Government consults on reform of zero-hours contracts for UK agency workers

The Employment Rights Act 2025 (ERA) gained Royal Assent on 18 December 2025, but the zero-hours contracts measures including those relating to agency workers require regulations to set out key details before the new rights can take effect. A government consultation on reforms of zero-hours and similar contracts published on 2 June addresses those details.  

While the consultation covers proposals for new rights for both directly engaged zero-hours workers and agency workers, the focus here is on the proposals that relate to agency workers. Under the ERA, the measures apply differently to agency workers compared to directly engaged workers to reflect the nature of agency work and the three-way relationship between agency worker, agency and hirer. 

The consultation sets out a list of questions and proposals for the core rights as they apply to agency workers. It does not include draft regulations but confirms the government's current preference for certain options and introduces new ideas, including the possibility that, in certain cases, the "agency", rather than the hirer, would be required to offer a guaranteed hours contract to an agency worker. The government has confirmed that it seeks input on the detail of the rights and, following the consultation, will develop final policy positions to be set out in a new set of regulations. 

Right to guaranteed hours

Who Is responsible?

Under the ERA, hirers are obliged to make guaranteed hours offers to qualifying agency workers. The offer must reflect the hours worked under the direction and supervision of that hirer during the "relevant reference period". If an agency worker accepts the offer, they will take up a worker's contract with the hirer and be directly engaged by them.

The ERA also enables ministers to determine cases in which this responsibility is placed on the agency or another intermediary instead of the hirer; for example, a party involved in the supply or payment of an agency worker. This power can be applied where the agency worker is of a description specified in regulations. The consultation seeks views on when this transfer of obligation to the agency or intermediary should apply.

Qualifying criteria

To qualify for a guaranteed hours offer, an agency worker must have worked for and under the supervision and direction of the hirer during the "reference period"; have met the "regularity requirements"; and not be an "excluded agency worker", if any exclusions are made in regulations. These conditions will be set out in regulations and may vary from those for directly engaged workers. 

Agency workers have the right to decline a guaranteed hours offer and remain on their existing arrangement if they prefer. 

Hours threshold

While the majority of agency workers do not have hours guaranteed contractually, some do; for example, by their agency or their umbrella company. The government intends to exclude agency workers from the right to guaranteed hours where they are already contractually guaranteed hours over an "hours threshold" to be specified in regulations. Its preference is to set the threshold within the range of eight to 20 hours per week, notably longer than most umbrella company 336-hour minimum guarantees.

The consultation asks whether regulations could establish that agency workers are excluded from the right to guaranteed hours offers either where they already have a contract guaranteeing hours above the threshold, regardless of which hirer those hours are to be worked for, or, where they already have a contract guaranteeing hours above the threshold specifically for one hirer. 

Initial reference period

An agency worker will also undertake an "initial reference period" with a hirer, starting either when the measures come into effect, in cases where the agency worker is already working for the hirer, or on the first day on which they work for the hirer after the measures commence. Its length needs to strike the right balance between ensuring that agency workers do not suffer prolonged one-sided flexibility, while allowing a period long enough to establish the hours they regularly work for a hirer. 

The options under consultation are 12 weeks, 26 weeks, or 52 weeks. A 12-week period would coincide with the qualifying period for the Agency Worker Regulations 2010, which would cease to apply where an agency worker accepts an guaranteed hours contract with the hirer.

Subsequent periods

After accepting a guaranteed hours offer from a hirer, an agency worker becomes directly engaged by the hirer and no longer engaged by the agency. Arguably they also become the hirer's employee with full employment rights.

The ERA also makes provision for "subsequent reference periods" for agency workers. An agency worker may qualify for a guaranteed hours offer from a hirer after a subsequent reference period if: they qualified for a guaranteed hours offer from a hirer at the end of an initial reference period but did not accept it; or they did not qualify for a guaranteed hours offer after the initial reference period – for example because they did not work regularly enough – but do qualify after a subsequent reference period. 

Regularity requirements

For an agency worker to qualify, the hours that they worked for that hirer during the reference period will also need to satisfy regularity conditions set out in the regulation. The aim is to cover agency workers who work regularly for a hirer. 

Two options are proposed. Option A is a weekly distribution requirement: the agency worker must have worked a minimum number of calendar weeks during the reference period for a specific hirer. Option B combines a weekly distribution requirement with a total hours requirement, where both oth must be satisfied.

Offer calculation

The offer will need to reflect the number of hours a qualifying agency worker worked for a hirer during the reference period. The government is consulting on whether this should be calculated using a mean average, where every hour worked equally influences the offer, or a median average, which reduces the influence of outlier weeks. Hirers may also be given some flexibility to use an adjustment margin when making guaranteed hours offers, which could help protect hirers against theoretical legal liability arising from minor calculation errors. 

Exemptions and exclusions

The ERA makes provision for three exemptions or exclusions in relation to the right to guaranteed hours for agency workers. Two relate to instances in which the duty to make guaranteed hours would not apply: a power to exclude agency workers of a specified description as set out in regulations from the right to a guaranteed hours offer and a power to specify circumstances in which the duty would not apply to hirers. 

Reasonable notice of shifts

Agencies' and hirers' joint liability

Agency workers have the right to reasonable notice of shifts, which both agencies and hirers are obliged to provide. Where a tribunal finds that unreasonable notice was given, a tribunal can apportion liability between the agency and hirer based on the extent to which each party was responsible for the failure to provide reasonable notice. 

Presumed reasonable notice

The government recognises that agency work is inherently flexible and can often be used to address last-minute changes in demand. 

The consultation asks what timeframe should be presumed reasonable, with options ranging from less than five days up to four weeks. This is a broader range than for directly engaged workers, reflecting the more flexible nature of agency work.

Hirer exemptions 

The government recognises that it may not be appropriate for certain types of hirers to be held liable for breaches of the reasonable notice duty. For instance, this could be where the hirer is a vulnerable individual who receives or procures care from agencies, in which case the agency might be in a better position to hold liability for any breaches. The ERA enables ministers to specify in regulations which types of hirers that will not be liable, leaving the agency solely liable for any failure to provide reasonable notice. 

Short-notice payments

Agency's obligation 

Eligible agency workers will also be entitled to payment for shifts cancelled, curtailed or moved at short notice. Agencies will have the obligation to make these payments, and the government aims to ensure there are no delays in payment. As with directly engaged workers, no short notice payment is required where the cancellation, movement or curtailment is initiated by the agency worker. 

Recouping payments 

Agencies will be able to recoup short-notice cancellation, curtailment or movement payments from hirers. The ERA provides that agencies that entered into agreements with hirers before two months after Royal Assent (where these agreements have not been modified since) are able to recoup the costs of the short-notice payment from the hirer to the extent the hirer is responsible for the short notice. After this point, agencies can expect to make these payments and may seek to include recoupment provision in  their arrangements with hirers. 

Short-notice periods

The consultation asks respondents to specify what timeframe should constitute "short notice" and "very short notice" for agency workers (options ranging from less than one day to seven days), with a potentially higher payment attaching to cancellations at "very short notice."

Payment calculation

The government intends that the short-notice payment should be calculated in the same way for agency workers as for directly engaged workers. The payment options being consulted on are either a percentage of what the worker would have earned from the shift, or a percentage of what they would have earned at the National Living/Minimum Wage rate, with the percentages ranging from 10% to 80%.

Protection gap

The government acknowledges that accepting a guaranteed hours offer that takes a worker above the hours threshold for guaranteed hours removes them from the scope of short-notice cancellation protections.

A worker who accepts a guaranteed hours offer and moves to a contract guaranteeing hours above the threshold loses the protection against short-notice cancellation of the additional hours they may be asked to work beyond their contract. Practically this could mean an agency worker who previously had short-notice payment protection for all hours worked may end up with less protection after accepting a guaranteed hours offer than before.

The Conduct Regulations 

The government is considering whether to add to the requirements under the Conduct Regulations 2003 to require agencies to give hirers relevant information to support them to comply with the zero-hour duties. This could include confirmation of whether or not an agency worker is in scope of the zero hours measures or the worker's contact details so the hirer can make a guaranteed hours offer to them.

Two options are presented: to amend the Conduct Regulations to require information-sharing between relevant entities, usually from agencies to hirers, or leave them unamended on the basis that hirers will already be obliged under the ERA to comply and will make their own arrangements with agencies. 

FWA enforcement 

The government believes the most appropriate zero-hours measure that the Fair Work Agency (FWA) could enforce is the right to payment for shifts cancelled, moved or curtailed at short notice, because not paying a short-notice payment is a discrete, measurable event with a clear financial impact. The other zero-hours measures – the right to guaranteed hours and the right to reasonable notice of shifts – are likely to require more complex assessments and would therefore be better considered through the employment tribunal system.

The government proposes setting the penalty for non-compliance with short notice payments at 50% of the arrears owed to the worker, with a minimum penalty of £100 per case and a maximum of £5,000 per worker. If the employer pays the worker the amount owed and at least 50% of the penalty within 14 days of the date the notice of underpayment is issued, the penalty would be treated as fully paid. This approach takes into account that the right to short-notice payment is a new right and allows time for employers to familiarise themselves with implementing the new obligations.

Unpaid sums owed to a worker or agency worker may be recovered for a period of up to six years from when the payment became due. This is a long tail of potential liability. An agency making payments to workers for cancellations today is potentially exposed to FWA recovery action on those payments until 2032 and beyond. 

Key proposals for agency workers

The following summarises the most significant practical implications for businesses:

Osborne Clarke comment

The proposals in the consultation do not appear to have moved on from those discussed at government level between various industry representatives and business interest groups last year. One representative, Neil Carberry, chief executive of the Recruitment and Employment Confederation, commented that "despite commitments given last autumn, there has been little evidence of government taking business concerns on the cost of employment seriously enough". There is a real concern that the right to guaranteed hours will provide protection way beyond the "exploitative" arrangements it was originally intended to address and, in doing so, will severely restrict work opportunities for young people and those who benefit from the flexibility that agency work offers.

That said, the consultation indicates the government's intention to push ahead with the new rights as planned, in 2027. For hirers, agencies and others involved in agency worker supply chains, the priority will be to assess how the new rights will affect contingent workforce programmes and whether any of the proposed exclusions offer a viable alternative to a hirer making guaranteed hours offers and directly engaging agency workers.  

The government confirms that the final regulations may allow contractually guaranteed agency hours which meet or exceed the minimum hours threshold to be excluded from the guaranteed hours obligations. This would remove the need for a hirer to offer guaranteed hours and keep agency workers off hirer's headcount. However, it would require the hirer to commit to and pay for contractually guaranteed hours with the agency to enable the agency (or other intermediary) to contractually guarantee hours to the agency worker. 

Other intermediaries in the supply chain, such as umbrella companies or employers of record, could also play a part.  But this will only work if there is adequate funding of the supply chain from the hirer. Anything less would further increase the pressure on employing intermediaries to fund guaranteed hours obligations by making savings elsewhere, such as via unlawful tax avoidance schemes and other contrived arrangements. 

The joint and several liability risk under the new umbrella tax legislation should reduce scope for savings through tax avoidance. Nevertheless, some unscrupulous "umbrellas" may begin to offer arrangements that claim to "self-fund" guaranteed hours commitments. Independent legal advice from an SRA-regulated lawyer is advisable for anyone considering such arrangements. As HMRC regularly warns, "if it looks too good to be true, it probably is."

Qualifying conditions for agency workers will vary from those for directly engaged workers and so hirers need to be aware of this and keep track of the regulations take shape.

Hirers will need to work with their managed service providers and agencies to identify which contingent workers are agency workers, as opposed to independent contractors, and determining appropriate processes or commercial arrangements to deal with the new guaranteed hours rights. This will involve considering different engagement options, the relative costs and negotiating new contracts. 

HR and procurement teams are likely to focus on ensuring that any communications and policies related to the new agency worker rights are directed only to agency worker supplies, excluding independent self-employed contractors from these processes. Buyers and investors will be looking for evidence that a target company has analysed the likely impact of the new agency worker rights and what compliance measures have been put in place.  

Negotiating with hirers on recoupment of short notice payments, as well as agreeing processes for providing reasonable notice of shifts and shift cancellations, will be a priority for many agencies. 

Some may seek to work around the new agency worker rights and other rights under the ERA, such as the reduction of the unfair dismissal qualifying period to six months, by encouraging or requiring individuals in certain roles to engage as self-employed contractors or freelancers. This may be an option for some roles that were moved to umbrella company Pay As You Earn as a matter of caution following the off-payroll IR35 tax reforms, but anyone contemplating self-employment as a means to avoid new agency worker rights would need to confirm that the role is one that can genuinely be performed by a self-employed, independent service provider. 

This is the second consultation under the ERA that relates directly to agency workers and follows the earlier Make Work Pay framework review that closed on 1 May. Both consultations will affect agencies and hirers: thorough impact assessments and careful weighing of options will be essential to the future viability of many contingent workforce programmes.