Zero-hour Contracts

Policy

Zero-hour contracts

The Employment Rights Bill does not ban zero-hour contracts outright but includes several measures that could significantly inhibit their use.  

The Employment Rights Bill contains detailed and (very) complex rules, but in short will require employers to make a “guaranteed hours offer” to “qualifying workers” after the end of certain “reference periods”.  

For now, much of the detail of how this will operate is left to further regulations, but what we know so far is: 

• To whom it will apply: A “qualifying worker” includes zero-hour workers and certain “low hours” workers who have a low number of guaranteed hours. What is considered “low hours” will be set in regulations. Where this threshold falls will have a big impact on how significant this new right will be.
• When to make a guaranteed hours offer: An employer must make a “guaranteed hours offer” to a worker if during the “initial reference period” the number of hours they work exceeds their minimum contractual hours and does so in a way that triggers the obligation to make a guaranteed hours offer under the provisions. The detail will be set in regulations including:
  • The length of the initial reference period, although the Government indicates this will be 12-weeks; and  
  • The detail of the conditions that would trigger the obligation to make an offer (such as the number or regularity at which the worker exceeds their minimum contractual hours over the reference period).   
• This is not a “one time only” duty on employers, instead employers will have to repeat the assessment of whether a new guaranteed hours offer needs to be made. After the initial reference period, the employer must monitor the worker’s working time over subsequent reference periods (the length of which is unknown – again, this will be subject to consultation and will be set in regulations) and offer further contracts for guaranteed hours if the conditions to make an offer are met.
• As the law has been drafted to permit a worker the flexibility to choose to accept or reject a guaranteed hours offer, there are a raft of complicated rules as to what will constitute such an offer, with certain crucial details left to regulations.
• Information rights: In addition, a set of Government amendments, agreed at Committee Stage, to these provisions will place a duty on employers to take reasonable steps to give and provide continued access to specified information to certain workers regarding their rights to a guaranteed hours offer within an “initial information period” and continuing thereafter.
• Exceptions and withdrawals: There are some exceptions where an employer will not be required to make a “guaranteed hours offer”, or such an offer will be treated as withdrawn, where there is a “relevant termination” (such as employee resignations other than constructive dismissal, worker terminations, fair dismissals, or expiry of a fixed term contract) during the reference, offer or response periods. Government amendments, agreed at Committee Stage, will require employers to give workers notice where they consider an exception to the duty to make a guaranteed hours offer or where a guaranteed hours offer has been considered to be withdrawn.
• Limited term contracts: Where work is genuinely temporary there will be no expectation on employers to offer permanent contracts, but a guaranteed hours offer can only be on a limited-term basis if it is “reasonable”. However, a Government amendment to the Employment Rights Bill, agreed at Committee Stage, will essentially create a rebuttable presumption that it is “not reasonable” for the workers contract to be limited-term unless the contrary can be shown.
• Claims: A worker can bring a claim to the employment tribunal for failure by an employer to make an offer or a compliant offer for the purposes of these provisions. A successful claim can lead to an award of compensation (with regulations being needed to set the maximum compensation that could be awarded). There are also amendments to the Employment Rights Bill that have been tabled by the Government for additional rights to bring a complaint to the employment tribunal regarding failing to give certain information or notices under the provisions. As is usual, there are some corresponding dismissal and detriment protections. 

Currently, the provisions do not apply to agency workers, but the Employment Rights Bill provides that regulations may be made to extend these protections to agency workers. The Government launched a Consultation on 21 October 2024 asking for views on, for example, whether the responsibility for offering agency workers guaranteed hours should fall to the employment agency or the end hirer. A response is now awaited. 

These provisions are complicated, and unfortunately much of the detail is saved for regulations, so we cannot say yet how this new right will work in practice. There is also a promise to consult at a later date on the implementation of the zero-hour contracts measures more generally. 

It will be interesting to see what the threshold will be for being a “low hours” worker, as some employers may try to bypass these complicated laws and just set minimum contractual hours above that threshold if they aren’t set too high. Even then – this might not be workable for all businesses. 

Further, as the obligation to monitor working time and make guaranteed hours offers is an ongoing one, this will likely be a compliance headache for smaller businesses and for certain sectors such as retail and hospitality that may rely on zero-hour contracts to fill seasonal resourcing gaps. 

Employers may be considering that agency workers could fill the resourcing needs to avoid these rules. However, if the new rules will extend to agency workers – this could result in even more complicated processes or increased costs for such workers. 

Notification of shifts

The Employment Rights Bill will introduce the following rights and obligations: 

• It will require an employer to give a worker “reasonable notice” of shifts for workers engaged on a zero hours or minimum hours basis, as well as workers with no set working patterns. What length of time amounts to ‘reasonable notice” is not defined and the minimum time will be left to regulations. 
• Such workers also will have the right to “reasonable notice” of any cancellation of or change to a shift. 
• If an employer fails to provide sufficient notice of a cancelled, moved or curtailed shift, they must make a payment to the worker (the amount of the payment will be set out in regulations – but it will be proportionate to the cancellation, change or curtailment). 
• As for the guaranteed hours offer, these provisions also do not apply to agency workers, but there is a specific provision in the Employment Rights Bill that states further regulations may extend these protections to agency workers.  The Government launched a Consultation on 21 October 2024 (now closed) on how these provisions could apply to agency workers, asking (among other questions):
  • Whether responsibility for providing the agency worker with reasonable notice of shifts should rest with both the agency and end-hirer; and
  • Whether the agency should be responsible for paying any short notice cancellation or curtailment payments to an agency worker and whether this cost can be recouped from the end -hirer. 

The above provisions are aimed at ending one-sided flexibility, although this will put the onus on the employer (or agency if applicable once the above consultation has been completed) to be organised with resourcing and to make payments for short notice changes to shifts – this may be more significant for large employers that employ flexible workers regularly (such as in retail and hospitality). 

Also of note is that the Workers (Predictable Terms and Conditions) Act 2023, which would introduce a new right to request a predictable working pattern, was due to be brought into force this Autumn. The Employment Rights Bill will repeal this Act. 

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Timing and developments

Included in the Employment Rights Bill.  

Further consultation and regulations are required. For example, regulations on:  

• Guaranteed hours offers – the definitions of low and zero-hour contracts, length of any reference periods and the requirements of a guaranteed offer etc; and  
• Shifts – what amounts to short notice or a moved shift and the payment amount). 

The Government launched a Consultation on 21 October 2024 on how the provisions will apply to agency workers, which closed on 2 December 2024. A response is now awaited and it is likely that guidance will also be needed. Further consultation is also promised in respect of the rights more generally and are likely to commence in 2025. 

Implementation is currently anticipated no earlier than 2026, though firm details on timing have not yet been provided.