REC urges a sensible approach to ill-judged and inflexible guaranteed hours policy, to aid job market recovery

Guaranteed hours risks backfiring without an exemption for agency workers, warns the Recruitment and Employment Confederation (REC). REC says the policy could deter hiring and tempt some employers and workers toward false self-employment.

The government proposal would oblige companies to offer contracts that reflect typical working patterns for staff on zero-hours or flexible arrangements over a 12-week period.

The REC is just one of many business groups that say the changes could raise labour costs and reduce flexibility in hiring and working at a fragile stage in the economic recovery – and just as the government is desperate to increase the number of young people in work.

The REC argues that agency work provides a regulated alternative to gig economy models, but warns the reforms could accelerate a decline in flexible hiring. That, it says, may tempt employers and workers toward choosing less regulated arrangements, such as forms of self-employment, with potential implications for worker protections and competition. The REC says an exemption for recruitment firms would show confidence in recruitment agencies’ ability to continue to manage the relationship between its candidates and end clients without the need for such a draconian policy in the first place.

Neil Carberry, REC Chief Executive, said:

“We need reforms that protect the benefits of flexible work without breaking what already works in giving us a dynamic temporary labour market that benefits thousands of workers and businesses every day. Get this wrong and you risk undermining good jobs and compliant firms for little obvious gain for workers or employers.”

In its conciliatory response to the government’s latest Make Work Pay consultation, the REC calls on ministers to allow employers to assess working patterns over a six-to-12-month period, saying a longer timeframe would better reflect seasonal demand and project cycles. Without at least a six-month reference period, the REC says the policy could raise employment costs and legal risks in labour-intensive sectors such as hospitality, retail and consumer goods, which already face tight margins, anxiety over energy costs and uneven demand through the year.

Neil Carberry said:

“The planned right to guaranteed hours after just 12 weeks is a blow to a fledgling job market recovery that has already been struggling with the effects of the Gulf crisis. Across sectors, there is deep concern these will push firms to hire less or rely on even more casual forms of employment – potentially benefiting less scrupulous firms over those who try to do things the right way. Most employers are likely to cut hiring, restrict hours and step back from flexible roles, limiting access to work. Entry-level roles, often the first step for young people, would be among the hardest hit. Flexible staffing is essential to productivity, cost control and the basic viability of businesses. For many workers, including students, carers and those with variable availability, flexibility is what enables participation in the labour market in the first place.”

This is a UK-wide policy proposal from the government and will begin in 2027.

In its submission, the REC has called for ‘fundamental reform’ of the ‘Key Information Document’ (KID). Since 2020, hundreds of thousands of workers looking for temporary work every year are given a KID by a recruitment agency. The KID sets out information about the worker’s relationship with the employment business and any third parties, including who will pay the salary and what the rate of pay is. But REC believes reform of KIDs is long overdue to help employees and HMRC better understand the complicated payslips that can sometimes arise when an umbrella company is involved in the supply chain.

Neil Carberry said:

“Key Information Documents are falling short in practice, with many workers struggling to understand them and facing inconsistencies with other employment documents. We need a simpler, worker-focused approach that genuinely delivers pay transparency. This makes sure workers can clearly see how headline rates translate into take-home pay. Where umbrella companies employ workers, they must take responsibility for setting out pay and deductions in a clear and consistent way.

“On umbrella companies, REC supports the introduction of direct, targeted regulation, with accountability clearly placed on those who employ and pay workers. Any reform should tackle non-compliance at source rather than placing additional burdens on compliant agencies, supported by effective enforcement through a properly resourced Fair Work Agency.”

Notes to editors

1.     REC Consultation Response: Make Work Pay: Modernising the Agency Work Regulatory Framework is on the REC website.

This risk from guaranteed hours proposal is not theoretical. It is already beginning to emerge. REC data shows job postings in hospitality fell by 5% between February and March 2026. At a time of elevated youth unemployment, poorly designed policy risks making access to work harder, not easier, cutting directly against wider employment objectives. And a recent REC survey of employers found that 30% expect day one rights to increase costs, with 27% anticipating a major increase. In response, 12% are considering reducing headcount, while 9% are looking to reduce their use of agency staff.

2.     The Employment Rights Act will include:

• a right to guaranteed hours, where the number of hours offered reflects the hours worked by the worker during a reference period; this initial reference period will be specified in regulations and is anticipated to be 12 weeks.
• a right to reasonable notice of shifts and a right to payment for shifts cancelled or curtailed at short notice.

3.     REC makes a number of recommendations in its submission to the government to align guaranteed hours with labour market reality to protect flexibility:

• Reconsider the current model to avoid undermining labour market flexibility.  
• Use a reference period of at least six months, with 12 months preferred.  
• Set a low hours threshold (e.g. eight hours) to target protections effectively. 
• Avoid unintended consequences such as reduced hiring, fewer hours and a shift to less secure work.  
• Re-engage with industry to ensure a workable and proportionate framework. 

And the REC also suggests the government must tackle poor umbrella practice without penalising compliant agency businesses. REC’s key asks:

• Only genuinely self-directed companies should be permitted to opt out of the Conduct Regulations; umbrella companies must not be eligible for this exemption.
• Fix pay transparency: reform the Key Information Document (KID).
• Ensure pay transparency by finding a route to accurately advertising the gross rate of pay.
• Mandate disclosure of kickbacks, rebates, fees and incentives.
• Allow legitimate cost recovery while protecting workers from unfair deductions.
• Preserve Preferred Supplier Lists as a key compliance safeguard.

4.     Recruitment and Employment Confederation’s latest Recruitment Industry Status Report (RISR) estimates that on any given day in 2024, 872,000 temporary or contract workers were on assignment. The report found that the Recruitment sector contributes more than £40 billion a year to the UK economy.