The package of 28 reforms, designed to upend the world of work in the UK and the accompanying Next Steps document, includes provisions for consultations on a variety of topics within the reforms, such as on the specific needs of agency workers, which recruitment industry leaders have welcomed. 

The employment team at law firm Osborne Clarke offered this reaction: “We expect to begin consulting on these reforms in 2025, seeking significant input from all stakeholders, and anticipate this meaning that the majority of reforms will take effect no earlier than 2026. Reforms of unfair dismissal will take effect no sooner than autumn 2026.”

A key sticking point for the recruitment and greater ‘world of work’ community is a fear of over-regulating the flexible work market to the extent that plans to get rid of zero-hours contracts could rob those who choose to work flexibly of choice and impede professional contractors in pursuing their careers. 

There are also concerns that costs associated with Day One employment rights may have a chilling effect on hiring, at a time when employers have already been delaying hires to the detriment of the recruitment sector (see today’s results from Hays).

Here are a number of reactions from UK recruitment and contracting specialists.

Neil Carberry, CEO, Recruitment & Employment Confederation: “Businesses can finally see the path ahead for this government on employment rights. There is good news in the timescale for delivery, and in the commitment to consultation, as much of the most important detail is yet to be worked out. This should calm business fears for now – but it does not take away from the need to ensure that we strike the ‘pro-business, pro-worker’ balance that the government wants. 

“Nothing is more pro-worker than a labour market where businesses have the confidence to invest and create jobs. A strong floor of well-enforced rights is essential in work, but so is job creation. We will judge this government on how it delivers both of these goals, with workforce and productivity at the heart of its industrial strategy.”

On zero-hours contracts, Carberry said: “Far too much is made of zero-hour contracts as being imposed on workers when there is more than enough evidence that people want to work in different ways. The measures in the bill are targeted, and we welcome the rejection of a ban on these contracts. But even the suggested approach could cause significant challenges if applied without understanding of workers’ varied needs. Carving out space to consult on the specific needs of agency workers is good news – reducing opportunities for people who want flexible work would be a grave mistake.”

On other provisions of the bill, he added: “[With regard to unfair dismissal] the nine months’ probation period that follows a job start should allow for an employer to see if things will work out. We would have preferred a longer period – to protect smaller firms. But the real test is the process firms have to follow to dismiss. It is good that it is to be simplified – but will it be simple enough for even the smallest firms to follow? If it is not, firms may be less likely to take a chance on someone.”

He went on to say: “Day One sick pay is a concern for flexible work, as workers will not need to have been on site for any period of time before calling in sick. For agencies who have to meet that cost, building client understanding that this is part of their fee is necessary. Agencies say they will need government support to educate clients on the need to accept rises in NMW and areas like sick pay.”

Tania Bowers, global public policy director at the Association of Professional Staffing Companies (APSCo), said: “Of course, the devil will be in the detail that we expect to be published over the period between the 2026 roll-out of the bill. As the Starmer Administration looks to improve the fortunes of the UK economy, we would advise that they pull on the knowledge and experience of those embedded in the staffing sector to ensure the Bill delivers value for all. 

“We are encouraged by the Next Steps document outlining reforms to be implemented in the future following consultations with relevant industry representatives. This suggests that the government is taking an informed and robust approach to what will be a significant overhaul of employment legislation.”

IPSE, the trade body for self-employed workers, said: “The proposed ‘Fair Work Agency’ – which would bring together three existing labour rights enforcement agencies into one body – marks the revival of the previous Conservative government’s plans for a ‘Single Enforcement Body’. Contractors – many of whom now find themselves working through an umbrella company as a result of the IR35 reforms – had hoped this new body would also take on the task of regulating the umbrella company market.

“Despite government running a series of consultations on umbrella companies in the run-up to the election, we are yet to see the new Labour government share much detail about how – or if – it plans to continue this work. However, we do know that the new Fair Work Agency will enforce rules around holiday pay, an area that IPSE has previously highlighted as being one of the priorities for regulation.”

Legal firm Osborne Clarke warned: “The additional Day One rights provided for by the bill will be additional costs for employers which could be substantial, particularly for those employers engaging lower paid workers. As employers seek to manage these changes, they will need to reassess staffing levels to reconcile the wage for their businesses and adapt their existing policies and procedures to reflect these new rights – for example, the removal of the statutory sick pay waiting period may require careful management of short-term sickness absence through policies, line-management and return to work interviews to address any issues. In the short-term these changes may result in hiring freezes and workforce reorganisations before the measures come into force.

“We may also see more cautious recruitment practices in light of the introduction of day one unfair dismissal rights (subject to a statutory probationary period); there is a risk that this could inadvertently drive practices of those who are an obvious fit for their organisation which could work to the detriment of inclusivity impacting on those with protected characteristics.”

Adding a note of caution, Osborne Clarke noted: “Employers will also need to consider the potential repercussions where there is increased movement between competing employers within the same sectors, including how sensitive business information will be protected. To address the risk of additional Day One rights increasing job mobility, employers will need to consider what loyalty incentives can be provided to control attrition, for example, through share incentive arrangements, retention bonuses etc.”

APSCo’s Bowers went on to say that the organisation “will be involved in the consultations in the coming months, but from our initial review of the proposals there are a number of areas we are keen to ensure are addressed”. She underscored concerns about the introduction of Day One rights. “Risk-averse employers may look at methods of pushing the risks onto others in the supply chain, such as staffing companies, which places these businesses in a difficult position,” she warned.

“We were expecting the right to guaranteed hours and a cancellation fee on zero hours in the bill and we are pleased to note that there is going to be consultation as to how agency workers are incorporated into this legislation. It is clear that the government has recognised the complexity of this, but the intention remains to fit agency workers into these zero-hours changes. This does create some concern, particularly around who should be responsible for this, employers or recruiters,” she said.

“It’s important that over-legislation doesn’t disadvantaging those who choose maximum flexibility in their working patterns or those that don’t want or need protection such as highly skilled contractors.

“The recruitment and hiring outsourcing sectors are built and thrive on a flexible labour market where individuals have the confidence and ability to steer their own career paths. We support the bill’s intention to support people into work and drive growth with a ‘pro-business, pro-worker’ approach but the unique diversity of the UK labour market with the value delivered by professional contracting must be retained and encouraged. The intention to move to a single status of worker, for example, is a highly complex challenge to address,” Bowers said.
    
• Comment below on this story. Or let us know what you think by emailing us at [email protected] or tweet us to tell us your thoughts or share this story with a friend.