Zero-hours contracts, where an employee lacks a fixed set of working hours from their employer, have faced scrutiny for some time. While these contracts can offer flexibility for employers, they often leave workers with uncertain job security and expose them to potential exploitation. However, recent updates to the Employment Rights Bill will introduce new rules regarding the use of zero-hours contracts, aiming to provide greater security and predictability for workers.
This month, we outline the changes and offer guidance on how businesses can prepare for this specific aspect of employment law reform.
Why Are Zero-Hour Contracts Under Fire?
Zero-hours contracts (link to article on zero-hours contracts) are a type of employment agreement that does not guarantee a specific number of working hours. Under these contracts, employees are offered work by the employer as needed, often with very little notice.
Zero-hours contracts have garnered considerable criticism in recent years. Concerns have been raised that these contracts could be exploitative, mainly favouring employers. The TUC reports that hundreds of thousands of individuals work under zero-hours agreements, despite long service with the same company. Additionally, these contracts have faced condemnation for their inherent instability, leaving workers unable to predict their shift schedules and causing their income to fluctuate from week to week.
Will Zero-Hours Contracts Be Banned Under the New Legislation?
Labour had previously stated its intention to ban zero-hours contracts but has since diluted this promise, shifting instead to a commitment to prohibit ‘exploitative’ zero-hours contracts.
It came as no surprise that the Employment Rights Bill does not implement a total ban on zero-hours contracts; rather, it introduces several measures designed to make them more predictable and equitable, focusing on enhancing security for workers engaged in these contracts.
Key Changes to Zero-Hours Contracts
The Employment Rights Bill introduces several essential changes to zero-hours contracts, including the following:
Notice for Shifts
Employers are required to give workers reasonable notice before scheduling a shift. If a shift is cancelled with less than the necessary notice before its scheduled start, workers may be eligible for compensation. Furthermore, there is a right to compensation for shifts that are rescheduled or shortened on short notice. The specific details of what constitutes reasonable notice will be detailed in regulations.
Minimum Guaranteed Hours
Under the new legislation, employees on zero-hour contracts may be eligible for a minimum number of guaranteed hours each week, provided they work consistent hours over a specified period. This change seeks to enhance their job security and provide a more stable income.
Providing the Same Protections to Agency Workers
The government expressed concern that employers might sidestep the new protections by hiring agency workers rather than recruiting zero-hours workers directly.
The consultation response regarding extending protections for zero-hours contracts to agency workers addresses this risk by stating that these workers will receive the same safeguards. They will also have the right to be offered a guaranteed hours contract and will receive reasonable notice for shifts and any changes to them. The government has specified that the responsibility for offering guaranteed hours falls to the end-user, with both the agency and the end-hirer responsible for providing reasonable notice.
Agency workers can turn down a guaranteed hours contract and maintain their zero-hours contract for its flexibility, should they prefer. Nevertheless, employers are obliged to offer a guaranteed hours contract at the conclusion of each review period, even if the worker has previously turned it down.
Implications for Employers
One consequence of these changes is that employers may become overstaffed due to the necessity of increasing hours across the board. The new provisions make it considerably more challenging for employers to adjust their workforce in the manner they currently can.
The new rules regarding reasonable notice for shift cancellations and alterations may impact an employer’s flexibility and could potentially increase costs associated with shift adjustments.
Nevertheless, adhering to the new regulations can ultimately prove advantageous for employers. For example, better employee morale, lower chances of disputes, and an improved employer reputation are likely positive outcomes of maintaining compliance.
When Are These Changes Expected To Come Into Effect?
The Employment Rights Bill is expected to become law in July 2025; however, most of the key reforms will not take effect until 2026.
What Should Employers Do To Prepare?
Employers will need to adapt their staffing practices, which may result in a greater administrative burden and difficulties in managing flexibility alongside business requirements.
Employers can start to implement various measures to facilitate a seamless transition to the new regulations, including:
- Reviewing and updating contracts, employers will need to ensure that all zero-hours contracts are updated to reflect the new minimum hours requirements, notice periods, and cancellation policies.
- Monitoring work patterns and logging hours worked now to make sure they are ready to offer guaranteed hours contracts if necessary.
- Providing training to managers on the new legislation will enable them to handle any changes and requests efficiently while ensuring compliance. Furthermore, employers should update the staff handbook and rota management policy to reflect the new laws regarding shift cancellation compensation and minimum notice periods.
- Considering alternative options to zero-hours contracts, such as fixed-term or annualised hours contracts.
- Clearly communicate the changes to employees so they understand their rights under the new legislation.
Contact Our Expert Employment Team
The Employment Rights Bill represents a notable change in the management of zero-hours contracts.
We are committed to helping employers navigate these changes, ensuring compliance with the law while promoting a fairer and more secure working environment.Contact our specialist employment law team today to discuss how these changes affect your business and to understand how to comply with the new regulations regarding zero-hours contracts. You can reach us on 0300 303 2071 or via email.
