Employment Rights Act 2025: What It Means for Recruitment Agencies

The Employment Rights Act 2025 became law in December 2025 and is being introduced in stages across 2026 and 2027. It matters a great deal to recruitment agencies, because the government has deliberately extended several of the new protections to agency workers so that agency labour can't be used to get around them. Some of the changes are already in force. The ones that will change how temp and contract desks operate arrive in 2027. Below is where things stand and what to do about it.

One thing to keep in mind first: a lot of the 2027 rules are still being finalised through regulations, so treat the specifics below as the current plan rather than settled law, and check anything you act on against the latest gov.uk and Acas guidance.

What's already in force (2026)

These changes are live now and mostly affect you as an employer of your own staff and anyone you engage directly:

• Day-one family rights. Paternity leave and unpaid parental leave became day-one entitlements from April 2026.
• Statutory Sick Pay. The waiting period and the lower earnings limit have gone, so SSP is available from day one and to lower earners.
• Collective redundancy. Protective awards for failure to consult have doubled.
• Record-keeping. New duties to keep records of holiday and annual leave took effect in April 2026.
• The Fair Work Agency. A new single enforcement body went live in 2026, pulling several existing enforcement functions together, with a remit that covers employment agency standards.
• Tribunal time limits. The window to bring most claims is extending to six months.

None of these should be a shock, but they are worth an audit of your own contracts and payroll. The bigger operational change for agencies is still ahead.

The big one for recruitment agencies: zero and low hours (2027)

This is where agencies are directly affected. The Act creates three new rights for people on zero-hours and 'low-hours' contracts, and the government has confirmed all three will extend to agency workers:

• A right to be offered guaranteed hours that reflect the hours someone actually worked over a reference period.
• A right to reasonable notice of shifts, including changes and cancellations.
• A right to a payment when a shift is cancelled, moved or cut short at short notice.

Without this, a hirer could sidestep the guaranteed-hours duty by using agency workers instead, so the government has extended the rights to cover them.

Because agency work is a three-way relationship between the worker, the agency and the hirer, the responsibilities are split:

• Guaranteed hours: the default duty to make the offer sits with the end hirer, not the agency, though regulations may place it on agencies in certain situations.
• Reasonable notice of shifts: shared between the agency and the hirer, since both can control part of how shifts are scheduled and communicated.
• Cancellation payments: generally the agency's responsibility to pay the worker, though you may be able to recover the cost from the hirer where they caused the cancellation and your contract with them allows for it.

Much of the detail is still being set in regulations, including the 'low hours' threshold that decides who qualifies. The government's stated preference is somewhere between eight and 20 hours a week, and the consultation on the mechanics closed in August 2026. So the structure is settled but the exact numbers aren't, and these rights are expected to take effect during 2027.

The REC has warned that the guaranteed-hours rules could reach well beyond the arrangements they were aimed at and eat into the flexibility that makes agency work useful. Whatever you make of that, the rules are coming, so it's worth preparing now.

Unfair dismissal changes from January 2027

Separately, from January 2027 the qualifying period for unfair dismissal drops from two years to around six months, and the cap on compensation is removed. It applies to people already employed on that date, so anyone you take on from around mid-2026 will be covered by the time it starts. For your own employed staff, it's worth tightening up probation, documentation and how you handle exits before then.

What to change now

Even with some detail unfinished, the groundwork is clear:

• Track hours accurately, per worker. Guaranteed-hours offers are based on hours actually worked over a reference period, so you need reliable records of what each temp did and when. If that data lives in spreadsheets or across tools that don't talk to each other, fix that first.
• Get shift notice and cancellations under control. You will need to evidence what notice was given and when a shift changed or was pulled. Text messages and manual rotas make that hard to prove.
• Review your hirer contracts. Decide now how guaranteed-hours offers, shift-notice duties and cancellation costs will be handled between you and each client, including who pays and how you recover costs where the hirer was at fault.
• Audit your own employment terms. Day-one rights, SSP and the coming dismissal changes affect your internal staff and anyone you engage directly.
• Watch the regulations. The thresholds and mechanics are still being confirmed, and the detail will change what counts as compliant in practice.

It is also worth separating this from the umbrella-company and PAYE changes that arrived in April 2026. Those are a different piece of legislation with their own implications for agencies, and are best treated separately.

Where your systems come in

Most of the readiness above comes down to data: who worked what, when they were told, what was cancelled, and what was paid. Agencies running temp and contract desks on spreadsheets and disconnected tools will find it hard to produce any of that if a claim is brought.

A connected setup makes this much easier. When hours worked, shift notices and cancellations are captured properly and flow into your recruitment CRM and payroll, the records you need come out of normal day-to-day work instead of a year-end scramble. If your website and back office aren't joined up, that's worth sorting before the 2027 changes take effect.

If you want a hand getting the systems side ready, that's what we do at Nodex.

This article is a general overview and not legal advice. Several of the 2027 measures are still being finalised in regulations. Check the current position on gov.uk and Acas, and take proper advice on your own contracts and workforce.