The Labour government unveiled the new Employment Rights Bill (ERB) on Thursday. The 28 changes outlined in this reform package is generating much discussion across the recruitment industry, with many recruitment agencies expressing uncertainty about its impact. As the sector grapples with the bill’s various provisions, there is a consensus forming that without the specifics it remains unclear how these regulations will impact permanent and temporary recruitment agencies.

Key Proposals in the Employment Rights Bill

Recruitment agencies, Employment confederations, and employment law specialists are adopting a cautious tone. The proposed changes in the ERB include reforms in:

• Universal sick pay entitlement from the first day of illness
• Guaranteed working hours for those on zero-hour contracts, if desired
• Repeal of anti-trade union laws
• Immediate qualification for protection against unfair dismissal

Impact on temporary recruitment agencies and agency workers

A significant point of interest for temporary recruitment agencies is the provision made specifically for agency workers under Section 27BV. It remains undecided how the employment rights bills proposed reforms will apply to agency workers. The provision is presumably, purposefully open-ended to allow time for the Secretary of State to consult with recruitment agencies and agency workers. Consultations begin early next year, with the reforms likely to take effect in 2026.

Concerns about the impact of the Employment Rights Bill

Ambiguity around the reforms and provisions in the ERB has led to concerns within the recruitment industry. Some agency workers worry the reforms could restrict the flexibility they value and the introduction of stringent regulations could limit their work options.

How the Employment Rights Bill could change hiring practices

Employers who rely on flexible staffing models could be negatively impacted, depending upon what provisions are made. Several of the proposed changes could increase employers’ financial responsibilities from day one, a factor that may slow down hiring or cause changes in hiring strategies. As a result, many recruitment agencies are adopting a wait-and-see approach, monitoring these changes as they unfold.

Industry leaders call for clarity and balance

Adam Lee, CEO of Mobile Rocket, highlighted the industry’s need for clarity, commenting, “We are working closely with our clients and leading recruitment bodies to ensure all our concerns are raised. We are prepared as a business for several eventualities and expect things to become clearer next year. The sooner we can get answers the better that will be for recruitment agencies.”

Lee also emphasised the importance of maintaining flexibility for agency workers, who often prioritise the ability to work when and how they like. He noted, “Reforms around zero-hours may have unintended consequences that could decrease the time an agency worker is able to work due to limited flexibility.”

Financial considerations for employers under the Employment Rights Bill

Discussing the financial impact on businesses, Lee added, “Employers will need to reassess flexible hiring practices and ensure they satisfy the latest reforms. Increases in the national minimum wage and day-one sick pay are reforms businesses need to be financially prepared for, especially those engaging lower-paid workers. We certainly expect businesses to evaluate staffing levels which may mean hiring freezes or reorganisation of their workforce. Recruitment agencies will have to educate clients and agree on how to handle these increased costs.”

What the future holds for the recruitment industry

The Employment Rights Bill is a significant overhaul of employment legislation and with any change a degree of uncertainty is normal and to be expected. The government does appear to recognise the complexity around agency workers and temporary recruitment practices, let’s hope this is an indication of the governments willingness to strike a balance.

Will the Employment Rights Bill support flexibility or restrict it?

As the dust settles, it remains to be seen whether the Employment Rights Bill will empower workers or place constraints on the flexibility that has long characterised the temporary recruitment industry. With consultations set to start next year, the recruitment sector braces for a period of adaptation, all while hoping the final reforms will support economic growth and provide opportunities for all.