Government plans to introduce guaranteed hours contracts for workers on flexible arrangements could reduce hiring, increase labour costs and push some employers toward less secure forms of work, recruiters have warned.
Business groups say the proposed reforms risk damaging fragile labour market recovery efforts at a time when employers are already facing economic uncertainty, rising costs and growing pressure to create more jobs for younger workers.
The changes, which form part of the government’s Employment Rights Act reforms due to begin in 2027, would require employers to offer contracts reflecting a worker’s typical hours after a 12-week reference period.
The warning comes from the Recruitment and Employment Confederation (REC), which said the plans could unintentionally reduce opportunities for agency workers, students, carers and others who rely on flexible work patterns.
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Concerns over hiring impact
Under the proposals, workers on zero-hours or flexible contracts would gain the right to guaranteed hours based on their average working patterns over a set period.
The REC said the current proposed 12-week timeframe was too short and failed to reflect seasonal demand, project-based work and fluctuating staffing needs in sectors such as hospitality, retail and consumer goods.
REC chief executive Neil Carberry said in a statement on Tuesday that employers were increasingly concerned about the cumulative effect of labour market reforms and wider economic pressures.
“We need reforms that protect the benefits of flexible work without breaking what already works in giving us a dynamic temporary labour market that benefits thousands of workers and businesses every day,” he said.
“Get this wrong and you risk undermining good jobs and compliant firms for little obvious gain for workers or employers.”
The REC said businesses could respond by reducing recruitment, cutting hours or shifting towards less regulated forms of self-employment. It also warned that entry-level roles could be among the hardest hit if employers become more cautious about flexible hiring.
“The planned right to guaranteed hours after just 12 weeks is a blow to a fledgling job market recovery that has already been struggling with the effects of the Gulf crisis,” Carberry said.
“Most employers are likely to cut hiring, restrict hours and step back from flexible roles, limiting access to work. Entry-level roles, often the first step for young people, would be among the hardest hit.”
Pressure on temporary work market
The REC argued that agency work currently provides a regulated alternative to gig economy-style arrangements, but warned that poorly designed reforms could encourage less secure working models instead.
The organisation is calling for employers to be allowed to assess working patterns over a period of at least six months, with 12 months preferred.
It also wants recruitment firms exempted from parts of the guaranteed hours policy, arguing agencies already manage relationships between workers and client companies within an established regulatory framework.
REC figures estimate that around 872,000 temporary or contract workers were on assignment on any given day during 2024, with the recruitment industry contributing more than £40 billion annually to the UK economy.
Separate REC data also suggested hiring demand in some sectors was already weakening. Hospitality job postings fell by 5 percent between February and March this year, while a recent employer survey found 30 percent expected day-one employment rights to increase business costs.
Around 12 percent of employers surveyed said they were considering reducing headcount, while 9 percent were looking at reducing their use of agency staff.
The REC also used its submission to call for reforms to Key Information Documents, which temporary workers receive when joining recruitment agencies. Carberry said many workers struggled to understand the documents and the deductions listed on payslips where umbrella companies were involved.
“We need a simpler, worker-focused approach that genuinely delivers pay transparency,” he said.
The government’s guaranteed hours reforms are expected to form part of wider employment changes being phased in from 2027 onwards.
William Furney is a Managing Editor at Black and White Trading Ltd based in Kingston upon Hull, UK. He is a prolific author and contributor at Workplace Wellbeing Professional, with over 127 published posts covering HR, employee engagement, and workplace wellbeing topics. His writing focuses on contemporary employment issues including pension schemes, employee health, financial struggles affecting workers, and broader workplace trends.
- William Furney
- William Furney
- William Furney
- William Furney
