Inside IR35 contractors are, in effect, an unnoticed group that the government’s zero-hours contract rule changes should be carving out but currently aren’t. Alongside other temporary agency workers, contractors working through an umbrella company or on an agency payroll, often because their assignments have been determined to fall Inside IR35, are part of the temporary agency work population on whose behalf we’ve joined seven other organisations to ask employment minister Kate Dearden for a meeting before the zero-hours reforms go any further.
The eight organisations behind the joint intervention (the Association of Labour Providers; APSCo, FCSA, Professional Passport, REC, TEAM, The Employment Status Forum and The Recruitment Network) are not arguing against the government’s broader ambition to improve fairness at work.
But we collectively warn the minister in a letter that the guaranteed-hours part of the zero-hours changes could cut Inside IR35 roles’ duration, and make what could become an umbrella company’s job — guaranteeing those hours — impossible where the role isn’t ongoing.
Dearden is further warned in our September 3rd letter to her, which we’ve shared with ContractorUK for the purposes of this article, of a timing clash between the zero-hours reforms and the still-unpublished agency work consultation response. This issue, and the fallout awaiting Inside IR35 contractors, I address below, writes Andy Chamberlain, head of strategic policy and advocacy at the Freelancer & Contractor Services Association (FCSA).
When did the zero-hours consultation close?
The zero-hours consultation, which officials opening it on June 25th said would ‘end one-sided flexibility,’ closed on August 25th 2026, and was criticised a day after that closure, as “far too broad to be clear in the future direction of travel.”
Kate Shoesmith of the British Chambers of Commerce which, alongside the British Retail Consortium and UKHospitality, has called the zero-hours reforms “terrible,” primarily due to its feared, likely impact on young people, also said in an online post:
“How we move forward from here is absolute [sic] critical to a jobs market that creates opportunities, supports people and allows businesses to grow.”
Shoesmith’s statement was responded to by IR35 expert Rebecca Seeley Harris, who reflected: “I wish government would understand that flexible work is not necessarily an abuse and many people want to work that way.”
What’s the core problem with applying zero-hours reform to agency workers?
There is indeed a difficult question sitting at the heart of the zero-hours reform plan: what happens when the flexibility that policymakers want to regulate is the very flexibility some workers have actively chosen?
This question matters particularly in the temporary jobs agency market — and not just for people who think of themselves as traditional agency workers. It also matters to contractors.
How do contractors work in 2026/27?
Partly due to reforms to IR35, contractors operating in 2026/27 may:
- move from assignment to assignment
- take breaks between contracts
- work for different/multiple clients over time or at the same time
- make decisions about the work they accept based on their own circumstances.
The key distinction here is that, for contractors, flexibility isn’t a feature they tolerate because they have no alternative. Rather, flexibility is the reason they choose to work independently in the first place.
So the whole reason contractors chose their professional life is currently at risk of getting lost in a policy proposal that understandably focuses on the problems associated with insecure employment.
Is opposing guaranteed hours the same as opposing worker security?
Let’s be clear: nobody would seriously argue against giving workers greater security where employers are using zero-hours contracts simply to shift risk onto their workforce. There is broad agreement that people should not be trapped in exploitative employment arrangements.
But the argument being made by us is not that agency workers should have fewer rights. Quite the opposite. Our concern is that the guaranteed hours part of zero-hours reform — a measure designed to provide greater security — could, if applied without considering how the agency market actually works, end up reducing choice and opportunity.
We’re aware it’s a difficult argument to make in the current employment landscape, especially with a new prime minister known to actively dislike injustice who invariably wants to put his policy stamp on things.
What does ‘flexibility’ at work mean?
“Flexibility” is a loaded word. For many workers who read ContractorUK, it means ‘freedom’ and ‘control.’ For others, it has become shorthand for unpredictable hours, insecure income and employers avoiding responsibility.
The challenge for policy officials at the Department for Business and Trade (DBT), who are behind the zero-hours-guaranteed-hours framework, is recognising that both things can be true. And the problem is that the proposed policy wording doesn’t.
Do all agency workers want guaranteed hours?
The truth is agency workers are not a single group with identical needs.
Someone looking for regular, predictable employment may welcome guaranteed hours. Someone else may want to work around childcare, study, caring responsibilities, another job or simply their own preferences.
And contractors can have yet another set of priorities.
How would guaranteed-hours affect umbrella company contractors?
For a contractor working through an umbrella company, the relationship between the contractor, umbrella, agency and end-client can already be complicated. Adding another layer of guaranteed-hours obligations, as DBT officials want to do, could have consequences for:
- how assignments are structured
- how the different parties manage their responsibilities.
If an assignment is determined to be Inside IR35, a contractor will generally face PAYE taxation on their earnings and may be engaged through an umbrella company. The contractor is therefore operating within an employment structure that can look very different from the traditional permanent employment relationship.
If the proposed guaranteed-hours rules are then applied to that chain without accounting for the nature of the underlying assignment, the unintended consequences could be significant.
What happens to Inside IR35 assignments under the 12-week rule?
Under the proposals, end-clients will have to offer Inside IR35 umbrella company employees a direct contract with their organisation:
- on a permanent basis, and
- after a relatively short time of them working together — the government’s stated preference in the consultation is 12 weeks.
The end-users of these Inside IR35 contractors are not going to want to make that offer of employment, so such Inside IR35 assignments could be cut short.
Depending on the nature of the supply chain, it could be the contractor’s umbrella company that has to guarantee the hours — even when the contractor has no ongoing assignment. This is a requirement proposed in the zero-hours plan that umbrellas will find impossible to fulfil.
A guaranteed-hours obligation, outlined on pages 14-40 of Make Work Pay – Ending one-sided flexibility: reforms of zero-hours and similar contracts, could have consequences beyond simply changing the number of hours written into a worker’s contract.
What might recruitment agencies have to rethink under zero-hours reform?
If the guaranteed hours rules go ahead as currently proposed, contractors’ recruitment agencies and other businesses may need to rethink:
- how assignments are structured
- how workers are engaged
- where responsibility for employment sits in the contractor supply chain.
What’s the wider economic risk of guaranteed-hours reform?
Unclear, ambiguous, risky work without worker protections is what the zero-hours plan has been drawn up to solve, but this could be the wider economic risk of guaranteed-hours reform.
That’s likely a consequence of what happens when the cost and complexity of hiring through legitimate agency and umbrella channels increases.
Businesses rarely absorb regulatory costs in isolation. They adapt. They change hiring models, reduce recruitment, automate, outsource or look for alternative ways of accessing labour.
None of those responses is necessarily bad in itself. But if a policy designed to improve worker protection encourages hirers to move away from established agency models, towards arrangements that offer less clarity or protection, policymakers could find themselves solving one problem while creating another.
Are agency workers actually satisfied with their current arrangements?
Most agency workers are satisfied with their current arrangements — a finding too important to overlook, so we set it out to minister Dearden in paragraph four of our September 3rd letter. In the letter, the relevant paragraph states:
“The Government’s own evidence indicates that a significant majority of agency workers are satisfied with their working arrangements. This raises an important question about whether the proposed framework is addressing a problem that exists across the agency workforce, and whether applying the same approach to agency workers would undermine the flexibility they value.”
Does that mean the agency labour market is perfect?
Even with the finding we’ve pointed out to the minister — that 72% of workers in insecure work agree their work arrangements are or were well suited to their lifestyle (May 2026, Experience of Workers in Insecure Work) — we’re not suggesting the agency labour market is perfect.
Many of the contractors that these rules will apply to would prefer not to be on the umbrella or agency payroll in the first place. Nor does it mean there are no workers who need greater protection.
It does, however, suggest that the experience of agency workers is more nuanced than the wider debate around insecure work sometimes implies.
If most people using a particular form of engagement are reasonably satisfied with it, the policy question should perhaps be less about whether that model needs to be eliminated and more about how its benefits can be retained while dealing with genuine exploitation.
Why should the guaranteed-hours plan wait?
And whatever the policy answer is, it must surely wait. In fact, in the letter to minister Dearden, we point out the government’s separate consultation on reforming the wider regulatory framework for agency work has closed too — yet the official response has not yet been published. Until that response is known, it is hard to judge how a guaranteed-hours regime would interact with it — or with the government’s own promised, and still-awaited, work on a simpler employment status framework.
This need to not put the zero-hours ‘cart’ before the agency regulation ‘horse’ is another reason why we’re asking Dearden to meet with us before the zero-hours plan goes any further.
What does FCSA want to tell Kate Dearden MP?
We would tell the employment minister, as well as business minister Jonathan Reynolds MP (the successor to Peter Kyle MP, who signed off the consultation in June), if he’d like to also attend, that there is a legitimate case for tackling one-sided flexibility.
But we’d also say in the meeting that there is an equally legitimate case for preserving flexibility where it works for the worker rather than against them.
Kyle, Reynolds and Dearden should know that the government's proposed rules, designed to tackle insecure work created by one-sided flexibility, are set to have a direct impact on how contractors work.
When they find themselves working through an umbrella company or on an agency payroll, often because an assignment has been determined to fall Inside IR35, the contractor can find themselves operating within the agency supply chain even though they have traditionally thought of themselves as an independent professional rather than an agency worker.
What do the zero-hours reform letter’s eight signatories want?
That’s why alongside seven other temporary work organisations, we’re asking for agency work to be treated on its own terms; a carve-out, if you will, from the zero-hours plan.
For Inside IR35 contractors in particular, this sought distinction could be particularly important. The dividing line between ‘agency worker’ and ‘contractor’ is not always as clear in practice as it might appear on paper. Once an individual is working through an umbrella company as part of a wider supply chain, changes to the rules governing agency work can reach much further than the traditional agency workforce.
The takeaway
The government needs to look at the whole chain rather than individual employment relationships in isolation. Good employment policy should protect people from arrangements they do not want or cannot escape. But at the same time it must preserve arrangements that give people genuine choice.
The success of guaranteed-hours reform should not simply be measured by how many contracts provide more certainty on paper. It should be measured by whether workers are actually better off as a result.
For agency workers, and the contractors who increasingly find themselves operating within the same supply chain, that means asking a deceptively simple question before the rules are finalised: is flexibility always insecurity, or can flexibility sometimes be the thing that workers value most?
The answer is likely to be somewhere in between. And getting that distinction right could make the difference between zero-hours contract reform that genuinely improves working lives and changes that, unintentionally, take away one of the key choices it set out to protect.
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