What Employers Need to Know About Zero-Hours Contracts and the Employment Rights Bill

Zero-hours contracts provide no minimum guaranteed work hours and, in some cases, provide that the worker is not obligated to accept the work offered.

Each piece of work or assignment constitutes a new and severable contract, leaving workers without a consistent income or job security.

However, this can benefit some individuals, particularly those with study or family commitments or those looking to earn some additional income during summer or Christmas periods, for example.

These contracts are most prevalent in the hospitality and retail sectors, and with over 1 million workers reported to be on zero-hours contracts between April and June 2024, any update to their use will have far-reaching implications.

The Employment Rights Bill proposes a balance between maintaining flexibility and providing more security to workers.

Here’s what’s changing:

Guaranteed Hours

The Bill requires employers to offer guaranteed hours to qualifying workers based on the hours regularly worked over a defined reference period, currently expected to be 12 weeks.

This applies to workers working under a zero-hours contract and those with a low number of minimum guaranteed hours but work more than those hours in the reference period.

What constitutes “low” is still to be set out in further regulations.

The offer of guaranteed hours should reflect the hours worked during the reference period, and the employer must set out the days of the week and times when the employer will make work available.

The offer must be made after an initial reference period (suggested as 12 weeks), and if more hours start to be regularly worked after this time, the employer is required to provide a further offer during subsequent reference periods.

The offer provided by the employer will be open for acceptance for a specific “response period”, which is still to be determined.

If a worker accepts the offer, they will start working under the new or varied contract the day after they inform the employer of acceptance.

The obligation to offer guaranteed hours is repeatedly triggered until the worker no longer qualifies for the right, most likely if they cease to be a low-hours worker.

There is, however, no obligation for the worker to accept any offer of guaranteed hours and, notably, the employer will be obliged to make subsequent offers during the cycle of reference periods if the worker rejects the offer of guaranteed hours and opts to remain on a zero or low hours contract or if the worker accepts the offer but still falls below the minimum number of “low” hours.

Implications for Employers

The requirement to make an offer will likely lead to increased administrative burdens, requiring employers to carefully track hours worked and reference periods for all zero-hours and low-hours workers.

Responding to customer demand could also become harder for employers to manage.

Where an offer of guaranteed hours is accepted, these become a permanent fixture of the worker’s employment, and there currently appears to be no scope to later unilaterally reduce the number of guaranteed hours if circumstances change.

In an attempt to resolve these issues for employers with temporary high levels of work, the Bill provides for circumstances where it will be considered reasonable to offer a “limited-term” (fixed-term) contract.

The circumstances are quite broad and could extend to predictable seasonal fluctuations, which will be welcomed by employers in the hospitality and retail sectors.

Additionally, the Bill also provides that employers will not be obliged to make an offer where the worker is fairly dismissed or resigns during the reference period or offer period, and there is no need to make an offer if a “limited term” contract ends because of a specified event.

Where those exceptions do not apply, and an employer fails to offer guaranteed hours to a worker on the required terms, the worker will have the right to bring an employment tribunal claim.

In those circumstances, a Tribunal may award compensation based on financial loss (which will continue to be subject to deductions due to mitigation efforts or lack of).

Similarly, workers have the right not to be subjected to a detriment because they accepted or rejected any offer, and an employee who is dismissed for accepting or rejecting any offer will be considered automatically unfairly dismissed. 

Shift Scheduling and Advance Notice

The Employment Rights Bill also provides employees with reasonable notice of a shift they are required to work and reasonable notice of any change or cancelled shift.

Employers are also obligated to pay workers each time their shifts are cancelled or changed at short notice, with the aim of compensation being proportionate to the cancellation or curtailment.

Further details of these rights will be clarified in subsequent regulations.