The Employment Rights Act 2025 represents the most significant overhaul of UK employment law in a generation. For logistics and manufacturing businesses that rely on agency workers — whether for ad hoc cover, peak season operations or managed service arrangements — the implications are substantial and, in some cases, carry real financial and legal risk.

At MCI People, we have been working through the detail with our clients since the Act received Royal Assent. This article sets out the four areas that matter most to industrial employers, and explains how our True Cost Clarity audit helps you understand your exposure before it becomes a problem.

Under the Employment Rights Act 2025, a number of rights that previously required a qualifying period of continuous employment now apply from the first day of work. These include:

Unfair dismissal protection. Workers can no longer be dismissed without a fair reason and a fair process simply because they have not yet reached a qualifying threshold. For businesses using agency workers on rolling or repeated assignments, this changes the risk profile significantly. Where an agency worker has been placed repeatedly at the same site over an extended period, the question of employment status — and who bears the liability — becomes more pressing.

Flexible working requests. The right to request flexible working now applies from day one, with a tighter response window for employers. For shift-based operations, this requires a clear process for handling requests from agency workers as well as direct employees.

What this means for you. If you use agency workers regularly, you need to be clear about the contractual relationship, the length and pattern of assignments, and how your agency manages the employment relationship on its side. MCI People operates transparent, compliant contracts and will always advise you if an assignment pattern creates risk.

This is the area that has generated the most concern among our clients, and rightly so.

The Act introduces provisions that can make end-user businesses jointly and severally liable for unpaid tax and National Insurance contributions where an umbrella company has failed to operate PAYE correctly. In plain terms: if a worker is paid through an umbrella company that does not remit the correct tax, HMRC can pursue you — the business that engaged the worker — for the shortfall.

The scale of the risk. Mini-umbrella fraud and non-compliant umbrella arrangements have cost the Exchequer hundreds of millions of pounds. HMRC has made clear that it intends to use the new joint liability provisions actively.

What this means for you. If any of your agency suppliers use umbrella companies to pay workers, you need to understand exactly how those arrangements work and whether they are compliant. You should be asking your agency for written confirmation of the payroll model used for every worker placed with you, and evidence of compliance.

MCI People does not use umbrella companies. All workers placed by MCI are paid directly through our own PAYE payroll. We can provide full payroll transparency on request.

The Act consolidates and clarifies the calculation of holiday pay for workers with irregular hours — a category that covers the vast majority of temporary and agency workers in the industrial sector.

The key change. Holiday pay for irregular-hours workers must now be calculated as 12.07% of all hours worked in the relevant reference period, including overtime. The previous practice of paying a flat rate or using a simplified calculation that excluded overtime is no longer compliant.

Rolled-up holiday pay. The Act formally permits rolled-up holiday pay for irregular-hours workers, provided it is clearly identified on payslips and calculated correctly. This is a significant practical change for agencies and their clients.

What this means for you. If your agency is not calculating holiday pay correctly, the liability can fall on you as the end-user in certain circumstances. You should ask your agency for a clear explanation of how holiday pay is calculated and evidenced for every worker placed with you.

MCI People calculates holiday pay in full compliance with the Act. Our payslips clearly identify holiday pay accrual, and we are happy to walk any client through our methodology.

The Employment Rights Act 2025 does not just change what you owe workers — it changes the risk profile of every agency relationship you have. A supplier that was compliant under the old rules may not be compliant under the new ones.

Our True Cost Clarity audit is a structured review of your current agency arrangements, designed to give you a clear picture of:

• The payroll models in use across your agency supply chain
• Whether holiday pay is being calculated and evidenced correctly
• The employment status and contract structure for workers on long-running assignments
• Any umbrella or intermediary arrangements that could create joint liability exposure
• The gap between the rate you are paying and the true cost of compliant employment

The audit is straightforward, takes less than a week to complete, and gives you a written report you can share with your legal team, your finance director or your auditors.

It is not a sales pitch. If your current arrangements are compliant, we will tell you so. If they are not, we will explain the risk and give you options — whether that means switching to MCI or simply tightening up your existing supplier relationships.

If you would like to discuss the Employment Rights Act 2025 and what it means for your operation, or if you would like to arrange a True Cost Clarity audit, get in touch with our team.

We respond to all enquiries within 2 hours during business hours. Call us on 024 7786 0209 (Coventry), 01392 964229 (Exeter) or 07904 262488 (mobile), or use the contact form on our website.

This article is for general information purposes and does not constitute legal advice. We recommend taking independent legal advice on your specific circumstances.