Inside IR35 Contractors and the New Guaranteed-Hours Reforms: What Could Change?

A potentially significant employment-law development has emerged for UK contractors, particularly those working through recruitment agencies and umbrella companies on inside IR35 assignments.

On the 14th September 2026, contractor sector representatives highlighted concerns that forthcoming guaranteed hours reforms could have unintended consequences for temporary workers, including contractors whose engagements have been determined inside IR35. Eight organisations representing the recruitment and flexible work sector have asked employment minister Kate Dearden for discussions about the issue.

The reforms are not yet fully in force, and many of the important details will be determined through secondary legislation. Nevertheless, contractors should understand what is being proposed and why the issue matters.

 

What are the guaranteed hours reforms?

The Employment Rights Act 2025 introduced measures intended to tackle what the government describes as ‘one-sided flexibility’.

Qualifying workers are due to receive new rights including an offer of guaranteed hours reflecting hours worked during a reference period, reasonable notice of shifts, and payment where shifts are cancelled, curtailed or moved at short notice. The government’s consultation has indicated a preference for a 12-week reference period, although important implementation details are still being determined.

Importantly for the contractor market, the proposals extend beyond conventional zero hours employees.

Government material confirms that agency workers are intended to be covered, although precisely how the obligations will operate in agency supply chains remains an important issue.

 

Why could this affect inside IR35 contractors?

Many contractors whose assignments are determined inside IR35 work through umbrella companies or agency payroll arrangements.

They can therefore sit within the broader temporary agency workforce affected by employment law reforms even though they may regard themselves professionally as contractors rather than traditional zero hours workers.

The concern raised by industry bodies is that legislation designed primarily to protect insecure workers could inadvertently make certain professional contract assignments more difficult to operate.

For example, an agency might supply a specialist contractor to a client for six months. The client controls how long that project exists, but the agency or umbrella may have contractual responsibilities towards the worker.

If guaranteed hours obligations continue beyond the client’s requirement for the contractor, somebody in the supply chain could potentially inherit an employment cost over which they have limited commercial control.

The government’s earlier consultation itself recognised this difficulty, noting that agencies could become responsible for guaranteeing hours even though demand is largely dictated by end hirers.

 

Could it reduce contractor opportunities?

This is the key concern rather than a confirmed outcome.

Industry representatives argue that poorly calibrated rules could encourage agencies or hirers to shorten assignments, alter engagement models or become more cautious about temporary hiring.

That would be particularly unfortunate at a time when UK organisations need flexible access to specialist expertise across technology, engineering, transformation, finance and other project led disciplines.

However, contractors shouldn’t assume these consequences are inevitable.

The detailed regulations are still being developed. Government guidance published on the 28th August 2026 explicitly confirms that the new zero hours measures are not yet in force and says guidance will be updated as implementation progresses.

 

Does this change IR35 itself?

No.

The guaranteed hours reforms concern employment rights. IR35 and the off-payroll working rules concern employment status for tax.

They are related only insofar as some contractors determined to be inside IR35 subsequently work through umbrella or agency arrangements that could bring them into the population affected by these employment reforms.

An inside IR35 determination therefore does not itself create a guaranteed hours entitlement simply because the contractor has been classified inside IR35.

Similarly, these reforms don’t alter the tests used to determine whether an engagement falls inside or outside IR35.

Contractors should continue to assess each issue separately.

 

Why accurate IR35 status remains important

The latest debate nevertheless demonstrates the wider consequences that can flow from employment status decisions.

For contractors pursuing genuinely independent engagements, ensuring that contracts and working practices support the intended relationship remains important.

An IR35 Contract Review can help identify contractual provisions that may create status concerns before an engagement starts or when it is renewed.

Contractors should also remember that the written agreement isn’t the entire picture. An IR35 status review, which includes looking at the working practices of the engagements, should fully reflect the relationship described in the contract.

Where appropriate, retaining contemporaneous evidence of independence, project deliverables and the genuine operation of the engagement can strengthen the contractor’s position.

 

Protecting the wider contracting business

IR35 is only one risk associated with operating a limited company.

Contractors delivering professional advice, consultancy, software development or other specialist services can potentially face allegations that an error or omission caused a client financial loss. Professional Indemnity Insurance can provide protection against covered professional negligence claims, subject to policy terms and limits.

Public Liability Insurance addresses different risks involving third-party injury or property damage, while Employers’ Liability Insurance may be required depending upon a contractor company’s circumstances.

Separately, IR35 Insurance can provide protection against specified costs and liabilities arising from a covered HMRC IR35 investigation.

The appropriate protection therefore depends upon the contractor’s individual business and engagements.

 

What should contractors do now?

There is no reason for contractors to make immediate changes purely because of the guaranteed hours proposals.

Instead, contractors working through agencies or umbrellas should follow the development of the regulations and understand how their contractual arrangements might be affected.

Those operating through limited companies should continue concentrating on robust contracts, genuine working practices and appropriate insurance protection.

The contractor sector is right to scrutinise legislation designed for the wider temporary workforce. Professional contracting depends upon flexibility for both businesses and individuals, and the challenge for policymakers will be preserving that flexibility while improving protection for workers who genuinely need greater certainty.

For now, the important distinction is simple:

The reforms are coming, but the detailed rules that will determine their practical impact on contractors are still being developed.