Agency workers: consultation on modernising the regulatory framework

Background

On 6 February 2026, the government launched a consultation on modernising the regulatory framework governing agency work and the wider temporary labour market.

The current rules were developed at a time when supply chains were typically more straightforward. The growth of umbrella companies and increasingly complex engagement models has led to concerns about gaps in protection, particularly where payment and employment responsibilities sit with intermediaries rather than the agency itself.

The Employment Rights Act 2025 has already amended the statutory definition of “employment business” to bring umbrella companies within scope of regulation. This consultation seeks views on how the wider framework should now be updated and simplified to reflect current working practices.

Security, transparency and choice

The consultation is organised around three broad themes: security, transparency and choice.

Under the heading of security, the government is seeking views on whether the existing rule preventing the withholding of pay should be amended so that it clearly applies to umbrella companies, including where they have not themselves been paid. It also asks whether some of the current information and suitability checks required before workers are supplied to hirers could be simplified, while retaining additional safeguards where roles involve vulnerable persons.

On transparency, the consultation questions whether the current information requirements are overly complex and ineffective in practice. It suggests a more focused set of core information that workers should receive about their employment status, pay, deductions and the identity of the hirer before starting an assignment. The government is also considering regulatory options to address financial arrangements between agencies and umbrella companies, often described as “kickbacks”, and whether restrictions are needed to prevent related costs being passed on to workers.

On choice, proposals include preventing agencies from making access to work conditional on a worker using a particular umbrella company. The consultation also seeks views on limiting the ability of umbrella companies to opt workers out of statutory protections.

Learning points for employers

Employers who use agency workers should expect increased scrutiny of supply chains, particularly where umbrella companies are involved. The direction of travel is towards clearer pay structures, stronger payment protections and enhanced worker choice.

The consultation closes at 11:59 pm on 1 May 2026, and employers are encouraged to review the proposals and submit responses. We will continue to report on developments.

For more information or advice, please contact Khadija Khatun in our Employment team.