Prepare Your Agency For The Employment Rights Bill

The Employment Rights Bill, due to take effect in April, marks the most significant reform of UK employment law in a generation. For workers, it’s a step forward: stronger protections, clearer rights, and fairer treatment from day one. For recruitment agencies, however, the legislation represents more responsibility, more scrutiny, and more risk, especially as it coincides with the introduction of new umbrella regulations.

Agencies that prepare now will remain compliant, competitive, and profitable. Those that don’t may face rising costs, enforcement action, and reputational damage. Below, we outline what’s changing, how it affects recruitment agencies specifically, and what actions you should take.

What’s Changing?

1. Guaranteed Hours & Predictable Work

Agency workers gain new rights to predictable hours, reasonable notice of shifts, and compensation for last-minute cancellations. This reduces the flexibility many end hirers have become used to. You should:

• Review zero-hours and variable-hours contracts
• Upgrade scheduling systems to ensure advance notice
• Review contracts to reflect guaranteed hours and cancellation provisions
• Align internal processes with more structured workforce planning

2. Day One Unfair Dismissal – Immediate Tribunal Risk

The qualifying period for unfair dismissal is being removed. Early terminations are now legally risky, even in the first weeks of engagement, and ‘it wasn’t working out’ is no longer a defence. You should:

• Introduce formal probation frameworks
• Document performance and conduct from day one
• Train consultants to handle dismissals lawfully and consistently

3. Removal of ‘Fire & Rehire’ Practices

Employers can no longer dismiss workers simply for refusing new contractual terms, unless no reasonable alternative exists. Contract changes will require consultation, negotiation, and justification. Blanket contract updates carry risk. You should:

• Review contract variation processes – stop unilateral contract changes
• Seek legal input before implementing changes to pay, hours or key terms
• Prioritise consultation and record-keeping

4. Direct Regulation for Umbrella Companies

Agencies can no longer distance themselves from umbrella non-compliance. Due diligence on your umbrella partners is crucial, liability for non-compliance increasingly flows up the supply chain. You should:

• Work only with audited, transparent umbrella providers such as our sister company, Workwell Contractor Solutions.
• Request proof of compliance with tax, holiday pay, and RTI as well as financial integrity. Visit our Information Hub to find out how to do this properly.
• Keep written proof of due diligence

5. Holiday Pay Entitlement

Holiday pay is a major hidden liability for agencies as the new rules are likely to lead to stronger enforcement and retrospective claims. Accrual errors, rolled-up pay mistakes, or opaque reporting, are high risk. who rely on working with compliant umbrellas to administer holiday pay correctly. This underpins the importance of working with a small number of proven, trusted umbrellas. You should:

• Work with only compliant umbrellas
• Standardise holiday pay calculations and practices and ensure workers can clearly see accruals and usage
• Fix historic issues

6. Day-One Employment Rights

Workers will have immediate access to paternity leave, enhanced flexible working rights, and wider redundancy consultation obligations. For agencies this means administrative and compliance complexity increases. You should:

• Audit employment terms and policies
• Implement systems to track leave and flexible working requests
• Communicate rights clearly to workers

Enforcement

A newly created Fair Work Agency will consolidate state enforcement powers into a single body. Its remit includes National Minimum Wage/holiday pay investigations and direct tribunal action against non-compliant businesses. Historic claims can go back six years and there can be penalties of up to 200% and fines reaching £200,000. It’s now more important than ever to audit holiday pay calculations, ensure transparent reporting and be ready for inspection with accurate, real-time data.

Prepare Your Agency – Weigh Up In-house Vs Outsourced Payroll

The regulations may mean it’s time to consider whether in-house payroll is a sustainable choice, particularly given the fact that Phase 2 of the Employment Rights Bill (2027) is set to include further dismissal protections, statutory bereavement leave, and expanded harassment obligations.

Whilst in-house payroll gives you complete control, the downside is that your agency takes on all the risk. Outsourcing can reduce cost, complexity, and risk.

Find Out More

Don’t leave your preparations to the last minute. Use the Calendly option below to set up a no-obligation discussion with a member of our expert team who will help you understand the cost-benefit of outsourcing your payroll to Workwell.