The United Kingdom government is moving forward with significant reforms to zero-hours contracts, extending the scope to include agency workers, a measure designed to curtail the use of temporary work as a loophole for employers seeking to circumvent new employment protections. This initiative, part of the broader "Make Work Pay" agenda, aims to offer qualifying agency workers the right to request and potentially receive guaranteed hours from the businesses they serve, fundamentally reshaping the landscape of flexible labour. However, the proposals have already met with considerable concern from experts within the temporary work sector, who warn of potential instability and the risk of unintended consequences in a market already navigating substantial legislative change.
The inclusion of agency workers in these reforms was initially signaled in March 2025. Since then, newly released options assessments within the ongoing zero-hours consultation have begun to flesh out the potential mechanisms for these changes. Central to the proposals is the "Right to Guaranteed Hours" assessment, which confirms that agency workers meeting specific qualifying conditions will be afforded rights broadly similar to directly engaged workers under the framework of the Employment Rights Act. While the overarching principle of worker protection is consistent, the operational arrangements for agency workers are expected to differ in some respects, with further specifics anticipated to be detailed in subsequent regulations.
Unpacking the Proposed Mechanisms
Under the government’s proposals, an agency worker who satisfies the stipulated qualifying conditions could receive an offer of guaranteed hours directly from the end hirer – the business where they perform their work. This offer would entail a new worker’s contract with the hirer, explicitly outlining the minimum number of hours the business would be obligated to provide, and consequently, the worker required to commit to, should they accept the terms. Crucially, the volume of hours offered would need to be a direct reflection of the hours the agency worker has consistently performed for that specific hirer over a predefined "relevant reference period."
Should an agency worker accept this offer, they would transition from an agency-managed arrangement to becoming directly engaged by the hirer under the new contract. This direct engagement would then open the door for potential eligibility for further guaranteed-hours offers in subsequent reference periods, contingent on their continued satisfaction of the qualifying conditions. The government’s rationale behind making the end hirer responsible by default is clear: to strategically close potential avenues for businesses to exploit agency work as a means to circumvent the newly established rights for zero-hours workers.
The government’s currently preferred approach for the initial reference period is 12 weeks, though this, along with a proposed hours threshold ranging between eight and 20 hours per week, remains subject to the ongoing consultation. The precise eligibility requirements and the methodology for calculating the guaranteed hours offer are slated to be detailed in secondary legislation following the consultation period.
Exclusions and Worker Autonomy
The consultation also addresses specific circumstances under which agency workers might be excluded from these provisions, primarily if they already benefit from guaranteed hours arrangements. Two main options are being considered: one that would exclude an agency worker holding a contract guaranteeing hours above the proposed threshold, irrespective of where those hours are worked; and another, more restrictive option, that would only apply the exclusion where the guaranteed hours relate specifically to work for the particular end hirer in question.
An important facet of these proposals, mirroring the broader zero-hours contract reforms, is the preservation of worker autonomy. Agency workers would not be compelled to accept guaranteed-hours arrangements. Like all other categories of zero-hours workers, they would retain the right to decline an offer and choose to remain on their existing zero-hours contract or other flexible arrangement if they value the flexibility such setups provide. This acknowledges that for some, the unpredictable nature of zero-hours contracts is a deliberate choice, offering a degree of control over their work-life balance that structured hours might diminish.
However, for businesses that routinely rely on agency workers to meet predictable patterns of work, these proposals could herald a significant shift in how regular temporary labour is managed. Depending on the final regulations, such businesses may find themselves mandated to extend guaranteed-hours offers, rather than continuing indefinitely with arrangements where workers lack any contractual guarantee of work.
A Sector in "State of Flux": Industry Concerns
The proposed reforms have ignited a chorus of concern from industry stakeholders, particularly those operating within the temporary labour market. Crawford Temple, CEO of Professional Passport, an independent assessor of payment intermediary compliance, articulated these anxieties, stating that the sector is in a "state of flux" and desperately needs a period of stability following an intense period of legislative change. He warned that the current proposals could be "easy to sidestep" and might fail to achieve their stated objectives.
Temple highlighted that the temporary workers sector has recently undergone a "massive change" with legislation introduced in April of the current year. This change transferred liability for unpaid PAYE tax from umbrella companies to agencies, fundamentally altering the market’s structure. He argued that it is "impossible to give meaningful context and feedback while these changes are still bedding in." Furthermore, the sector is also awaiting the outcome of another significant consultation, which closed on May 1, pertaining to "Modernising the Agency Regulatory Framework." The government’s response to this consultation is expected to directly influence the direction of the zero-hours contract reforms.
Temple’s concerns extend to the potential for "distortions" in the market. He fears that if the changes proceed as currently prescribed, they are unlikely to be universally applied. This could create an uneven playing field between compliant operators, who would bear the administrative and cost burdens of adhering to the new rules, and those who simply disregard them. This scenario, he noted, has historically led to "significant commercial damage to compliant operators, who have then been forced to relax their position to protect their businesses." He concluded that "the lack of timely enforcement to address unintended consequences has, and continues to, create a race to the bottom," underscoring the critical importance of robust enforcement mechanisms to ensure the reforms achieve their intended impact.
Broader Context: The "Make Work Pay" Agenda and Insecure Work
These reforms are an integral part of the government’s broader "Make Work Pay: ending one-sided flexibility – reforms of zero hours and similar contracts" consultation. This initiative reflects a growing governmental focus on tackling what it perceives as exploitative practices in the labour market, aiming to enhance worker protections and foster a more equitable working environment. The consultation remains open for comments until 23:59 on August 25, allowing various stakeholders to submit their feedback.
The government has bolstered this consultation with several new documents, providing a deeper analytical foundation for the proposed changes. These include: an "Analysis to support the consultation"; a detailed "Right to guaranteed hours: options assessment"; a "Right to reasonable notice of shifts: options assessment"; a "Right to payment for shifts cancelled, moved or curtailed at short notice: options assessment"; a "Zero hours contracts evidence and policy implications: research paper"; and two versions of an "Experiences of workers in insecure work: research paper," one with accompanying data tables. These documents collectively aim to provide comprehensive insights into the prevalence and impact of insecure work, informing the final policy positions.
The Rise of Zero-Hours Contracts and Agency Work in the UK
To fully appreciate the significance of these reforms, it’s essential to understand the landscape they seek to address. Zero-hours contracts, which offer no guaranteed minimum hours, surged in popularity in the UK over the last two decades. According to the Office for National Statistics (ONS), the number of people on zero-hours contracts peaked at around 1 million in late 2022, representing approximately 3.2% of the total UK workforce. While proponents argue these contracts offer unparalleled flexibility for both employers and employees, allowing businesses to scale staffing according to demand and workers to manage personal commitments, critics highlight the inherent insecurity, lack of predictable income, and challenges in accessing benefits or mortgages.
Agency workers constitute a vital segment of the UK labour market, providing flexibility and expertise across a multitude of sectors, from healthcare and education to logistics and manufacturing. The Recruitment & Employment Confederation (REC) estimates that over 1.3 million agency workers are deployed across the UK annually, playing a crucial role in filling skill gaps, managing seasonal demand, and supporting economic agility. However, their position has often been more precarious than directly employed staff, with fewer rights and greater vulnerability to fluctuating demand. The Agency Workers Regulations (AWR) 2010 provided some protections, granting agency workers equal treatment on pay and basic working conditions after 12 weeks in the same role. The current proposals build upon this foundation, aiming to extend security further.
Implications for Stakeholders
The implications of these reforms are far-reaching:
- For Workers: For agency workers currently without guaranteed hours, these proposals offer a pathway to greater financial stability and potentially better access to benefits and long-term planning. A guaranteed income stream could significantly alleviate the stress associated with unpredictable work. However, for those who genuinely value the extreme flexibility of zero-hours arrangements, the option to decline the offer is critical.
- For Businesses (End-Hirers): Companies that regularly use agency labour will face increased administrative burdens and potential shifts in their workforce management strategies. They will need to meticulously track agency worker hours to comply with reference period requirements and be prepared to offer direct contracts. This could lead to higher labour costs, as guaranteed hours may necessitate more robust planning and potentially less flexibility in reducing staff during quiet periods. Some businesses may also re-evaluate their reliance on agency workers, potentially moving towards more direct employment models for their core staffing needs.
- For Recruitment Agencies: The reforms could alter the operational models of recruitment agencies. While they will continue to play a crucial role in sourcing talent, the ultimate responsibility for offering guaranteed hours shifting to the end-hirer could impact their relationship with both clients and workers. Agencies will need to adapt their compliance frameworks and advise clients on the new regulations, potentially seeing a reduction in their long-term placements if end-hirers opt for direct engagement.
- Economic Impact: The reforms aim to reduce precarious work, which could, in theory, boost worker morale, productivity, and consumer spending due to increased financial certainty. However, concerns about increased labour costs for businesses could lead to reduced hiring or shifts in investment, particularly for SMEs. The balance between worker protection and maintaining a dynamic, flexible labour market will be a critical economic tightrope for the government to walk.
The Enforcement Challenge Ahead
As Crawford Temple’s comments underscore, the success of these reforms will hinge significantly on the efficacy of their enforcement. Past labour market regulations, such as IR35 or the Gangmasters and Labour Abuse Authority (GLAA) regulations, have highlighted the challenges of effective oversight and the potential for non-compliance to create unfair competition. Without clear guidance, adequate resources for monitoring, and swift action against those who seek to circumvent the rules, there is a tangible risk that the reforms could lead to further market distortions rather than genuinely improving working conditions across the board.
The government’s commitment to "Make Work Pay" is evident in the breadth of this consultation and the detailed documents accompanying it. Following the conclusion of the consultation on August 25, ministers will meticulously review the responses, evidence, and research to finalise the policy positions. The subsequent step will involve laying secondary legislation in Parliament to officially enact these policy positions into law. The coming months will be crucial in determining the ultimate shape and impact of these far-reaching reforms on the UK’s dynamic and often complex labour market.
