Navigating Labour’s New Employment Legislation: Why Limited Company Contractors and Agency Temps Could Be the Solution

With Labour’s upcoming legislative changes strengthening unfair dismissal protections, businesses face increased challenges when hiring and managing interim staff. The new laws aim to provide greater job security for employees, making it harder for companies to dismiss workers without following strict procedures. However, these changes will have varying effects depending on how a worker is engaged—particularly for those operating through limited companies (PSCs) or umbrella companies.

How Will the New Legislation Affect Hiring Interims?

The key issue for employers is that directly hiring temporary workers may now come with additional risks. If a business engages a fixed-term employee, they could fall under these new protections, making termination more complex. This could lead to increased costs, longer disputes, and less flexibility in workforce planning.

However, businesses still need interim talent, whether for project work, covering long-term absences, or managing workload spikes. So, what’s the alternative?

The Benefits of Hiring Through LTD Contractors or Agencies

Limited Company Contractors (PSCs) Remain Flexible

• ‍‍Contractors operating through their own Personal Service Company (PSC) are typically classified as self-employed rather than employees.
• Since they are engaged on a business-to-business basis, they do not receive employment rights such as unfair dismissal protection.
• This means companies can still engage and release PSC contractors swiftly based on project needs, avoiding the legal complexities tied to full employment.

Agency and Umbrella Workers Still Offer Agility

• Workers engaged via an umbrella company are classed as employees of that company, not the end client.
• While they will benefit from the new protections, agencies and umbrella firms often have structured processes for managing redeployments or terminations, reducing risk for the hiring company.
• Using an agency temp model ensures compliance with employment law while maintaining operational flexibility.

What Does This Mean for Employers?

With increased employment protections on the horizon, hiring directly on fixed-term contracts could become riskier and more complex. Engaging interim talent through limited company contractors or agency solutions allows businesses to retain the flexibility they need without exposing themselves to unnecessary legal risks.

For organisations that rely on temporary expertise, now is the time to reassess hiring strategies. Partnering with the right agency or engaging PSC contractors could be the key to maintaining agility in an evolving legislative landscape.