Ban on zero-hour contracts for agency staff ‘unworkable’, say UK recruiters

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UK recruiters are raising the alarm over government proposals to include agency workers in a new ban on “exploitative” zero hour contracts, saying the options set out to implement it are “unworkable”.

In a letter seen by the Financial Times the bosses of 16 large recruiters and staffing companies — including Adecco, Hays, Randstad and Manpower — have urged the business secretary Jonathan Reynolds to rethink the plans.

The groups argued that Labour’s reforms would undermine the jobs market for both permanent and temporary workers.

“The likely response would be lower levels of hiring, and more work either delayed or fulfilled by people taken on as self-employed,” they argued, adding: “We cannot see how any of the options in the current consultation document could be made workable”.

A right to a contract reflecting workers’ regular hours is one of the key measures in the employment rights bill that will give shape to the Labour administration’s flagship reforms to workers’ rights.

The government has said it is “determined” to ensure the UK’s 900,000 agency workers benefit from this entitlement, partly because it does not want agency work to become a loophole for employers to avoid the new right. A consultation on how to achieve this closes on Monday.

Although many of the details have yet to be decided, the intention is that employees with no or low guaranteed hours will be offered a contract reflecting their working pattern over a 12-week period, which they will be free to decline.

About 1mn people in the UK work through agencies at any time, typically on assignments lasting longer than 12 weeks, and in a variety of roles ranging from warehouse staff to NHS workers, engineers or supply teachers.

Some agency staff juggle several roles at a time, while others can be working full-time hours for long periods.

Agencies argue that many people choose to work on this basis because they have care responsibilities or other commitments and do not want to commit to regular hours.

But unions say they find many agency workers “parked” on insecure contracts even though they are engaged in long-term work and would prefer guaranteed earnings in order to qualify for a mortgage.

The key choice set out in the document is whether the offer of guaranteed hours should be made by the agency who engages a worker, or the end hirer using their services.

The consultation suggests that for this second option to work, it might be necessary for the hirer to become the agency worker’s employer, potentially without paying the transfer fee that would usually be due to the agency.  

The Recruitment & Employment Confederation, which represents the agencies, has warned that both options undermine their business model.

The consultation notes that the first option places risk on the agency as it cannot control what work is available. The REC argues that in the second scenario, clients might be less willing to hire someone who would gain the right to direct employment after 12 weeks.

But if they were recruiting, in the absence of transfer fees, “surely all businesses would just hire a temp?” argued Kate Shoesmith, REC deputy chief executive.

Michael Ford KC, a barrister focused on labour law, said the government’s proposals were “puzzling”, as it was not clear why an agency worker would need to switch into direct employment to benefit from the new right.

The main problem with the zero-hour ban, flagged up by many business groups, was the seasonal or unpredictable nature of demand in many sectors, he said.

He added that there would be “a predictable rush to use agency workers” if they were excluded.

Tim Sharp, senior policy officer for employment rights at the TUC union umbrella body, said the government’s explicit aim was to change the structure of the labour market, so that a reduction in the size of the agency sector would not be a cause of concern.

“Hopefully you will see a situation where more people are employed on long-term contracts where they are trained and developed,” he said. “We think there is a demand for greater security.”

The Department for Business and Trade said it was committed to ending “one-sided flexibility for agency workers and others”, to ensure workers have more predictability to better plan their lives and finances.

It added that it would “consider all responses to the consultation once it closes” and continue to engage with unions and key stakeholders to ensure any changes work for both businesses and workers.