Near £8 million a day hit to business on employment costs from government curbs on work freedoms - REC

Responding to a package of evidence published by the government today relating to reforms of zero hours and similar contracts, Neil Carberry, Chief Executive of the Recruitment and Employment Confederation (REC), said:

“We believe this assessment by the government of its reforms around flexible work undercounts the compliance and process costs businesses will face. Even so, a potential £2.9bn addition to the rapidly rising cost of employment will only make our youth unemployment issues worse. Government’s data suggests it will cost employers up to £8 million every day, or roughly the annual wage bill for 137,000 full-time workers between 18 and 20 years old on national minimum wage.

“It is time to think again. A better approach is possible – one that supports growth and employment opportunities. The gold-plated proposals in the Employment Rights Act lack the practicality of other options – like that suggested by the Low Pay Commission before the pandemic. A return to pragmatism – with employers in the room, not frozen out – is now needed. The ultimate losers in getting this wrong will not be businesses – who have other options - but workers themselves. At the very least, genuinely temporary workers must be excluded, to avoid firms stopping the creation of temporary work.”

Notes to editor

1.     Make Work Pay: ending one-sided flexibility – reforms of zero hours and similar contracts, August 2026

2.     Why the guaranteed hours proposal is flawed and must exclude agencies:

Healthcare staffing case study

A healthcare workforce provider that is a member of REC explained that NHS trusts and healthcare providers control workforce planning, budgets, shift creation, patient demand and shift cancellations, while agencies simply facilitate access to qualified workers when staffing gaps arise.

For example, a hospital may request agency nurses with only a few hours' notice to cover unexpected sickness absence, emergency leave, a surge in patient admissions, or increased patient acuity. Equally, shifts can be cancelled at short notice when staffing levels improve, patient demand falls, or operational priorities change. In these situations, the agency has no control over either the original request or the cancellation.

Requiring agencies to offer guaranteed hours or compensate workers for cancelled shifts could create liabilities for decisions made entirely by the hirer. This could expose agencies to significant financial and administrative burdens, particularly if they are required to compensate workers up front and subsequently recover costs from NHS trusts.

The member also warned that the proposals could reduce the flexibility that attracts many healthcare professionals to agency work and discourage healthcare providers from using temporary staff due to increased legal and financial risks. Given that agency staffing is often relied upon to maintain safe staffing levels during periods of unpredictable demand, the REC member cautioned that any reduction in workforce flexibility could affect NHS workforce resilience and, ultimately, patient care.

Retail sector case study

An REC member highlighted a large-scale retail staffing arrangement where significant numbers of temporary workers could be cancelled at short notice because of factors outside the control of either the employment business or the worker, including sudden reductions in customer demand, supply chain disruption or operational changes. Under a highly prescriptive cancellation regime, employment businesses could face substantial financial liabilities before recovering costs from clients, creating considerable cash-flow pressures and increasing the overall cost of providing temporary labour.

Construction sector case study

The construction sector demonstrates why a longer reference period is essential.

Major construction projects often experience significant fluctuations in labour demand throughout their lifecycle. In addition, most projects close during the Christmas and New Year shutdown period, which can last between 10 days and two weeks. During this period workers are typically encouraged to use accrued annual leave and labour providers generate little or no revenue. A 52-week reference period would provide a much more representative assessment of working patterns by capturing seasonal shutdowns, project mobilisation phases, peak delivery periods and demobilisation activity. It would also align with the existing 52-week holiday pay reference period, providing consistency and reducing complexity for businesses and workers alike.