an agency worker might become a qualifying worker of an end client , the agency must take reasonable steps to tell the agency worker about their rights. This would therefore be a consideration for any assignment that is Ionger than the statutory reference period (expected to be 12 weeks). As with direct employment, the information must generally be provided within 2 weeks of when the employment starts or the law comes into force. Agencies that look to side step this obligation (and being caught by the provisions generally) by offering per assignment contracts for a period below this threshold risk being caught by the anti-avoidance provisions under the Bill which aim to catch these sort of practices.

The legislation will allow for flexibility, enabling agencies or “other entities” to offer guaranteed hours in certain scenarios. It is not yet clear what these scenarios will be; this will be set out in future regulations. The government has also emphasised that, regardless of an end client’s obligations, any agency could themselves offer guaranteed hours to an agency worker if they wish. Agencies might be prepared to do this when they are keen not to lose their assets; and at present it seems that limited term contracts with regular hours over the low hours threshold would fall outside the scope of the regime.

The changes are likely to cause a significant shift in the recruitment agency industry. If a worker accepts an offer of guaranteed hours (or even a limited term contract), there is a heightened risk that individuals will no longer want to continue as an agency worker. This could result in agencies losing assets or having a higher turnover over staff. In order to retain agency staff, agencies will need to consider offering regular hours to agency workers from the outset to avoid being caught by this regime; and end clients may be pressured to ensure the assignments being offered are not for zero or low hours.  Agencies and end clients may also look to renegotiate issues such as transfer fees.

Notice of shifts and shift changes

Although this proposed regime is perhaps not quite as complicated as guaranteed hours, it inevitably becomes trickier when considering the tripartite relationship. 

Who needs to provide the agency worker with notice?

Both agencies and end clients will be responsible for providing agency workers with reasonable notice of shifts. This extends the existing concept of joint liability sets out in the existing agency worker laws.

It will therefore be for a tribunal to determine who is responsible for providing unreasonable notice and apportion liability accordingly. What constitutes “reasonable” notice is still unclear and will be dealt with in regulations to help guide tribunals (which we expect will be subject to consultation).

While the principle of joint liability for providing reasonable notice of shifts is sound, there are questions about the practical implementation of this measure.  A definition of "reasonable notice" is still needed. But it seems likely that agencies and end clients will want additional contractual provisions to avoid disputes over when the end client must give the agency notice, as well as who is ultimately responsible for notifying the worker.

What about the short notice cancellation payments?

Agencies will be responsible for paying agency workers for shifts that are cancelled or curtailed at short notice.  The government considered this the most “efficient” option, given the worker would already be on the agency’s payroll. This measure is designed to protect workers from the financial impact of sudden cancellations.

Agencies will have the temporary right to recoup these costs from end clients, if the end client was responsible for the short notice cancellation. However, this is only where the contractual arrangements between the end client and the agency was entered into up to two months after the Bill is passed (likely later this year). After that, recovery of costs can be dealt with in the relevant agreement between agency and end client.

Are there any exceptions?

A payment does not need to be paid for an “excluded shift”. Regulations will set out exactly what this means but it could relate to the amount payable for a shift, the number of hours to be worked or the time the shift is to be worked.

As with the guaranteed hours proposals, a collective agreement (which has been incorporated into a worker’s contract) can contract out of this regime entirely or replace it with something different.

How will end clients be affected?

Although not directly responsible for making any payment, end clients will need to consider how and when an agency can recoup costs in any commercial documents. They will also likely want contractual protection against an agency delaying telling a worker about a shift cancellation or change. End clients will be reluctant to assume any responsibility for telling the worker directly to avoid any arguments there is an employment relationship.

Ultimately, as with direct employers, end clients will still need to become more mindful of shift allocations and resourcing.

How will agencies be affected?

While it is logical for agencies to manage and administer short notice cancellation payments, there are concerns about the potential for increased costs and administrative burdens on agencies.

In its consultation response, the government has said that they will not be prescribing in legislation how agencies should be notified by the end client of available shifts or changes to shifts. Agencies will therefore be keen to address this in their contract with the end client, as well as a mechanism for recouping the full or partial amount of any payment.

What next?

As with these provisions more generally, much of the detail has been left to regulations. Understanding the underlying regimes is critical to being able to assess the full impact on both end clients and agencies and how these proposals will work in practice. Further consultations will be held to refine the regulations.

The government recognise that, as with zero hours arrangements, agency work arrangements often work well for many people, such as those with caring responsibilities. The underlying regimes do not mean any individual needs to accept an offer of guaranteed hours, but it will likely allow them more control over their working arrangements. The changes will undoubtedly be an additional administrative burden for both end clients and agencies. Given the complexity of the provisions, and the fundamental rebalancing of duties and responsibilities it will entail, both agencies and end clients are likely to experience a period of adjustment as they navigate the best path forward.