New Zero-Hour Contract Rules for Agency Workers: What Employers Need to Know

The context — why the rules are changing

The Employment Rights Bill responds to a genuine problem: a growing cohort of UK workers on zero-hour or very-low-hour contracts who in practice worked full-time or near-full-time hours for the same employer for months or years, without any of the security or guaranteed-income features of a standard contract. The government's argument, backed by Low Pay Commission analysis, is that the flexibility in these arrangements had become one-sided — the employer got the flexibility, the worker got the insecurity.

The original zero-hour provisions in the Bill covered directly-employed workers. The extension to agency workers closes the obvious loophole: without it, any employer facing the new obligations for direct hires could simply route the same labour through an agency and reset the clock. That workaround is now off the table.

What the new rules require

Workers on qualifying zero-hour or low-hour arrangements will have the right to be offered a contract reflecting the hours they have actually worked over a reference period. The reference period is expected to be 12 weeks in the final regulations, though the Bill leaves the specific figure to secondary legislation. For agency workers, the obligation sits with either the end-user (the venue) or the agency — the specific allocation will be confirmed in regulations, and current signals suggest a shared responsibility model.

Alongside the guaranteed-hours obligation, workers gain three linked rights: to reasonable notice of shifts, to be paid for shifts cancelled or shortened at short notice, and to full protection against detriment for exercising these rights. Together these provisions are structured to move the cost of labour flexibility from the worker to the employer.

• Right to reasonable notice of shifts (specific notice period to be set in regulations, likely 48 hours)
• Right to compensation for shifts cancelled or shortened at short notice
• Right to be offered a contract reflecting hours actually worked over a 12-week reference period
• Full detriment protection for workers who exercise these rights or bring a related tribunal claim
• Extension of these rights to agency workers as well as direct hires

When the rules commence

The Bill is expected to receive Royal Assent in mid-to-late 2025, with staged commencement running into 2026 and 2027. Government signals suggest the zero-hour and agency-worker provisions will commence in late 2026 rather than immediately after Royal Assent, giving employers a roughly 12-month lead time. That lead time is not a reason to relax — the compliance work below takes months, and the operators who do it in Q1 2026 will be in a dramatically different position from those who wait until Q4.

What it means for hospitality operators

The days of using agency staff as an infinitely flexible buffer are ending. If you use the same agency worker weekly for a full season, you should assume they will qualify for a contract offer at the end of the 12-week reference period, and you should plan the labour model around that reality rather than trying to route around it. The operators most exposed are the ones who currently rely on the same 3–5 agency workers across most weekends of the year — a pattern that is extremely common in city-centre restaurants and event-heavy venues.

There are three broadly workable responses. First, convert the reliably-used agency workers to direct hires on the hours they are already working. This is the response that most closely matches the intent of the legislation and is usually the lowest-risk operationally. Second, genuinely rotate agency usage so no individual worker crosses the reference-period threshold — this is workable for banqueting and events, less workable for regular weekend service. Third, redesign the labour model to use fewer agency shifts and a larger core team, absorbing the resulting fixed cost through pricing, productivity or rota discipline.

The response that does not work — and this is worth stating clearly — is trying to game the reference period through paperwork gymnastics (rotating agencies, splitting the worker across two entity names, structuring the arrangement as a series of separate assignments). The Bill includes anti-avoidance provisions, and the tribunal will look through obvious workarounds. Trying to route around the intent of the legislation is a fast route to a punitive award.

The compliance risk in practice

The obvious compliance risk is a tribunal claim for failure to offer guaranteed hours. Less obvious but arguably more significant is the reputational risk — the government's enforcement strategy has signalled that the Employment Agency Standards Inspectorate and HMRC will be actively investigating agency-worker arrangements after commencement, with public naming for repeat offenders.

There is also a commercial risk that operators frequently underestimate: the agencies themselves will price this into their rates. Agencies whose margins depend on placing the same worker at the same venue for months on end are, in effect, sharing that revenue with a worker who now has a claim on either direct employment or short-notice cancellation pay. Agency rates for regular-use hospitality staff are likely to rise 8–15% between now and commencement, and any operator whose labour budget assumes flat agency rates through 2026 is under-budgeting.

Practical steps to take in the next 90 days

Six actions that make a material difference to the readiness of a hospitality operation for the new rules.

• Audit your agency usage by worker (not by supplier) over the last 12 weeks. Identify anyone used for more than 8 weeks consecutively — these are the live cases at commencement.
• For each identified worker, decide the response: convert to direct hire, formalise the agency arrangement, or genuinely rotate. Document the decision.
• Rebuild your rota planning process to give at least 48 hours' notice of shifts as a default; even if regulations settle on a longer period, 48 hours is a workable floor to hit now.
• Introduce a shift-cancellation policy that assumes compensation for short-notice cancellations. This is a rota-discipline change, not just a paperwork change.
• Re-tender agency contracts with the new rules explicitly referenced — request the agency's compliance plan and price impact in writing.
• Model the labour-cost impact of the change on your P&L. For most hospitality operations, the effective labour cost increase is 5–12% depending on current agency reliance. This is the number to plan against.

How to think about it strategically

The operators most likely to come through this well are the ones who use the change as a reason to rebuild the core team rather than to argue with the legislation. A stable, well-trained core team with a smaller agency top-up is dramatically more productive per labour hour than a small core team with heavy agency reliance — the operators who make that shift will find the cost impact of the new rules substantially smaller than the headline models suggest.

The operators most exposed are the ones running an under-invested core team and relying on agency to bridge every peak. That model was already fragile at £12.21 minimum wage and 15% employer NI; the new agency rules make it structurally uneconomic. The response is not to fight the legislation — it is to fix the labour model.