The guaranteed hours and cancellation pay changes are upcoming provisions within the Employment Rights Act 2025 that will require employers and recruitment agencies to offer regular workers a contract reflecting their actual working pattern, give reasonable notice of shifts, and pay compensation when shifts are cancelled at short notice. These changes are expected to come into force in 2027 and will apply to agency workers as well as directly employed staff.
For temp agencies, these provisions represent one of the most significant operational changes in years. They affect how you manage bookings, how you communicate with candidates, how you handle last-minute client cancellations, and ultimately who pays when things change at short notice.
This post breaks down what is coming, what is still unclear, and what you should be doing right now to prepare.
Most of the commentary around guaranteed hours and cancellation pay has focused on retail, hospitality, and gig economy employers. That makes sense because those sectors rely heavily on flexible contracts.
But temp recruitment agencies sit in a uniquely difficult position with these changes, because they operate in the middle of a 3-way relationship. You have the candidate who works the shift. You have the client who books the shift. And you have the agency in between, managing the booking, processing the pay, and now potentially bearing the cost when something falls through.
When a client cancels a shift at short notice, the agency is the one with the relationship to the worker. Under the upcoming rules, someone has to compensate that worker. The question of whether that cost sits with the agency, the client, or both is still being worked through in the regulations. But the obligation itself is coming, and agencies need to be ready for it regardless of where the cost lands.
The core principle is straightforward. If a worker on a zero-hours or low-hours contract works regular hours over a defined reference period, their employer must offer them a contract that reflects those hours.
The reference period is expected to be 12 weeks, although the final regulations have not confirmed this yet. Government consultations closed in May 2026, and more clarity should come through later this year.
Here is how it would work in practice for a temp agency. If you have a candidate who has been working 30 hours a week for 12 consecutive weeks through your agency, you would need to offer them a contract guaranteeing 30 hours. They can decline the offer, but you have to make it.
This creates some immediate questions for agencies.
Who makes the offer, the agency or the end hirer? The current expectation is that both the agency and the end hirer will share responsibility, but the detail is not settled.
What happens when hours fluctuate? A candidate who works 40 hours one week and 15 the next has a different pattern from someone doing a consistent 30. How the reference period calculation handles that variation will matter enormously for agencies managing candidates across multiple clients.
What about seasonal work? In sectors like agriculture, education, and events, demand is inherently variable. A 12-week reference period might capture a peak that does not reflect the rest of the year. The regulations need to account for this, and agencies in these sectors should be paying close attention to the detail as it emerges.
Does it apply to every worker? The provisions target zero-hours and low-hours workers specifically. Workers who already have guaranteed hours contracts would not be affected. But in temp recruitment, a significant proportion of the workforce operates on flexible arrangements that will fall within scope.
The second major change is the requirement to give workers reasonable notice of shifts and to pay compensation when shifts are cancelled, moved, or shortened at short notice.
Again, the exact definition of “reasonable notice” has not been finalised. This is one of the most debated elements of the regulations, because what counts as reasonable varies significantly depending on the sector.
In logistics, a week’s notice of a shift might be standard. In education supply, a booking might come through at 6am for a shift starting at 8am. In event staffing, demand can emerge with days or hours of notice. A single definition of “reasonable” that works across all of those contexts is difficult to draft, and the Government has acknowledged this.
What we do know is that if a shift is cancelled without sufficient notice, the worker is entitled to compensation. The compensation is expected to reflect the pay they would have received for the cancelled shift, although the precise calculation method has not been confirmed.
For temp agencies, the critical question is cost allocation. When a client cancels a booking at short notice, the agency currently absorbs the administrative cost of rearranging but does not typically pay the candidate for the lost shift. Under the new rules, someone has to pay. If the agency is liable and cannot recover the cost from the client, that changes the economics of every booking.
There is a lot that agencies are waiting on, and it is worth being direct about what is not yet settled rather than pretending the picture is clearer than it actually is.
The exact reference period for guaranteed hours. It is expected to be 12 weeks, but the final regulations have not confirmed this.
The definition of “reasonable notice” for shifts. This is the area generating the most debate, and the outcome will vary in impact depending on your sector.
How costs are split between agencies and end hirers. The Government has indicated that both parties will share responsibility, but the mechanics of how that works in practice are not yet published.
How the rules interact with existing AWR obligations. Agency workers already have certain protections under the Agency Workers Regulations. How the new guaranteed hours and cancellation pay rules sit alongside AWR is an area that needs clarification.
Whether exemptions or sector-specific adjustments will apply. Some industry bodies have argued for sector-specific definitions of “reasonable notice.” Whether the Government agrees remains to be seen.
The consistent message from across the recruitment industry at recent events, including the ALP Roadshow, has been clear: agencies can and will adapt, but they need the detail now rather than regulations published weeks before implementation.
You do not need to wait for the final regulations to start preparing. There are practical steps you can take today that will put you in a much stronger position when the rules arrive.
This is the most important thing you can do. When the guaranteed hours obligation comes into force, you will need to know which candidates have been working regular patterns and what those patterns look like. If you only start tracking this when the rules land, you will be scrambling.
Record hours worked per candidate per week. Note which candidates are working consistently for the same client. Flag anyone approaching a 12-week pattern of regular hours. Your recruitment agency software should be doing this for you, but if it is not, start capturing it manually until it can.
Your contracts with end hirers need to address who bears the cost when shifts are cancelled at short notice. If your current agreements are silent on this, you are exposed. The time to have that conversation with your clients is now, while it is a planning discussion rather than a dispute about who pays.
Consider adding clauses that cover cancellation liability, minimum notice periods for booking changes, and cost recovery for short-notice cancellations. These do not need to mirror the final regulations exactly, but they need to establish the principle that cancellation costs are shared rather than absorbed entirely by the agency.
Look at how bookings are currently confirmed, communicated, and changed. Where does “reasonable notice” currently happen in your process, and where does it not? Understanding your current baseline will help you identify where changes are needed when the rules arrive.
Pay particular attention to sectors where short-notice bookings are common. If you operate in education supply, events, or industrial staffing, the gap between your current practice and the upcoming requirements may be significant. Identifying that gap now gives you time to close it.
Your consultants need to understand what is coming, not just the headline changes but the practical impact on how they manage candidates. They are the ones having daily conversations with workers about shifts, availability, and cancellations. If they are not aware of the upcoming obligations, they risk making commitments or handling situations in ways that create problems once the rules are live.
This does not need to be a formal training programme right now. A clear briefing covering what is changing, what is still uncertain, and what the agency is doing to prepare is enough at this stage.
Your workers will have heard about the Employment Rights Act. Some will have questions. Some will have expectations that may not match the reality of what is coming. Being proactive about communicating with your workforce, even when the detail is not yet finalised, builds trust and prevents misunderstandings later.
A simple message explaining that changes are coming in 2027, that you are preparing, and that you will keep them updated as the detail becomes clearer goes a long way. It also positions your agency as one that takes worker rights seriously, which matters more than ever with the Fair Work Agency now operating.
These changes are not arriving in isolation. They sit alongside statutory sick pay from day one (already live since April 2026), the Fair Work Agency conducting audits, zero-hours exclusivity protections (live since January 2026), day-one paternity and parental leave rights, and unfair dismissal reforms expected in 2027.
Taken together, the Employment Rights Act is fundamentally changing the operating environment for temp agencies. Not overnight, but steadily, across 2026 and 2027.
The agencies that will manage this transition best are the ones preparing now. Not panicking, not ignoring it, but methodically getting their recruitment agency software, contracts, processes, and teams ready for the detail when it arrives.
For a full breakdown of every Employment Rights Act change affecting temp agencies, including what is already live and what is still coming, visit our comprehensive guide on the Employment Rights Act 2025 for temp agencies.
What are guaranteed hours in temp recruitment?
Guaranteed hours are an upcoming obligation under the Employment Rights Act 2025. Workers on zero-hours or low-hours contracts who work regular hours over a reference period (expected to be 12 weeks) will be entitled to an offer of a contract reflecting those hours. This applies to agency workers as well as directly employed staff.
When do the guaranteed hours rules come into force?
The guaranteed hours obligations are expected to come into force in 2027. The exact date has not been confirmed. Government consultations on the detailed regulations closed in May 2026, and further clarity is expected later this year.
What is cancellation pay for agency workers?
Cancellation pay is compensation that workers will be entitled to when a shift is cancelled, moved, or shortened without reasonable notice. The amount is expected to reflect the pay the worker would have received for the cancelled shift, although the precise calculation has not been finalised.
Who pays cancellation compensation, the agency or the client?
The Government has indicated that both agencies and end hirers will share responsibility. The exact mechanics of how costs are split between the two parties are still being worked through in the regulations. Agencies should review their client agreements now to address cancellation liability.
How should temp agencies prepare for guaranteed hours?
The most important step is to start tracking working patterns for all agency workers now. Record hours per week, note consistent patterns, and flag candidates approaching regular hours over a 12-week period. Agencies should also review client agreements, audit shift management processes, and brief their teams on the upcoming changes.
Does the Employment Rights Act affect agency workers specifically?
Yes. The Act explicitly includes agency workers within the scope of guaranteed hours, shift notice, and cancellation pay protections. Responsibility for compliance will be shared between the agency and the end hirer, although the detailed regulations on how this works in practice are still pending.
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