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Application of zero-hours contracts measures to agency workers

TUC response to Department for Business and Trade consultation
Report type
Consultation response
Issue date
Introduction

The Trades Union Congress (TUC) exists to make the working world a better place for everyone. We bring together around 5.5 million working people who make up our 48 member unions. We support unions to grow and thrive, and we stand up for everyone who works for a living.

We appreciate the opportunity to respond to the government’s consultation on applying zero hours contracts measures to agency workers.

The TUC welcomes measures in the Employment Rights Bill to stop the abuse of zero hours contracts. We also welcome the clear commitment to extend the provisions to cover agency workers, so that no group of workers can continue to be employed on exploitative zero-hours contracts. 

A survey of zero-hours contract workers carried out for the TUC earlier this year found that 84 per cent wanted regular hours of work, 52 per cent had had shifts cancelled with less than 24 hours’ notice, 66 per cent had received no compensation for cancelled shifts and 50 per cent had experienced difficulty managing childcare with their work. 1

Workers report having problems budgeting and managing the balance between their private and work lives.

Our analysis has also shown that many workers are being parked on zero hours contracts for prolonged periods. Two in three zero-hours contract workers have been with their current employer for over a year. One in eight zero-hours contract workers have been with their current employer for over 10 years. 2 Their employers are not filling short-term labour gaps, they are routinely using insecure forms of contracts.

The government’s moves to ensure that workers with regular patterns of employment have a right to a guaranteed hour contact are welcome and will deliver urgently needed improvements in security at work. 

But for such provisions to be effective they must apply to all workers. It is vital that agency workers are included in scope. 

Agency work is a very insecure form of employment. Workers typically have no guarantee of work or even pay rates. Agency workers are not eligible for many key employment rights. They can struggle to enforce those they do have.

Yet unions report that employers often continue to use agency contracts even where work is stable and predictable. For example, in 2023 RMT surveyed workers employed by two agencies to work on London Underground’s track maintenance teams. Of these, 94 per cent of the workers surveyed had worked on London Underground for more than five years. They averaged 4.5 shifts per week and a 35-hour week. And 84 per cent of the workers said they would rather have guaranteed hours, even if it meant less flexibility for them.

A similar picture is seen in further education colleges and schools where unions report that often staff are engaged on casual forms of contract for predictable forms of work. Such has been the concern about conditions in education that supply teachers were specifically referenced in the UK Labour Market Enforcement Strategy 2019/20.3

To exclude agency workers from the right to guaranteed hours contracts would be to unnecessarily deny many workers the right to security over their working time and pay. Where workers’ patterns of work mean that they meet the threshold for an offer of a guaranteed hours contract, this should be provided to them, regardless of whether or not they are an agency worker 

The government has calculated that of the estimated 900,000 agency workers in the UK, around 140,000 are also identified as being on a zero-hours contract and a further group of agency workers are likely to be employed on low hours contracts. And while we recognise that some agency work assignments will not meet the 12-week threshold, the average length of an agency work assignment in 2023 was reportedly 22 weeks, indicating that many workers will benefit from the extension of these provisions. 4

LFS analysis also shows that around 455,000 permanent employees in the UK report that they are agency workers, with just under 60 per cent having been with their current employer for over two years and only 33 per cent saying their hours tend to vary. This suggests a substantial proportion of the UK agency workforce have working patterns which would put them in scope of guaranteed hours provisions. 

Another key reason for extending the zero hours provisions in the Employment Rights Bill to agency workers is to prevent those employers who directly employ zero- and short-hours staff from circumventing new restrictions by using agency staff. Were provisions not extended to agency workers, a significant loophole would be opened, enabling unscrupulous employers to avoid new requirements to offer guaranteed hours contracts by increasing their use of agency workers.

Q1: Are you (please select from the following):

trade union or staff association

Q2: If you are an employer or individual, what is your role or the role of the organisation that you work for (please select from the following)? N/A

Q3: If you are an employer or individual, what type of organisation (do you work for) (please select from the following)? N/A

Q4: If you are an agency, an umbrella company or an end hirer of agency workers, how would you describe the size of your entire organisation? N/A

Q5: Do you think the guaranteed hours should be offered by the  employment agency (option 1) or the end hirer (option 2)?

The TUC strongly supports the extension to agency workers of the rights to guaranteed hours, reasonable notice of shifts and compensation for shifts that are cancelled or curtailed at short notice contained in the Employment Rights Bill. Without this extension, a significant number of workers would not benefit from the overall policy intent to address one-sided flexibility and in many cases these would be some of the workers most vulnerable to labour exploitation.

Compared to workers in general, agency workers are at greater risk of low pay, poor working conditions and poor job security – conditions that the government recognises have been holding our economy back. 5 The Resolution Foundation calculated the agency worker pay penalty as £400 a year, and found widespread experiences of poor and sometimes unlawful practices. 6 This pay penalty is likely to be worse for agency workers on zero hours contracts (ZHCs), as median hourly pay for ZHC workers is so low. 7

For many employers, agency workers are used in much the same way as directly-employed zero hours workers to allow them to adjust employment at short notice. The Taylor Review found that “too many employers and businesses are relying on zero hours, short-hours or agency contracts, when they could be more forward thinking in their scheduling.” 8 This suggests that many of the anticipated impacts of right to reasonable notice and compensation, including greater investment in workforce planning, would be undermined if agency workers were not covered as some employers would increase their use of agency workers to maintain one-sided flexibility. This risks significantly undermining the policy intent of this measure, as it would open a substantial loophole by which rights to a guaranteed hours contract could be avoided.

Given this, the TUC view is that both the end hirer and the agency should be responsible for offering the worker a guaranteed hours contract, based on a 12-week reference period. This recognises that both parties have significant roles in the employment relationship and would minimise the risk that a worker’s right to a guaranteed hours contract would not be fulfilled by allowing them to seek redress against either of them. 

This approach recognises that both the agency and end hirer already have relevant legal responsibilities regarding information which would then be pertinent to a guaranteed hours contract:

  • Before a placement starts, the agency must get information from the end hirer on the expected duration of the placement and workings hours. 9
  • Information must also be communicated on whether the role is permanent or temporary.10
  • The agency must hold and retain a copy of any contract between the work-seeker and the end hirer that was entered into on the work-seeker’s behalf. 11"
  • The agency must give the employee or worker a written statement of employment particulars. This must include the start date, the date that continuous employment started for an employee, the date that 'continuous employment' (working for the same employer without a significant break) started for an employee, and how long the job is expected to last if it is temporary or fixed term. 12
  • The agency is responsible for paying the worker for hours worked and is therefore required to comply with National Minimum Wage record keeping requirements, so there is therefore ongoing record keeping and communication between the agency and end hirer about working hours. 13

So, under current regulations the agency and end hirer are both required to establish information that is relevant to the right to guaranteed hours and any related duty on the employer and other relevant parties. This includes whether the worker or employee is hired on a zero or low hours contract, if the contract is temporary or permanent and information about ‘continuous employment’ which is relevant to the reference period. They should also both hold information that is necessary to calculate the number of guaranteed hours that should be contracted, as well as whether the employment contract is temporary or permanent. 

Also relevant is the existing right that agency workers have to equal treatment, which applies after a 12-week reference period. 14   The right to equal treatment already creates obligations for both the agency and end hirer in terms of communicating relevant information and agreeing relevant contractual terms so that the employee or worker receives equal treatment after 12 weeks. The agency must:

  • ask the end hirer for information about pay and basic working conditions (when it is clear that the agency worker will be in the same job with the same hirer for more than 12 weeks) so that they are treated as if they had been directly recruited to the job.

And the end hirer must: 

  • provide their agency with up-to-date information on their terms and conditions so that they can ensure that the agency worker receives the correct equal treatment, as if they had been recruited directly, after 12 weeks in the same job. 15

We anticipate that the right to equal treatment will also mean that guaranteed hours contracts that workers receive will need to comply with equal treatment provisions i.e. reflect the same rights as those employed directly. 

In the case of multiple agencies being involved, we would again refer to the approach taken with regard to equal treatment which places responsibilities on both the agency and the end hirer. It would be consistent with this approach for new rights for zero hours contracts workers to apply to both the end hirer and the agency at the 12-week mark. This would require the employment agency to be aware of relevant work with the end hirer undertaken by the employee or worker. To establish this, there should be a duty on the agency to request this information and a duty on the end hirer to share this.   

Making both the agency and end hirer responsible for offering the guaranteed hours contract, would also put the employee or worker in a stronger position in cases of non-compliance. It would mean that they would not have to identify which party was at fault and the agency or end-hirer could not blame the other for the non-compliance and delay recourse. 

Were responsibility to sit with the end hirer only, the worker would only have a right to recourse if they were able to identify the end hirer, which means that they are reliant on the written statement provided by the agency being accurate – which is not always the case. Were responsibility to sit with the agency only, the worker may be disadvantaged if the agency goes bankrupt and they had no basis on which to make a claim on the end hirer. Joint liability would also protect workers in circumstances which create further complexity, such as when a joint employment model is used. 16

Umbrella companies also create further complexity for agency workers, including in being able to identify who their actual employer is. The Director for Labour Market Enforcement has recognised that for lower paid workers, umbrella companies create difficulties in establishing who is responsible for aspects of their terms and conditions, noting that “[f]or workers seeking to resolve concerns there can be a ‘pass the buck’ mentality by entities in the labour supply chains.” 17 The TUC has previously highlighted that umbrella companies do not always carry out their responsibilities as an employer effectively, denying umbrella workers access to the employment rights framework. 18

As umbrella companies play an additional role for many agency workers in the worker/agency/end hirer relationship it is important that the regulations and guidance are designed to maximise clarity about responsibility for offering guaranteed hours contracts (as well as reasonable notice and compensation), and that a worker would be eligible for additional compensation were a tribunal able to determine that the agency had used an umbrella company to avoid upholding their responsibilities to the worker.  We welcome government action to address tax avoidance amongst umbrella companies and urge further work to end the use of umbrella companies by employment agencies. 19

We do note that the government’s preferred approach, as set out in question 5, is to make only one of the end-hirer or agency responsible for the guaranteed hours contract.

As set out above, our preferred option is joint liability. However, if the government is to persist in an approach which only places responsibility on one of the end-hirer or the agency, we suggest that the end-hirer should bear the responsibility.

As set out above, this formulation would marry with the right of agency workers, after 12 weeks, to be employed on the same conditions as employees of the end hirer, set  out in Regulation 5 of the Agency Workers Regulations 2010.

We urge the government, however, to consider whether in such a circumstance there should still be accessory liability for the whichever of the parties was not given the primary liability for the guaranteed hours contract. 20 Both an employment agency and an end-hirer will exercise significant control over aspects of that employment relationship. For example, the end-hirer is likely to control whether hours of work are available, the agency to a significant extent the terms and conditions provided to the worker. Whether the agency or the end-hirer has greater power is likely to vary from sector to sector.

Transfer fees to hiring companies (‘temp-to-perm’)

Q6: Should end hirers be required to pay a transfer fee or use an extended  hire period if they are required to offer guaranteed hours to an agency  worker?

No. This would create a disincentive for the end hirer to be in a position where they are required to offer a guaranteed hours contract to agency workers and the only beneficiaries would be the employment agency. At no point has this been stated as a desired outcome of the policy and we do not see a justification for it. It could also create an incentive for end hirers to increase the number of work placements that last fewer than 12 weeks. This could lead to an increase in short-term agency work and a reduction in longer-term agency work and temp-to-perm transfers, which undermines the overall objective of the ‘ending one-sided flexibility’ policy, which is to improve workers’ job security. 21

Q7: If you think there are other factors specific to agency workers that need to be taken into account in applying the new right to guaranteed hours to them, please explain them here.

Anti-avoidance measures:  as recognised in the Agency Worker Regulations 2010, a loophole could arise in the calculation of the 12-week qualification period if agencies and end hirers are permitted to structure assignments so that the same worker can undertake multiple work placements (each lasting fewer than 12 weeks) with the same hirer in close succession.  The same anti-avoidance measures should be in place for the right to guaranteed hours as already exist for the right to equal treatment, 22 so that there are no loopholes in the calculation of the 12-week reference period. 

Additional complexity of the worker/employer relationship: agency workers typically have a more complex relationships involving the agency, the end hirer and potentially an umbrella company or similar organisation. Agency workers have separate employment rights compared to the general workforce, often making it harder to understand what they are entitled to and who is responsible for providing this. 

To increase the likelihood that new rights to guaranteed hours will deliver on the policy objectives for agency workers, it is very important that this additional complexity is recognised. We strongly recommend that rights for agency workers mirror rights for other workers as much as possible, so that it is straightforward for agency workers to understand what they are entitled to and what actions to take in incidents of non-compliance. Similarly, providing clarity on details such as how the contract should be offered to agency workers will help to minimise any confusion about how the right should be applied. 

PART 2: Reasonable notice of shifts and  payment for shifts cancelled or curtailed at  short notice

Reasonable notice of shifts

Q8: Do you agree that the responsibility for providing an agency worker with reasonable notice of shifts should rest with both the employment  agency and the hirer, so that where a tribunal finds that unreasonable  notice was given, it will apportion liability according to the extent that the  agency and the hirer are each responsible for the unreasonable notice?

Yes, we strongly agree that responsibility should be held by both the agency and end hirer and that the tribunal would decide how to apportion liability. This would increase the likelihood that both the agency and end hirer would keep appropriate records relevant to the right to reasonable notice. It would also mean that the employee or worker would not have to identify who was responsible were they to complain to a tribunal, which could be impossible for them to do had they not been given accurate information about who the end hirer was, for example. It also minimises the risk of delays in the worker receiving compensation, as the complaint will be brought against both the end hirer and agency. 

Q9: Do you think that legislation should prescribe how the end hirer should  notify the agency that they have a shift available and of changes to these  and when notification should be deemed to be received?

Yes, as this will make it more straightforward to identify non-compliance and should therefore make the route to recourse for employees and workers more straightforward. 

Q10: If you think there are other factors specific to agency workers that  need to be taken into account in applying the new right to reasonable  notice of shifts to them, please explain them here.

As already mentioned in response to question seven, the additional complexities that agency workers face in relation to factors such as their employment status, who their employer is and the role that organisations like umbrella companies play means that these rights will need to be clear and robust for workers to understand and use. 

Role for collective agreements. The TUC strongly recommends that the Bill is amended to include a role for collective agreements in establishing working practices such as notice periods. The Bill states that reasonable notice period should be defined in regulations up to a maximum of seven days. The TUC proposes that the seven-day period is the option set out in secondary legislation to allow workers time to put in place arrangements such as for caring. However, there should be scope for collective agreements to shift notice periods outside these parameters because workers and employers in particular workplaces are in the best place to agree practices that work for their establishment.

This is already the approach taken in other countries. For example, in Belgium workers have a right to seven days’ notice, but this can be reduced to three days if a collective agreement is in place. 23

Such an approach might have the additional benefit of increasing collective bargaining coverage in sectors which currently have a high reliance on short-notice shift work, including hospitality and social care. 

Short notice cancellation and curtailment of shifts

Q11: Do you agree that the agency should be responsible for paying any short notice cancellation or curtailment payments to an agency worker?

Yes, as the payment should be made in the same way (including method and timeframe) as the employee or worker is paid for shifts which are not cancelled or curtailed. The purpose of the right is to rectify any loss in income the employee or worker would have faced were the shift cancelled or curtailed and their pay for these hours was cut accordingly. To maximise the likelihood that the policy objective will be achieved – so that these workers gain a greater ability to plan their lives with regard to their income – the agency should be responsible for payment.  

Q12: Do you think that the agency should be able to recoup this cost from the end hirer if/to the extent that the end hirer was responsible for the short  notice cancellation or curtailment?

We do not take a view on this, but if the agency were able to do this it must not result in delay in payment to the worker. As stated in answer to question 11, it is imperative that the payment for missed or curtailed shifts is made in the same way and timeframe that payment would have been made were the shift not cancelled/curtailed to fulfil the policy objective of improving workers’ ability to plan their finances. 

Q13: If you think that the agency should be able to recoup this cost from the end hirer, do you think the Government should legislate to ensure that the agency can recoup the costs?

Again, we do not take a view on this but legislation should set out that disputes between agencies and end hirers cannot be justification for delaying payment to the employee or worker. 

Q14: Do you think that it should be possible to override legislative provisions allowing agencies to recoup cancellation/curtailment costs  through contracts signed after implementation (or that are clearly entered  into in contemplation of the commencement of the legislative provisions)?

No, as this would risk creating more opaque arrangement between agencies and end hirers which could result in more protracted tribunal proceedings were the employee or worker to make a complain to an employment tribunal. Furthermore, it may make it harder for the tribunal to determine where fault lies (between the end hirer and agency) and therefore increase the risk that the employee or worker would not be awarded compensation. 

We would oppose any provision which allowed the agency or end hirer to override legislative provision for these reasons. 

Q15: If you think there are other factors specific to agency workers that need to be taken into account in applying the new right to payment for short notice cancellation or curtailment to them, please explain them here.

As above, the complexity of agency workers’ employment circumstances means that right needs to be as clear and robust as possible to ensure the maximum number of agency workers can benefit.

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