Employment Rights Bill Sparks Backlash from Recruitment Industry

Thursday, January 16, 2025

The Employment Rights Bill, designed to tackle "one-sided flexibility" in zero-hours contracts, has come under fire from the recruitment industry, with critics warning of unintended consequences that could undermine fair employment practices.

During a recent House of Commons Business and Trade Committee hearing, Neil Carberry, Chief Executive of the Recruitment and Employment Confederation (REC), labelled parts of the Bill “undercooked and unworkable.” Carberry cautioned MPs that the proposed legislation could inadvertently encourage false self-employment and neglect crucial compliance issues within the umbrella company sector.

Agency Workers in the Spotlight

Key provisions of the Bill include guaranteed hours based on a reference period, reasonable notice for shift scheduling, and compensation for cancelled shifts. However, Carberry argued that extending these measures to agency workers would be inappropriate and damaging.

“Agency workers operate on a two-sided flexibility model, choosing where and when they work, unlike the zero-hours contract framework this Bill seeks to reform,” Carberry told MPs. He emphasised that agency workers already benefit from significant protections under the Agency Workers Regulations, the Conduct of Employment Agencies and Employment Businesses Regulations, and Key Information Documents (KIDs).

Carberry highlighted the risks of imposing the proposed framework on agency workers, warning that it could lead to widespread false self-employment, as unscrupulous employers exploit loopholes to misclassify workers. “The real enemy here is false self-employment. If we’re not careful, these rules could unintentionally exacerbate that problem,” he said.

Umbrella Companies Escape Scrutiny

The REC also criticised the Bill for overlooking unethical practices in the umbrella company sector, where some firms have been accused of exploitative payroll schemes. Carberry called for a regulatory overhaul akin to the strict frameworks governing employment agencies.

“While many umbrella companies operate ethically, the lack of comprehensive oversight leaves room for abuse,” he said. “We need the same level of regulation applied to umbrellas as we see with employment agencies.”

Shift Cancellations and Responsibility

Another contentious issue is the proposal to hold agencies solely responsible for shift cancellations and insufficient notice periods. Carberry argued that this approach unfairly burdens agencies for decisions often made by clients.

“No one should lose income because of last-minute cancellations. However, the cost should be borne by the party responsible for the decision—typically the client—not the agency,” he said.

Carberry also called for a more flexible definition of “reasonable notice,” noting that different industries have varying operational needs.

Defending Transfer Fees

The REC defended the continued use of transfer fees, which charge clients when they transition temporary workers to permanent roles. Carberry warned that scrapping these fees could lead to exploitation, with companies treating agency workers as a disposable labour force before permanently hiring them at no cost.

“Transfer fees ensure fair treatment of workers and discourage exploitative hiring practices,” Carberry stated.

A Call for Balanced Reform

While Carberry acknowledged the importance of addressing exploitative zero-hours contracts, he urged policymakers to refine the Bill to avoid unintended consequences. “We need better enforcement of existing laws and a more nuanced approach to reforms. Overlooking the complexities of agency work could hurt the very workers the Bill aims to protect,” he concluded.

As the Bill progresses through Parliament, the debate highlights the challenge of balancing worker protections with the need for flexibility in an evolving labour market.

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