What's the latest with the Employment Rights Bill?

Bill provision

Details

Impact for employers

New day 1 right

One of the most significant changes is "Day One" rights for employees for unfair dismissal, as well as parental entitlements and sick pay. This marks an important departure from the current legal position, whereby two years of service is required for employees to qualify for protection against unfair dismissal.

However, the Government has acknowledged that probationary periods are an important tool for employers to assess the capability of new hires within the business. In light of this, the Government will be consulting on a new statutory probation period, currently anticipated to be up to 9 months, during which time there will be a "lighter touch" process for employers to follow to dismiss employees who are not right for the role. Further regulations are required to confirm what this will look like, however employers will still need a fair reason for the dismissal, which may be either performance, conduct, breach of law or some other substantial reason. The recent amendments to the Bill include a further power for the Secretary of State to specify the maximum amount of compensation available where an employee is unfairly dismissed during this "initial period". We therefore anticipate a separate compensation regime will apply to dismissals under the "lighter touch" procedure.

Additional Day One rights introduced by the Bill include the right to paternity leave, unpaid parental leave and bereavement leave. In the case of statutory sick pay, the effect of the Bill is that all employees will become entitled to statutory sick pay from their first day of sickness absence rather than having to wait three days before the entitlement kicks in.

A further related amendment announced in November 2024 is that the time limit for employment tribunal claims is set to be increased from 3 to 6 months.

If the Bill is enacted in its current form, employers will need to make sure that they follow a full and fair process each time they are faced with a potential dismissal situation following completion of the new (currently undefined) statutory probation period. It will also be more important than ever to make sure managers are identifying, managing and addressing issues early during the probation period.

The Government has indicated that reforms of unfair dismissal legislation will take effect no sooner than autumn 2026.

Employers will also need to consider the potential cost implications of statutory sick pay and paternity leave being more readily available to employees earlier than has previously been the case and be prepared to review their handbooks and policies to reflect the new family friendly rights to paternity, parental and bereavement leave, and ensure that payroll systems and processes reflect the changes in entitlements.

Flexible working

The Bill includes provisions which will make it harder for employers to refuse flexible working requests.

An employer will only be able to reject a flexible working request if:

• the employer has a specified ground for doing so (which are the same grounds which already exist); and
• the rejection is reasonable in light of that ground.

When notifying the employee of its decision to reject a flexible working request, the Bill now requires employers to identify the specific statutory reason and to justify why the rejection is reasonable.

The Bill also empowers the Secretary of State to specify steps employers must take before rejecting a flexible working request. The Bill itself does not contain much detail on what would be considered "reasonable" and we await further guidance from the Government.

Employees may bring a claim if the employer fails to "act in accordance with" the legal requirements for flexible working.

The Bill potentially limits employers' ability to refuse flexible working requests unless they can show that the refusal is reasonable. This will add a layer of complexity for employers, particularly as there is currently no practical guidance on what employers should consider in order to comply with their new obligations.

Employers should prepare for these changes by reviewing their current flexible working policies and procedures. Employers should also start considering how they can accommodate future flexible working requests reasonably including having systems that capture requests and responses for traceability, and monitoring and demonstrating compliance.

Fire and rehire

The Bill introduces changes to unfair dismissal law which will mean that where an employee is dismissed as a result of not agreeing to proposed changes in their contract of employment, the dismissal will be automatically unfair unless the employer can demonstrate:

(a) evidence of financial difficulties; and

(b) that the need to make the change in contractual terms was unavoidable.

Fire and re-hire was always used as very much a last resort by employers, given that any dismissal through this route already gave rise to a potential unfair dismissal claim. However, it's now clear that this route should only be considered by employers in circumstances where the business is facing financial distress.

In a small concession to employers, the Government confirmed in the March 2025 changes that it will not proceed with the proposal to allow interim relief in fire and rehire cases.

Zero-hour contracts and contracts reflecting hours regularly worked

Under the proposed measures, workers on zero or low hours contracts will be entitled to be offered contracts with guaranteed hours, alongside introducing the right to reasonable notice of shifts and payment for short notice cancellations.

The Bill requires employers to make an offer of guaranteed hours, on terms which are overall no less favourable, following an 'initial reference period' of the worker's service. The guaranteed hours must reflect those regularly worked during such 'initial reference period'. If a worker rejects an initial offer, an employer must continue to offer the worker guaranteed hours contracts after each 'subsequent reference period'.

The March 2025 proposed amendments do not clarify what the length of the 'initial reference period' will be, but a period of 12 weeks has been floated by the Government.

Any offer of guaranteed hours offer should contain clear details on the working patterns that will be required (including times of day). The Bill does acknowledge the need for fixed term contracts where reasonable and makes reference to specific tasks or events being potentially reasonable circumstances. The Government will consult on what is a genuine temporary work need and set out details in regulations.

The Bill also contemplates that the duty to make a guaranteed hours offer will not apply where there has been a "relevant termination" of a worker's contract or agency work arrangement. Secondary legislation and Government guidance will need to set out details of how this exception will work in practice, but relevant circumstances will include where an agency worker decides they no longer want to work for an end client, and where the end hirer asks an agency to stop supplying the worker for a "qualifying reason" (e.g. capability).

Failure to comply with the guaranteed hours and reasonable shift notice obligations will give rise to the right for workers to pursue employment tribunal claims, with awards reflecting the financial loss suffered by them. The Government's March 2025 proposed amendments enhance the enforcement of the new zero-hour contract measures by creating a new claim that workers can bring against an employer where an employer has sought to manipulate or avoid their obligations to make a guaranteed hours offer.

Agency Workers

The Government's March 2025 proposed amendments extend its new zero-hour contract measures to agency workers. The particulars of the agency workers framework are largely subject to further consultation and secondary legislation. Nevertheless, the amendments do contemplate the following:

• The right to offer guaranteed hours based on the initial reference period will be extended to agency workers. The Government's consultation response confirmed the default position will be that responsibility for offering these guaranteed hours will be on the end hirer as they are best place to forecast resource demands. However, the amendments include a provision that regulations could instead place obligations on an agency or other entity in certain circumstances. This seeks to address business stakeholder feedback during the Government's consultation on the application of zero hours contracts measures to agency workers which highlighted the need for flexibility to cater for the different practicalities of agency work across different sectors.
• The right to reasonable notice of shifts will also extend to agency workers. The Government's amendments place responsibility for providing reasonable notice of shifts on both the agency and the end hirer. The Government's response to its consultation on the application of zero-hours contracts measures to agency workers acknowledged that either party might be responsible in practice for providing unreasonable notice of shifts, and by placing responsibility on both parties the Government wants to ensure an Employment Tribunal can apportion liability appropriately in the circumstances. The Government has committed to further consultation on secondary regulations that will deal with circumstances where short notice can be reasonable.
• Agency workers will also be entitled to compensation if their shifts are cancelled, curtailed, or changed without reasonable notice. Agencies will be responsible in the first instance for paying compensation for unreasonable notice of cancelled, curtailed or changed shifts.
• However, for agency agreements that are agreed up to two months after the Bill has received Royal Assent, the agencies will have the temporary right to recover compensation from the end hirer where the end hirer is responsible for any shifts that are cancelled, moved, or curtailed at short notice.
• Agencies will not be able to rely on this route for agency agreements reached more than two months after the Bill receives Royal Assent, and the recovery of any compensation will need to be negotiated and dealt with in the provisions of the relevant agreement between the agency and end hirer. By enabling parties to allocate costs as they deem appropriate, the Government is attempting to ensure businesses retain flexibility to make contractual decisions about how they manage costs especially in sectors such as hospitality, retail and leisure where agency work is a practical solution to staffing needs.

The March 2025 amendments include a proposal to enable employers and workers to contract out of the rights to guaranteed hours and reasonable notice of shifts through collective agreements, provided the agreement contains express terms that replace these rights. In addition, replacement terms must be incorporated into the worker's contract and the worker must be notified in writing of the incorporation and effect of any replacement terms. Where agency workers are used, the collective agreement can be with the person who has the contract with the agency worker.

The impact on businesses that rely on flexible working arrangements, such as hospitality and events, may be significant, particularly for businesses that use agency workers to resource their workforce. Precisely what impact the reforms will have is difficult to assess at this stage because so many key details remain to be consulted on and dealt with in regulations.

What is clear is that the new measures necessitate additional record keeping and internal processes to ensure compliance with the obligations.

Moreover, as the Bill will require employers to give reasonable notice to workers that they are required to work, this will mean greater forward resource planning by employers which, if not done effectively, may lead to the employer failing to meet fluctuating demand. To add to this, failure to give reasonable notice for a flexible worker's shift to be cancelled or curtailed may result in the employer having to pay compensation.

The Government's recent proposed amendments to the Bill seek to ensure that employers cannot 'game' the system, as workers will be able to make claims against employers who attempt to evade their obligations. It will therefore be essential that employers implement monitoring systems to ensure compliance with these new rights and avoid any attempts to circumvent them.

As a result, businesses will need to consider the adequacy of existing enterprise resource planning, payroll and rostering systems in respect to their configuration of work allocations, pay and entitlements, and the capturing of associated data to be able to both effectively staff for business needs, and monitor and demonstrate compliance.

These monitoring and compliance considerations will be particularly important for end hirer businesses in light of the proposed extension of these rights to agency workers. End hirers currently have no contractual relationship with an agency worker and hirers (as well as agency workers) value the flexibility that agency work arrangements allow. Businesses will need to ensure that they can effectively plan and track the working patterns of agency workers in order to demonstrate compliance with the new obligations to make offers of guaranteed hours to agency staff and not change or cancel their shifts without reasonable notice.

Businesses will also need to consider reviewing and updating their agreements with agencies to address the allocation of compensation in the event of a change or cancellation in an agency worker's shift to avoid any uncertainty in the event of a claim made by an agency worker.

There will also be potentially significant impact for agencies. As the obligation to offer a guaranteed hours contract will fall on end hirers, agencies will need to manage potentially losing worker resources and may need to weigh offering regular hours to retain workers.

Statutory sick pay

As mentioned above statutory sick pay will be payable from day 1 of sickness.

Additionally individuals earning below the Lower Earnings Limit will be entitled to SSP payable at 80 per cent. of normal weekly earnings.

SSP will be paid at the lower of £118.75 and 80 per cent. of the employee's normal weekly earnings.

Many employers operate an enhanced sick pay policy. However, for those that don't, system changes will be required to accommodate these changes to SSP especially if different rates apply to different staff. These system changes and the related pay entitlement calculations will need to be tested and monitored for ongoing compliance.

Dismissal on return from parental leave

The Bill introduces the ability for the Secretary of State to bring in regulations that prohibit the dismissals of women during or after a "protected period" of pregnancy. Previous guidance notes clarify that there will be exceptions to this prohibition on dismissal in "specific circumstances", although no further details are provided about what these circumstances might be.

Additionally, the Bill provides for the Secretary of State to make regulations regarding dismissal in the period after someone returns to work following adoption leave, shared parental leave and neonatal care leave. This power will also extend to regulations regarding dismissal when someone returns from bereaved partners paternity leave, once that comes into force under the Paternity Leave (Bereavement) Act 2024.

Recent Government amendments to the Bill provide that the Employment Rights Act 1996 will be amended to enable the regulations regarding dismissal to set out specific notices that will need to be given to the employee, the evidence the employer will need to produce and “other procedures” that will need to be followed by employees and employers. The regulations will also make provision for the consequences of failing to give notice, producing evidence, complying with procedural requirements, or failing to act in accordance with a notice. However, no detail is currently provided as to what these consequences might be, and so it is likely we will need to wait for the regulations themselves to understand the practical impact of these changes.

These Bill provisions demonstrate that the Government is strengthening protections for pregnant woman and giving new mothers certainty that the law is on their side, but is also looking to extend these protections to a broader range of employees. We await details about how such restrictions on dismissals would work in practice, and particularly what the exceptional "specific circumstances" might be, but the Bill makes clear that employers will need to be aware that a potentially wide range of employees will be protected from dismissal once they return from various forms of family leave.

Employers will need to be aware of the potential costs of needing to keep certain employees employed throughout the specific period of protection from dismissal once they return from applicable family leave, and otherwise think carefully about how they plan and structure any dismissals.

Trade Union provisions

Information about right to join a union

The Bill imposes a new duty on employers to inform all new employees of their right to join a union. This information must be included in the written statement of particulars that employers are required to provide to their new hires.

Facilitating trade union recognition

The Bill lowers the level of support unions need to show from workers to gain statutory recognition.

The March 2025 proposed amendments go further towards facilitating recognition in various ways, including:

• prohibiting unfair practices from the point when the CAC accepts a union’s application for statutory recognition;
• lowering the burden of proof for unions to show that unfair practices occurred and extending the time limit for making claims;
• providing that at the point the CAC receives the application from the union, the number in the proposed bargaining unit cannot be increased for the purposes of the recognition process, preventing the alleged practice of employers recruiting employees to dilute votes for recognition;
• allowing independent unions to apply for recognition where an employer has already voluntarily recognised a non independent union after receiving a request for voluntary recognition by the independent union.

Access to workplaces and facilities

The Bill creates a right for independent trade unions to access workplaces to meet, represent, recruit or organise workers or to facilitate collective bargaining.

The Bill would also require employers to provide trade union representatives with sufficient access to facilities, for example office and meeting space.

The March 2025 proposed amendments extend this by:

• including "supporting a trade union member with an employment-related matter" as a purpose for which unions can exercise access rights;
• creating a "fast track" process for applications to the CAC which meet prescribed requirements (the details of which are yet to be announced); and
• allowing access agreements to cover virtual access to employees.

Industrial action

With respect to industrial action, the Bill repeals minimum service level requirements during strikes and lowers the level of support required for industrial action. The March 2025 proposed amendments extend the expiry of a mandate for industrial action from 6 (or 9 by agreement) to 12 months and reduce the amount of information a trade union must provide to employers, but slightly increase the notice a trade union must give of industrial action to the employer after it has secured a ballot mandate and before any such action is taken – whereas under the Bill's original proposal the time limit was reduced from 14 to 7 days, it is now proposed to be set at 10 days.

The original proposals marked a seismic shift in favour of unions and workers, and the proposed amendments continue this trend.

The Government carried out a consultation in late 2024 on further reforms to the industrial relations framework, but despite many submissions from employers, the consultation has not led to material change to the proposals in favour of employers.

It is clear that the Government continues to be driven by the principle that trade unions play an important role and that the law should better facilitate that role, so the amendments do not row back from that principle – in many cases they go further towards increasing trade unions' role, and any changes in employers' favour are minor – for example the revised Bill includes a slight increase to the amount of notice of industrial action, but the notice period is still a reduction compared to how things stand now.

The proposals as they now stand would create a challenging landscape for employers and will continue to embolden trade unions.

The new access rights will be important for unions seeking to gain a foothold, and employers could see increasing trade union membership, more extensive calls for recognition and a strengthening of union resolve around the bargaining table.

In light of these proposed reforms, and their potentially far reaching implications, employers ought to review and adapt their current practices and strategies.

The Fair Work Agency

The Bill creates a new Fair Work Agency (FWA) to enforce employment rights, such as holiday pay, NMW, sick pay, agency rules and modern slavery. It replaces the existing separate bodies that deal with these issues, such as the Gangmasters and Labour Abuse Authorities.

The Bill includes the ability to issue "Labour Market Enforcement Undertakings" to non-compliant businesses asking them to take action to improve their practices. LME undertakings would be in place for up to two years.

Businesses that refuse or fail to comply could be subject to a Labour Market Enforcement court order prohibiting or requiring certain actions. There are broader rights in the Bill, including rights for enforcement officers to inspect workplaces, documents and information.

Non-compliance with an LME order, giving false information or documents, or obstructing the FWA's work would lead to fines and/or imprisonment (up to two years in some cases).

In March 2025, the Government put forward additional proposals to strengthen the Bill and the FWA's powers. These include:

• A new obligation on employers to keep adequate records relating to holiday, including the amount of leave and pay provided to workers. Failure to comply could result in enforcement action via the FWA including a fine.
• The ability of the Secretary of State to issue a notice of underpayment for certain statutory payments (for example NMW or sick pay), with payment due within 28 days. Underpayment notices could cover periods up to 6 years prior to a notice being issued.
• A penalty regime in relation to underpayment notices, set at 200% of the value of the underpayment (capped at £20,000 per individual who has been underpaid). A penalty is reduced to 50% if the underpayments and half the penalty are paid within 14 days of the notice being issued. There is a right to appeal to the employment/industrial tribunal within 28 days of a notice being given and the amended Bill sets out the permitted grounds for appealing.
• The FWA's right to bring proceedings in an employment tribunal in place of a worker.
• The FWA's ability to assist a party to a civil claim when it relates to an employment, trade union or labour relations issue. This includes provision of legal advice, representation or any other assistance excluding settlement.
• The FWA's right to recoup enforcement costs against the party responsible for a breach of legislation.

For employers and businesses, this means a heightened need for compliance with labour market legislation, readiness for inspections and information requests, and awareness of the severe penalties for non-compliance (including liability on individual directors, officers, managers and partners).

The additional proposals in March 2025 would increase the risk of enforcement action, fines and penalties for employers who fail to pay their workers correctly or keep adequate records of their holiday entitlements. Employers would also face the possibility of the FWA intervening in tribunal or civil claims on behalf of workers or assisting them with legal advice or representation.

Businesses will need to review their internal compliance mechanisms. For example mapping obligations to compliance arrangements and controls, introducing more regular audits, monitoring and demonstrating compliance through data and reporting, and enhanced record keeping.

Gender Pay Gap Reporting and Equality Action plans

The Bill introduces new obligations, alongside existing gender pay gap reporting, for employers with 250 or more employees to develop and publish equality action plans on an annual basis.

The plan must address matters related to advancing gender equality, including addressing areas such as the gender pay gap and supporting employees going through menopause.

Businesses with 250 or more employees will need to review their existing gender pay gap data collection and reporting processes and likely invest time in preparing, developing and updating their Equality Action plans.

Further details will be published on the proposed content of the Equality Action plans, including regulations on how failure to comply may be enforced.

Employers may need to factor additional reporting into their plans depending on the outcome of the consultation on the Equality (Race and Disability) Bill: mandatory ethnicity and disability pay gap reporting, published on 18 March and closing on 10 June 2025.

Bereavement leave

What was previously a right limited to parents, the right to take bereavement leave is due to be extended to a broader range of relationships.

Further regulations are required to confirm how a bereaved person will be defined, how long they may take off and when the leave may be taken, however the leave entitlement will be at least one week where the leave is taken in respect of a person other than a child and may be taken until at least 56 days after the person's death.

The regulations are likely to provide certain protections for employees who take bereavement leave, including protection against detriment and dismissal where it takes place for a reason relating to a bereavement.

Employers should be prepared to review their policies on employee leave to account for this new entitlement once the Bill comes into effect. It will also be important to ensure no detrimental decisions are taken in relation to employees in connection with them having taken time off work for bereavement.

Ability to take paternity leave following shared parental leave

The Bill will remove the restriction on employees taking paternity leave and pay following shared parental leave. Under the new legislation, parents will be able to take their paternity leave and pay after their shared parental leave and pay if they wish. This will be the case both where the new parents have given birth and for adoption.

Employers should be aware that employees will have some additional flexibility in how they structure their family leave and policies may need updating to reflect this.

Protection from harassment

The Bill includes three new provisions to enhance protection against harassment in the workplace. It covers:

Amendments to the new duty to take reasonable steps to prevent sexual harassment

The duty on employers to prevent sexual harassment in the workplace requires employers to take reasonable steps, but the Bill proposes amending this to require employers to take all reasonable steps. This would raise the standard required of employers for compliance with the new preventative duty.

Third Party Harassment

The Bill reintroduces a previously repealed provision which places liability on employers for third party harassment. These provisions cover all types of harassment, not only sexual harassment and it creates a direct and independent right of action against employers. The new third party harassment provision imposes a duty on employers not to permit third party harassment and makes employers liable if:

• the harassment occurs in the course of the individual's employment, and
• the employer fails to take all reasonable steps to prevent the harassment.

Whistleblowing protections

The Bill proposes to amend applicable whistleblowing legislation to recognise a disclosure relating to sexual harassment as a qualifying disclosure. This would give workers who raise concerns that sexual harassment has taken place, is taking place or is likely to take place enhanced protections. It would also unequivocally override any confidentiality clause in a settlement agreement that could otherwise restrict the worker from disclosing the sexual harassment allegations.

All of the proposals emphasise that employers would need to take active steps to tackle harassment (and particularly sexual harassment) in the workplace.

In addition to the new duty regarding sexual harassment the proposals, if implemented, would impose a more stringent standard of conduct on employers and require them to take more proactive measures to prevent harassment.

We recommend seeking legal advice on the appropriate action employers need to take, both in respect of fulfilling their preventative duty from 26 October 2024 onwards, but also in respect of the potential wider liabilities proposed under the Bill.

Collective redundancies

Under current law, collective consultation obligations are triggered where an employer is proposing on making 20 or more employees redundant within a 90 day period at one "establishment." An establishment is a local unit where the dismissed workers carried out their duties.

The Bill initially sought to eliminate the concept of "establishment" from the legislation altogether, meaning redundancies across the employer's entire business would need to be taken into account when determining whether the collective consultation obligations were triggered.

It appears the Government has reconsidered its position. Notably, the March 2025 amendments propose retaining the "establishment" concept, meaning collective consultation obligations would continue to be triggered where an employer is proposing to make 20 or more employees redundant at one establishment within a 90 day period. But they also propose introducing a new and additional "threshold" which would trigger the collective consultation obligations. No detail about how this "threshold" would work has been provided but it could be a specified number higher than 20 or a percentage of employees – this will be clarified in future regulations. However, it is likely this new "threshold" would apply across the employer's entire business, significantly broadening the scope of collective consultation requirements.

In addition, the proposed March 2025 amendments clarify that employers will not be required to reach the same agreement with various employee representatives across various locations over unconnected local redundancies.

Finally, the March 2025 proposed amendments double the maximum protective award an employee could be awarded for its employer's failure to comply with its collective consultation obligations, from 90 days to 180 days gross actual pay.

Clearly these changes are aimed at ensuring compliance to protect employees. However, the latest round of amendments could be seen as a win for employers.

Following the consultation response, the Government appears to have backtracked (at least partially) from its original position. Not only are the Government now proposing to retain the "establishment" concept, the increase to the maximum protective award could have been much worse – the Government had also been consulting on removing the cap entirely and/or making interim relief available to those who bring protective awards claims but, in an arguably pro-business move, has decided against these measures.

Nevertheless, this is still not great news for employers. If the currently undefined threshold is set to apply across an employer's entire business as expected (ie., not just limited to redundancies at one establishment), this could significantly broaden the scope and application of collective consultation and notification obligations. As a result, employers would need to be more diligent in monitoring proposed redundancy numbers across their entire business to avoid inadvertently exceeding the threshold. This means the collective consultation obligations will be triggered more often.

Public sector outsourcing: protection of workers

The Bill contains restructured proposed new provisions of the Procurement Act 2023 so that the powers and duties are also extended to the Scottish Ministers and Welsh Ministers, and devolved Scottish and Welsh authorities. The Bill now provides for a Minister of the Crown, the Scottish Ministers and the Welsh Ministers (each being an "appropriate authority") to make "provision for the protection of workers in relation to relevant outsourcing contracts". An "appropriate authority" is intended to be able to make regulations and to impose a duty to publish a code of practice. The original guidance notes to the Bill comment that these powers are "intended to be used to set out measures to avoid the emergence of a "two-tier workforce"", i.e. where ex-public sector employees and private sector employees are each on different terms and conditions. The updated version of the Bill provides that an appropriate authority may make regulations to ensure that:

• specified ex-public sector workers are treated no less favourably as workers of the supplier or subcontractor than they were of the contracting authority they were transferred from; and
• the supplier's or subcontractor's specified other workers are treated no less favourably than the transferring workers.

The codes of practice are intended to contain guidance to contracting authorities to ensure that such applicable workers are treated no less favourably.

These changes could give rise to increased staff costs for those companies engaged in contracting with the public sector. Those employers should stay alert for the publication of the subsequent regulations.

Umbrella companies

The Government proposes significant changes to the regulation and tax compliance of umbrella companies, which are entities that employ individuals and supply their labour to end clients. These changes are driven by concerns that umbrella companies can deny individuals their key employment rights and may give rise to disguised remuneration tax avoidance schemes.

The new definition of umbrella companies under the Bill would bring such entities in scope of the conduct regulations currently applicable to employment businesses, with the Employment Agency Standards Inspectorate enforcing these regulations until the Fair Work Agency takes over.

Separately, from April 2026, the responsibility for accounting for PAYE and national insurance contributions for workers employed by umbrella companies will move from the umbrella company to the recruitment agency supplying the worker to the end client. If no agency is involved, the responsibility will fall on the end client.

Employers utilising umbrella companies will need to ensure compliance with the new regulations, and should adopt enhanced due diligence to assess these arrangements given the increased risk.

Agencies and end clients must be prepared to handle payroll functions in-house or through payroll agencies by April 2026.

Umbrella companies may become a less attractive option for employers that may opt for direct employment or alternative payroll solutions.