In 2024, the Labour Government introduced the Employment Rights Bill, which represents a significant overhaul to UK employment legislation. The stated aim of the 28 reforms is to enhance worker protections and recruitment agency compliance, as well as boosting productivity. Reforms are expected to take effect no earlier than 2026, due to the time required for consultation and implementation.

Without an exact date for when the new changes will come into effect, it’s important to ensure your recruitment agency is prepared. We’ve highlighted the key reforms to expect, to help your recruitment agency navigate the Employment Rights Bill and stay compliant.

Employment law changes for recruitment agencies

The Bill is lengthy and continues to be amended at the time of writing. Here are some of the headlines for recruitment agencies to be aware of right now:

Unfair dismissal will become a “day one” right

An estimated nine million workers will gain protection from unfair dismissal as soon as they start a new role. It’s considered unfair dismissal when there is not a clear justification for dismissing an employee and/or the employer doesn’t follow a fair procedure. At present, employees are only entitled to claim unfair dismissal after working for an employer for at least two years.

Fire and rehire restrictions

The changes here are aimed at preventing workers being dismissed for not agreeing to changes to their contract, and to stop employers dismissing and rehiring employees in order to change their terms with a new contract.

Ban on zero-hours contracts

The Bill bans zero-hours contracts, labelling them “exploitative”. Once the reforms go through, all employees will have the right to a contract that reflects the number of hours they regularly work. Reportedly, agency workers will also be included in the ban – they will have to be offered a minimum number of hours each week.

More flexibility, supporting “family friendly rights”

The Bill strengthens workers’ existing right to request flexible working. Employers will have to have reasonable grounds for denying a request, such as “the burden of additional costs” or “detrimental impact on performance”, but the employer must clearly explain why they thought it was reasonable to refuse the request.

Creation of the Fair Work Agency (FWA)

The Bill will create the basis for the “Fair Work Agency”. The FWA will enforce a wide range of employment rights and combine current enforcements, such as Statutory Sick Pay and the National Minimum Wage. This will provide employers a centralised place to go for assistance and advice. The Agency will also be given the power to investigate, inspect and act against businesses that are not following the law.

Umbrella Companies and the Fair Work Agency

There will be new regulation to bring umbrella companies within the scope of the Employment Agencies Act 1973 and under the jurisdiction of the Fair Work Agency. The act currently regulates the conduct of employment agencies that recruit temporary workers. There will be new regulation to bring umbrella companies within the scope of the Employment Agencies Act 1973 and under the jurisdiction of the Fair Work Agency. The act currently regulates the conduct of employment agencies that recruit temporary workers, but as there is no legal definition of an umbrella company, HMRC have highlighted the potential risk of tax evasion, misleading pay deductions, incorrect holiday pay, and other issues.

At present, it’s thought that it won’t affect other monitoring bodies that regulate umbrella companies; the FWA will simply be an additional regulatory body to ensure compliance.

Challenges for recruitment agencies

As a payroll provider with many years of experience working alongside recruitment agencies, we know the new standards ushered in by the Bill will present some difficulties. The Bill is very employee/worker friendly and is designed to protect the interests of workers. If you operate recruitment agency, there are conversations you should be having around this and preparations you should be making right now. Although the Bill has been quietly progressing through Parliament, we shouldn’t underestimate how its changes will impact businesses.

There is going to be a huge increase in administrative duties for employers to ensure that procedures are fair and up to date. Your recruitment agency will be responsible for giving workers notice of shift cancellations; there must be procedures in place to ensure that shift plans, changes, and cancellations are communicated well in advance. The ban of zero hours contracts could see penalties for businesses who cancel shifts at short notice; you’ll want to make sure you have a good system in place so you’re not paying out unnecessarily.

There will be a new obligation for employers to keep records of all workers’ Statutory Sick Pay (SSP) for six years, or face potential penalties and fines. Again, planning and preparing systems to effectively track holiday pay and sick pay are essential.

You may need to revise your contracts, and update policies to ensure all terms of employment are clear, and provide information and training where necessary about the new protections. It’s important to ensure that communication is clear, and if you’re working with a payroll provider, that all legal obligations are met and well-communicated.

We’re here to help

What do you think to the Employment Rights Bill? Are you worried about your recruitment agency and how it may affect your business strategy? Let us know your thoughts and get in touch with our friendly team on 0114 478 9351.

We’re here to help you successfully navigate the evolving regulatory landscape and create a compliant and positive workplace for recruitment agencies and contractors alike.

Disclaimer:

This blog is intended for informational purposes only and does not constitute legal advice. The information presented is based on research conducted but it is essential to seek professional advice for specific guidance.