Guaranteed hours and 'day one' employment rights for UK agency workers deferred to 2027

The government appears to have realised that its plans relating to guaranteed hours and "day one" employment rights, among other things, are likely to have a very complicated impact on the UK labour market – including the use of agency workers and contractors.

A new timetable was published on 1 July for enacting the provisions of the Employment Rights Bill, a central part of its manifesto pledge to "make work pay" and raise standards for businesses to "do the right thing" for employees. Some measures will come into effect shortly after the bill receives Royal Assent, while others will be introduced gradually through 2025, 2026 and into 2027.

2027 deferment

Significantly, the implementation of guaranteed hours rights for zero-hours workers – which can be interpreted to include guaranteed hours rights for agency workers although this is not explicitly stated in the announcement – has been deferred until 2027, as has the right to protection from unfair dismissal from day one of employment.

This is commonly referred to as "day one" rights and may apply to any agency worker who accrues the right to guaranteed hours. Changes to umbrella company regulation, which is distinct from umbrella company tax legislation, have also been deferred until 2027.

April 2026 timeframe

However, the Fair Work Agency, endowed with new powers to investigate and enforce employment rights such as unpaid wages, holiday pay, illegal deductions and modern slavery, will be established in April 2026.

The umbrella tax legislation is not part of the Employment Rights Bill and is set to come into effect in April 2026. There is no delay to this legislation and a draft legislation relating to this is expected soon.

Autumn consultations

The publication of the consultation and implementation timetable relating to the Employment Rights Bill is a significant announcement and will be welcomed by many staffing businesses, platforms, and the users of their services. It provides all stakeholders ample time to prepare for the upcoming changes, including time to respond meaningfully to the government consultations to be issued in the autumn of 2025.

The consultations will specifically be on the regulation of umbrella companies; that is, the inclusion of umbrella companies within the Employment Agencies Act and the Conduct of Employment Agencies and Employment Businesses Regulations regime.

Zero-hours focus

They will also focus on ending the exploitative use of zero-hours contracts, which it is believed will include consultation on the right to guaranteed hours for agency workers. This line of consultation is likely to include whether or not agency workers will have day-one employment rights when offered guaranteed hours.

The government will seek feedback on how the proposed changes will affect stakeholders' existing systems and processes and the steps they will need to take as a result.

Osborne Clarke comment

To ensure effective implementation, we urge all suppliers and users of contingent resources to use the intervening period to examine how and for what purpose contingent resources are deployed by or engaged within their businesses and to use this knowledge, data and understanding to inform meaningful responses. That will help with the detail of the legislation.

These measures are part of a key manifesto commitment. We believe the government will press forward broadly on the basis already announced relating to the rights of agency workers to guaranteed hours. We also believe there is a strong likelihood that once they have those hours, they will have employment rights.

Hirers and suppliers will likely want to start looking at and talking to each other about the options they may have to reduce the impact of the new rights on their contingent workforce arrangements and cost of supply. Minimising this impact will require months of planning.

In the meantime, this delay gives all in the supply chain more time to get their heads around and prepare for the expected major impact of the umbrella tax legislation that is due to come into force in April 2026.

It will also gives the supply chain time to deal with the impact of the recent increase in HMRC tax enforcement action against types of umbrella companies and their users: for many suppliers dealing with that development and the Employment Rights Bill simultaneously might have been too big a mouthful to chew.