Employment Law Changes 2026–27 for Agencies

6 April 2026

SSP from day one, umbrella PAYE rules, holiday records duty

7 April 2026

Fair Work Agency starts operating

1 October 2026

Tribunal time limit rises from 3 to 6 months

2027

Umbrella regulation, guaranteed hours, shift notice

What's changing, at a glance

The Employment Rights Act 2025 is being brought in over two years, in stages. The government publishes the order in its timeline update, and it changes as consultations close. At the time of writing, these are the dates that matter most to an agency supplying temporary workers:

• 6 April 2026: Statutory Sick Pay (SSP) loses its waiting days and its lower earnings limit. Under new HMRC rules, when an umbrella company employs the worker, the agency (or the end client, if there's no agency) is responsible for making sure PAYE is operated correctly, and HMRC can recover any underpayment from it. The umbrella remains the employer. Employers must keep holiday records for six years. Day-one paternity leave and unpaid parental leave also started, and the maximum period of the collective redundancy protective award doubled.
• 7 April 2026: the Fair Work Agency began operating.
• 1 October 2026: the time limit for bringing an employment tribunal claim rises from 3 to 6 months. For breach of contract claims in Scotland, the change takes place on 9 November 2026.
• January 2027: the unfair dismissal qualifying period drops to 6 months for dismissals from 1 January 2027, compensatory awards are uncapped, and fire-and-rehire protections start.
• During 2027: umbrella companies are brought into regulation, and the right to guaranteed hours and the rights to reasonable notice of shifts and short-notice payments are due, with timings to be updated after consultation.

The employment-law changes below (SSP, holiday records, guaranteed hours and the Fair Work Agency's role) apply in Great Britain (England, Scotland and Wales); Northern Ireland has its own employment law. The umbrella PAYE rules are different: PAYE is a UK tax, so they apply UK-wide.

The Fair Work Agency: one enforcement body instead of several

The Fair Work Agency (FWA) began operating on 7 April 2026. Gov.uk records that it replaced both the Employment Agency Standards Inspectorate (EAS), which policed recruitment agencies, and the Gangmasters and Labour Abuse Authority (GLAA). It is an executive agency of the Department for Business and Trade.

Its own description lists what it does: it enforces the National Minimum Wage and National Living Wage, regulates employment agencies and businesses in England, Scotland and Wales, licenses gangmasters (labour suppliers for agricultural work, gathering shellfish, or processing or packaging agricultural produce, shellfish or fish), and acts against serious labour exploitation. For minimum wage cases, gov.uk's pay and work rights complaints page says HMRC enforces the National Minimum Wage on its behalf.

For an agency, the rules themselves haven't changed. The Conduct Regulations 2003 still govern how you deal with work-seekers and hirers. What changed is who enforces them, and the name on your paperwork. The Key Information Document you give an agency worker now names the FWA as the enforcement contact. If you supply labour for agricultural work, gathering shellfish, or processing or packaging agricultural produce, shellfish or fish, your licence is now an FWA gangmaster's licence; see our gangmasters licence guide.

Statutory Sick Pay from April 2026

Sections 10 and 11 of the Employment Rights Act 2025 came into force on 6 April 2026 and changed SSP in three ways:

• Paid from the first day. The three waiting days have gone. A period of incapacity for work can now be at least one full day, rather than four days in a row.
• No lower earnings limit. Employees who earned too little to qualify before are now covered.
• A percentage cap. The weekly rate is the lower of a flat rate and a percentage of the employee's earnings. For 2026 to 2027 that is £123.25 or 80% of average weekly earnings, whichever is lower.

SSP is paid by the worker's employer. For a temp on your own payroll, that's you. For a worker employed by an umbrella company, it's the umbrella. Our free SSP calculator works out the daily and weekly amounts under the April 2026 rules.

Umbrella company PAYE from April 2026

From 6 April 2026, HMRC's PAYE rules for labour supply chains that include umbrella companies apply to new and existing supply chains, for money paid to workers on or after that date. They cover the agency that has the contract with the end client to supply workers, the end client if there's no agency involved, and the umbrella company itself.

In practice, choosing an umbrella is now a decision with PAYE risk attached, not only a convenience for the worker. HMRC points agencies to its guidance on how to reduce the risk of using an umbrella company that does not follow the PAYE rules.

The regulation of umbrella companies is a separate change, which the government lists for 2027 in its timeline. Until then, check the live gov.uk position rather than assuming a particular licensing or registration regime.

Holiday pay record-keeping

From 6 April 2026, a new regulation 16B of the Working Time Regulations 1998 requires employers to keep records adequate to show they've met the leave and holiday-pay rules, for example the annual leave entitlements, holiday pay and the 12.07% accrual for irregular-hours workers, and to keep them for six years from the date they were made. Gov.uk's holiday pay page adds that employers may be fined if they cannot show they keep holiday records.

This duty is already in force. It applies whenever you are the employer, including for temps on your own payroll. The format is up to you, as long as the records show leave taken and holiday pay paid.

It sits alongside the 2024 rules for irregular-hours and part-year workers, who accrue holiday at 12.07% of hours worked. Rolled-up holiday pay for those workers is regulation 16A, a separate provision that allows a 12.07% uplift paid with each pay packet. Our holiday pay calculator works through both methods.

Guaranteed hours for agency workers

The Employment Rights Act 2025 gives workers on zero-hours contracts, and some others on low hours, a right to be offered guaranteed hours that reflect the hours they worked over a reference period. Agency workers get their own version. Schedule 1 of the Act, brought in by section 4, inserts a new Schedule A1 into the Employment Rights Act 1996, under which the hirer must make a guaranteed hours offer to a qualifying agency worker after each reference period.

The right is enacted but not yet in force. The government's timeline lists guaranteed hours, and the rights to reasonable notice of shifts and to short-notice payments, for 2027, with the note "timings will be updated after consultation". The reference periods, and the conditions an agency worker's hours must meet to qualify, are left to regulations. Until those are published, don't assume the right already applies to a particular placement.

Why this guide gets reviewed every quarter

This area of law is changing faster than most. Commencement regulations, consultation responses and gov.uk guidance update throughout the year, and several dates above are still "2027" rather than a fixed day. We review this guide every quarter, and sooner if the government changes its timeline. The "Last reviewed" date at the top tells you when every date and figure was last checked against gov.uk and legislation.gov.uk.

How Templio helps you stay ahead of these changes

Templio is timesheet, approval, invoicing and compliance software for recruitment agencies. It doesn't run payroll, calculate SSP or take on your PAYE responsibilities. It does keep the records these changes put more weight on. Each contract holds its compliance record, the document vault stores the worker's documents with expiry alerts, and approved timesheets give you a dated record of hours worked. See our recruitment agency compliance checklist and how to start a recruitment agency for where these duties fit into running an agency. You can try it with a 14-day free trial, no card required.

This guide is general information, not legal advice. It reflects the law and gov.uk guidance as at the "Last reviewed" date and is reviewed quarterly. Check the live gov.uk and legislation.gov.uk pages before relying on a specific date or figure.