Making Work Pay: the application of zero hours contracts measures to agency workers

The Government is consulting on the application of its zero hours measures to agency workers. This follows the publication of the Employment Rights Bill (see Advisory Bulletin 728), which contains measures to provide zero hours workers with rights to guaranteed hours from their employer, reasonable notice of working hours and rights to compensation in some cases where shifts are cancelled, moved or curtailed. Those rights will apply in the case of direct employment, but the Bill also contains an enabling provision for further regulations to be made to apply the zero hours rights to agency workers. The consultation, therefore, concerns questions of how those rights might apply and addresses the following issues:

• whether the guaranteed hours should have to be offered by the agency or by the hirer? 
• where the worker accepts the offer of guaranteed hours from the hirer, should the hirer have to pay a transfer fee to the agency?
• where short notice of shifts is given, how should liability for compensation operate between the hirer and the agency?; and
• where shifts are cancelled at short notice or curtailed, should the agency be responsible for paying the required compensation, and how / should those costs be recoupable from the hirer where they were responsible for the cancellation or curtailment? 

The consultation closes on 2 December 2024 and details of how to respond are on the Government’s consultation website. Local authorities will have varying views on the issues so we encourage them to respond direct to the consultation. If you do respond direct, please send a copy to us at [email protected]

The LGA will also be responding to parts of the consultation, and in order to assist us with that we should be grateful if authorities would email us their responses to the questions we have asked in the sections below which set out further details on the issues. They should be sent to us at [email protected] by 15 November.

After twelve weeks, the employer of an eligible worker will be required to offer them guaranteed hours which reflect the hours they have regularly worked over the twelve-week reference period. As set out above, the Government is considering whether agency workers should be offered guaranteed hours by the employment agency, or by the end hirer, for example a local authority using agency workers through an agency. 

The consultation document notes that if the guaranteed hours had to be offered by the agency, the worker may be entitled to more guaranteed hours, because they may well be based on work undertaken for multiple end hirers where the worker is placed at a number of hirers. However, it is also noted that agencies would become liable to offer guaranteed hours, when in practice they may not have ultimate control on whether there will be work available, as that will normally be determined by the hirer. 

If the hirer had to offer the guaranteed hours, the consultation says that would “follow the logic” that the hirer is in a better position to forecast and manage hours of work. 

Also, the consultation states that it could mean that effectively the hirer became the employer, with the consequence of stepping into that role (one of which is addressed in the ‘Transfer fee’ section below).

To assist the LGA in its response to this part of the consultation we should be grateful if authorities would send us responses to the following questions:

1. Does your authority use agency staff on zero hours contracts arrangements?

2. Do you think the guaranteed hours should be offered by the agency or by the end hirer (i.e. your local authority where it uses agency staff on zero hours contracts)?

In answering question 2, we anticipate that for cost and administrative reasons, authorities would prefer that the agency had to offer the guaranteed hours. However, it should be noted that even if that were the case, there might be some costs consequences as it might result in agencies increasing their fees to account for the administrative costs incurred by them in managing the process.

If the hirer had to offer guaranteed hours, and the worker accepted them, the consultation document says that the worker would, for that contract, switch from a contract with the agency to a contract with the end employer – i.e. the hirer. Under current legislation, the end hirer would generally be required to pay a transfer fee to the agency (called a ‘temp-to-perm’ fee) or enter into an extended period of hire.

This part of the consultation asks whether end hirers should be required to pay a transfer fee / have to enter into an extended period of hire, and to assist the LGA with its response we would be grateful for local authorities’ response to the following question:

3. Should end hirers (including for example local authorities) be required to pay a transfer fee / have to enter into an extended period of hire in such cases?

We anticipate that authorities will consider that hirers should not be required to pay any transferee fee or have to enter into an extended period of hire, but we should be grateful for confirmation of that.

Under the plans in the Employment Rights Bill, if employers do not provide reasonable notice of shifts, workers will be able to take a case to an employment tribunal to receive compensation for the loss that they have suffered as a result of unreasonable notice. The Government intends to provide agency workers with such a right but is seeking views on how that should operate in relation to the hirer and the agency. In that respect, it notes that agencies usually rely on hirers to let them know when a shift is available but it will then be the agency that passes that information onto the agency worker. The Government proposes therefore, that both the hirer and the agency should be responsible for providing reasonable notice of shifts. Related to that, the Government considers that on claims for compensation, the employment tribunal should be able to find that either the agency or the hirer, or both, should be liable to compensate the worker, but only to the extent that they are responsible for the unreasonable notice.

To assist the LGA with its response on this issue we should be grateful for local authorities’ response to the following question:

4. 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?

As with providing reasonable notice of cancellation of shifts, the Employment Rights 

Bill contains provisions for workers to be compensated by their employer in the case of short notice cancellation and / or curtailment of shifts. The Government’s intention is that the same rights should apply to agency workers, and that the agency should be responsible for making the compensation payments. However, the consultation document also indicates that “it is likely to be appropriate” for the agency to be able to recoup those costs from the hirer, where the hirer was responsible for the cancellation or curtailment. It also says though that the Government is reluctant to interfere in business relationships between agencies and hirers, and therefore, rather than legislation being made to provide for such recoupment, it may better be dealt with through contractual arrangements. We anticipate that many local authorities will agree with that, especially as they will be experienced in negotiating contracts with employment agencies.

To assist the LGA with its response on this issue we should be grateful for local authorities’ response to the following questions:

5. Do you agree that the agency should be responsible for paying any short notice cancellation or curtailment payments to the agency worker but that the agency should be able to recoup those costs from the hirer where the hirer was responsible for the cancellation or curtailment?

6. Do you think the Government should legislate to ensure agencies can recoup those costs, or would recoupment be better dealt with through contractual arrangements?