Get Agency Work Regulation Right: Protect Flexibility, Support Growth

The Recruitment and Employment Confederation (REC) has today submitted its response to the Government’s consultation on Modernising the Agency Work Regulatory Framework.

This comes at a pivotal moment for the UK labour market. Following the Employment Rights Act 2025 becoming law, businesses and workers are already navigating significant change. Getting the framework for agency work right is therefore critical.

Our message to Government is clear: protect what works, fix what does not, and avoid unnecessary complexity that could undermine flexibility, participation and growth.

The response calls for clearer, worker-focused pay information, greater transparency across supply chains and an end to hidden costs. It makes clear that accountability must sit with those who employ and pay workers, rather than being diffused across multiple parties. It also highlights the need for a practical approach to guaranteed hours, clearer allocation of responsibilities, and a streamlined regulatory framework that reflects how the modern labour market operates.

A sector that powers growth

A well-regulated recruitment sector is central to UK prosperity. In 2025, it contributed £40.6 billion to the economy, accounting for 1.6% of Gross Value Added.

Agency work is not just short-term cover. It enables businesses to access specialist skills, respond to uncertainty and manage fluctuating demand, while offering workers flexible opportunities that suit different needs and lifestyles.

At its best, agency work is both pro-worker and pro-business, helping firms stay productive while giving individuals access to consistent opportunities across assignments. Poor regulation, however, risks pushing activity into less transparent parts of the market, weakening protections rather than strengthening them.

A critical moment for reform

Alongside the wider implementation of the Employment Rights Act, this consultation presents a major opportunity to modernise the framework.

Done well, reform can support growth and improve outcomes for workers and businesses. Done poorly, it risks increasing costs and undermining flexibility. The system must support compliant firms, not penalise them. Too often, additional rules have added burdens to responsible businesses while encouraging more opaque models. Reform must correct this imbalance.

The risk of getting Guaranteed Hours wrong

One of the most significant concerns is the proposed approach to guaranteed hours.

REC research shows 30% of businesses expect day one rights to increase costs, with 27% anticipating a major rise. Some are already considering reducing headcount or scaling back their use of agency workers.

Poorly designed proposals risk becoming a tipping point, undermining temporary and seasonal work, reducing opportunities for those who choose flexibility and weakening labour market participation. This is not about resisting reform, but ensuring it works in practice. A one-size-fits-all model will not reflect the realities of agency work and could lead to fewer jobs, not more rights.

Fixing accountability and enforcement

Clear accountability is essential. The current framework did not anticipate modern supply chains or the rise of umbrella companies, meaning responsibility can fall on agencies even when they are not at fault.

This must change. Responsibility for pay, compliance and transparency should rest with the organisation that employs and pays the worker. Targeted regulation of umbrella companies is key to achieving this.

Effective enforcement will also matter. The new Fair Work Agency has the potential to create a more coherent system, but it must be properly resourced and build on existing expertise. Enforcement should focus on bad actors, not compliant firms.

A simpler, modern framework

There is a clear need to simplify the system. Improving pay transparency, reducing duplication and clarifying responsibilities across supply chains will create a framework that is easier to understand and enforce.

Getting this right

Agency work is a cornerstone of the UK economy. This consultation is a critical opportunity to ensure regulation reflects modern labour market realities.

Targeted, proportionate reform can protect workers, support businesses and strengthen growth. The priority is clear: protect flexibility, ensure fairness and place accountability where it belongs.

Get that right, and the sector will continue to deliver for workers, businesses and the wider economy.