Following consultations held last year, October 2024 saw the introduction of the new Employment Rights Bill (ERB) which was deemed to be the biggest upgrade to workers’ rights in over a decade. Earlier this year in March, a series of amendments were published giving more clarity to certain aspects of the ERB, many of which relate directly to agencies and agency workers.
Though the reforms won’t come into play until 2026 at the earliest, it’s important to be aware of upcoming legislative changes and reforms that will be unfolding over the next few months that will impact you and your business.
We’ve summarised some key points you should be aware of below.
Umbrella regulation
The latest amendments to the ERB regarding umbrella companies has been to bring them within the scope of the Employment Agency Standards Inspectorate’s remit to ensure workers receive the same rights and protections as in traditional employment.
There was also further confirmation that recruitment agencies will be responsible for ensuring that PAYE is collected and paid, instead of the umbrella company employing the worker. Where there is no agency involved, the responsibility will sit with the end client.
The key area of clarification is based on whether the umbrella company will be required to use the employment business’ (or end client in no agency) employers’ reference number or continue to use their own.
Statutory sick pay
We now have confirmation that all workers will be eligible for Statutory Sick Pay (SSP) from day one. Details around how exactly this applies to agency workers – especially what counts as the official ‘day one’ and how regular earnings should be calculated – is something that we hope to get clarification on in secondary legislation.
SSP will be paid at a rate of £116.75 or 80% of the worker’s regular earnings, depending on which is lower.
Shift notices & cancellations
Agencies will now be held responsible for paying workers when shifts are moved, curtailed, or cancelled on short notice. However, where the hirer is responsible for the shift change, terms may be negotiated as to who reoccupies costs.
As such, both the end hirer and the agency will oversee providing agency workers with reasonable notice of shifts, shift cancellations, and changes to working schedules.
Guaranteed hours for agency workers
The government is following through with plans to ban ‘exploitative zero-hours contracts’ with the most recent amendment to the ERB outlining that agency workers will need to be offered a contract stating a guaranteed minimum number of hours each week.
While there is some worry that the inclusion of agency workers within this ban will impact the flexibility that the recruitment sector provides, it does of course provide some certainty to those contingency workers that are not provided with any option but to accept these types of contracts. It is now believed that workers will be given the option to accept a guaranteed hours contract meaning that all workers will be able to make an informed decision.
It is important to note that the requirement to provide a guaranteed hours offer will normally sit with the end hirer, though in some cases the responsibility may fall to the agency or other intermediaries. Secondary legislation will help solidify this point and outline how the new rules will work in different scenarios.
Umbrella Company: Best Practice
As a recruitment agency, it’s perhaps more important than ever to take the time to conduct due diligence into the umbrella companies you’re working with.
It is therefore useful to know the in early April, the government introduced guidance for recruitment businesses which highlights the key elements for identifying a compliance umbrella company. example of good practice of umbrella companies. This guidance is very much welcomed by the compliant providers like Parasol, and we would suggest it referred to when reviewing your PSL.
The guidance suggests the following questions:
- Run by fit and proper people? Individuals who own and run the company should be listed on Companies House
- Financially viable? They should be able to demonstrate appropriate and adequate levels of insurance as an employer of staff
- Following statutory requirements that apply to all employers: staying up to date with relevant employment, tax, and company laws, employees’ entitlements are set out in the contract of employment, undertaking right to work check on employees before engaging them under a contract
- Accurately operating payroll for their employees: this includes using payroll software for accuracy when calculating pay and tax liabilities, paying at least National Minimum or National Living Wage, and making the correct deductions for pay (such as pensions, student loans, etc)
For a more detailed breakdown of good practice and how you can protect yourself from fraudulent and exploitative umbrella companies, head to this website.
What are we doing at Parasol to ensure we comply with current and incoming legislation?
When it comes to changing legislation and implementing new regulations, Parasol is committed to being an industry leader and upholding only the highest standards.
A leading employment and payroll solutions provider with over two decades’ worth of experience in the umbrella sector, Parasol has managed payments for over 250,000 contractors and 3,000 agencies thus far. We understand that compliance forms the backbone of the umbrella industry, so it’s at the heart of everything we do. Not only are we FCSA accredited, but we’re also one of the founding members. Plus, we’re certified by Cyber Essentials PLUS, ensuring only the best when it comes to security and safeguarding data.
What’s more, we’re here to keep you updated with regular insights and commentary on the latest changes over the coming months, so be sure to check back in on our Knowledge Hub for further updates.
What happens next?
The ERB is still navigating its way through the Parliamentary process, and it is unlikely that most of the proposed reforms will take effect before 2026. It will be essential to keep an eye on how the bill evolves over the next 6 months and the Parasol team will be providing regular updates.
What we do know is that the government is committed to engage with the recruitment sector where possible to identify the best way to extend rights for agency workers without causing unintended consequences for agencies and end-hirers.
In respect to the umbrella regulations there are still outstanding questions concerning the timeline for putting these proposed measures into practice, however it does now seem that the government is listening to relevant stakeholders’ concern and we should hopefully hear more about the direction of travel in May, which will be followed by draft legislation in July.
In the meantime, if you need clarification on anything mentioned in this blog or want more information on how these changes will affect you, we’re here to help. Get in touch with our team today.
