Earlier this month the government issued a consultation on its zero hours reforms which will be introduced under the Employment Rights Act 2025. The consultation closes on 25 August, and the new measures are scheduled to come in sometime next year. Given the complexity of this area it's likely that this won't be until the latter half of 2027!
What are the zero hours reforms?
Regulations are required to set out the key details of the zero hours measures and the purpose of the government's consultation is to focus on those details.
Once implemented, those workers in scope will have:
- a right to guaranteed hours (where the hours offered reflect those worked during a reference period);
- a right to reasonable notice of shifts; and
- a right to payment for shifts cancelled, curtailed, or moved at short notice.
The zero hours measures have also been extended to agency workers. The rationale behind this is to avoid employers moving to an agency model as a way of circumventing the zero hours provisions.
Guaranteed hours
Who qualifies?
A worker must either work on a zero hours contract or arrangement, or be guaranteed a number of hours below an "hours threshold" to be specified in regulations.
The worker must also have worked during the reference period. If they are on a low guaranteed hours contract then they must have worked in excess of their contracted hours, and their hours must have met the regularity requirements.
The hours threshold
The purpose behind the hours threshold is to include workers who are guaranteed some hours but experience unpredictability of hours and income in a similar way to zero hours workers. It is not the government's intention to include workers who already have a baseline level of security and predictability.
The government's preference is to set the threshold within the range of 8 to 20 hours per week, although the consultation invites views on options ranging from 8 to 48 hours per week for both directly engaged and agency workers.
The reference period
Guaranteed hours offers must be calculated by employers based on the hours worked by a qualifying worker during a reference period. Low-hours workers will be eligible for offers if the number of hours they work during their reference period exceeds the minimum number of hours specified in their contract. Offers will then have to be made at the end of every reference period, until the worker no longer qualifies as a zero or low-hours worker.
The hours worked during the reference period must satisfy conditions around regularity and/or number. Only workers who work regularly for their employer will be entitled to the right to a guaranteed hours contract.
There are two types of reference period to consider: the initial reference period and subsequent reference periods. The government's preference is for the initial reference period to be 12 weeks long, however the consultation still asks for views on whether it should instead be 26 weeks, 52 weeks or another period.
The government is seeking views on the length of the subsequent reference periods; whether they should be the same as the initial reference periods or longer (six months or a year are proposed) and whether they should begin immediately after the previous reference period. The government acknowledges that rolling 12-week subsequent reference periods could increase administrative burdens for employers, while longer periods of 26 or 52 weeks, or periods with gaps, could reduce this burden. Subsequent reference periods cannot be used to reduce hours already guaranteed in a contract.
Hours and regularity
Only workers who work regularly for their employer will be entitled to the right to guaranteed hours. The government is consulting on two options:
- Option A: A weekly distribution requirement – under this requirement the worker must have worked a minimum number of hours during the reference period. For example, if the requirement is set at 8 weeks, a worker who worked in 8 or more weeks of a 12-week initial reference period would qualify. In effect what this means is that if a worker worked well in excess of their guaranteed hours overall but only worked in 7 of the 12 weeks in the reference period then that would not be enough to qualify.
- Option B: A weekly distribution requirement plus a total hours requirement; the worker must have worked both a minimum number of weeks and a minimum number of hours above their contracted hours. This would make qualifying more difficult, meaning workers could work a limited number of hours in excess of those guaranteed (for example as voluntary overtime) without qualifying for an offer.
Temporary need or seasonal work
Employers can use limited-term contracts to manage periods of increased demand, such as seasonal fluctuations. If a limited-term contract is shorter than the relevant reference period, the employer would not need to make a guaranteed hours offer, provided it was 'reasonable' for the contract to be entered into on a limited-term basis. The consultation gives the example of a worker who is only needed for 8 weeks to perform a specific task, and the contract terminates after it is completed.
A limited-term contract is reasonable where it would be reasonable for the employer to consider:
- that a worker is only needed to perform a specific task,
- that a worker is needed only until a particular event occurs; or
- for another 'temporary need' as defined in regulations.
The consultation asks for examples of temporary needs that are not related to a specific task or event.
How will a guaranteed hours offer be calculated?
A guaranteed hours offer will reflect the number of hours a qualifying worker worked during a reference period. The government is considering two different calculation methods.
- Under Option 1 (mean average), every hour worked will equally influence the number of hours guaranteed in the offer.
- Under Option 2 (median average), hours worked during outlier weeks (e.g. unusually high or zero hours) will have less influence, which could be more representative of the hours a worker regularly works.
A particularly busy week out of the 12-week period when the worker worked for 60 hours could significantly increase the guaranteed hours offer if the mean average was used (option 1) but will only have a minimal impact on the median average (option 2).
The government is also considering allowing employers a small 'adjustment margin' (a fixed figure e.g. 2 hours or a percentage of the hours generated by the calculation e.g. 10%) when making offers, to protect against theoretical legal liability arising from minor calculation errors. The consultation points out that in some cases, it could also make it easier to align guaranteed hours offers with an employer's usual shift allocation pattern, e.g. where shifts are always 8 hours long and an offer is close to a multiple of 8 it could be revised up or down.
Employers would be able to add or subtract the margin from the offer. The margin – whether a percentage or a fixed amount – would need to be small to ensure that the offer reflects the number of hours worked during the reference period.
The consultation also asks whether an employer should have flexibility to determine how hours will be allocated (weekly, monthly or otherwise) or whether this should be set out in regulations.
What happens if a worker refuses a guaranteed hours offer?
Although an employer has to offer guaranteed hours to workers who fall in scope of the provisions the worker can then choose either to accept or reject the offer. There will then be a further reference period, at the end of which the employer will again have to offer guaranteed hours should the worker remain or become eligible. This obligation to make an offer will continue on repeat until the worker no longer qualifies for the right. If a new or varied contract is accepted by the worker which has guaranteed hours which exceed the "low" number threshold, the employer will no longer need to monitor their hours or make further offers.
Notice of shifts and payments for shifts cancelled, moved or curtailed at short notice
Who is eligible?
The government proposes that the rights to reasonable notice and payment for shifts cancelled, curtailed, or moved at short notice should only apply to people with up to and including a certain number of hours guaranteed in their contract — the "hours threshold". The "hours thresholds" could be the same as the guaranteed hours measure although it wouldn't have to be. The consultation gives options of between 8 and 48 hours a week.
If a worker accepts a guaranteed hours offer which takes them over the hours threshold then they will no longer be in scope of the rights to reasonable notice and short notice periods. If, for instance, the hours threshold for the right to reasonable notice and payment for shifts cancelled, moved or curtailed at short notice was 16 hours a week, and a worker received a guaranteed hours offer of 18 hours a week, then accepting this offer would take them out of scope of the rights to reasonable notice and short notice payments.
As the consultation points out workers will have more security and predictability after accepting an offer of guaranteed hours and so may have less need for the rights to reasonable notice and short notice payments. It also points out that the more guaranteed hours a worker has, typically the less scope there is for the timings of their work to move around in the week.
What is reasonable notice?
The consultation asks how much notice should be presumed reasonable. For those workers who are directly engaged, options are one week; two weeks; three weeks; four weeks; and "other".
A fixed period of notice in every case is unlikely to work in all situations and so what is "reasonable" will be case dependent. The consultation seeks views on the circumstances in which it might be acceptable to offer shifts with less notice, and the circumstances in which employers should provide more notice. It might be that more notice should be expected when a worker is contractually obliged to work any shifts that are offered to them than when a worker is free to turn down any shift that is offered. It may also be that less notice should be expected if an employer is seeking cover for another worker who has unexpectedly called in sick or is unable to work at the last minute for some other reason.
Payments for cancelled, curtailed or moved shifts
Employers will have to make a payment to eligible workers when they cancel, curtail, or move a shift at short notice. Short notice payments won't be required where the cancellation, movement, or curtailment is initiated by the worker — for example, where a worker notifies the employer at short notice they cannot work, or where two workers voluntarily agree to swap a shift.
The government is also considering whether to have one time period or to have a short notice period (anything from 1 day up to 7 days) and a separate 'very short notice' period (less than 1 day up to 5 days), with a higher payment due for cancellations, movements, and curtailments at very short notice.
The payment should relate to how much the worker would have earned had they worked the shift. Two options are considered:
- a percentage of what the worker would have earned from the shift at their actual rate; or
- a percentage of what they would have earned from working the relevant hours at the applicable National Minimum Wage rate.
The consultation also asks what that percentage should be (ranging from 10-80%).
The consultation seeks views on whether there should be exceptions to the payment requirement in certain circumstances, such as where the cancellation arises due to an extreme weather event or widespread power outage.
Enforcement of the new rights
The Act places primary enforcement responsibility with the employment tribunal system, but the government also intends that the Fair Work Agency (FWA) will enforce aspects of these rights to help increase compliance.
It will be possible for a worker who is not offered hours on the required terms to bring an employment tribunal claim. If the claim is successful, the tribunal must make a declaration and may make an award for compensation. The compensation awarded will be capped (details of this will be set out in regulations) and will be that which is just and equitable based on the individual's financial loss (which is likely to be based on the guaranteed hours that should have been offered).
Workers will have a right not to be subject to a detriment because they accepted or rejected any offer. Any dismissal of an employee for accepting or rejecting an offer will be automatically unfair. The usual rules for unfair dismissal compensation will apply.
The government proposes that the FWA could issue notices of underpayment, requiring employers to pay arrears owed to workers, and pay an additional penalty to the government. It proposes setting the penalty for non-compliance with short notice payments at 50% of the arrears owed to the worker, with a minimum penalty of £100 and a maximum of £5,000 per worker.
Conclusion
There is still considerable uncertainty surrounding the zero hour provisions and a lot will hinge on what the low-hours threshold will be. Obviously the lower the threshold, the fewer workers will fall within the remit of the employer's obligation to offer guaranteed hours contracts.
The main point to make is that for employers flexibility is going to be key, and if the zero hours provisions are too difficult to manage then it's likely that employers will look at instituting short fixed term contracts or the use of self-employed contractors as a way of avoiding them.
It will be key to make your voices heard and feed into the consultation so that you have some say over the way the new measures will be implemented.
