As part of the Labour government's commitment to end 'one-sided flexibility', the Employment Rights Bill introduces a requirement on employers to offer qualifying zero-hours and 'low-hours' workers a contract with guaranteed hours reflecting the hours worked during a reference period (expected to be 12 weeks). It also creates new rights to reasonable notice of shifts and to payment for shifts cancelled, moved or curtailed at short notice.

Zero-hours contracts

With a zero-hours contract, an individual:

  • has no guarantee of work i.e. you are not obliged to give them any minimum working hours; and 
  • is only paid for the hours they actually work.

According to data from August 2024 over 1 million people in the UK are on zero-hours contracts. Although the government accepts that they can benefit both parties, it is of the view that they often lead to 'one-sided flexibility' with workers bearing the financial risk.

Right to guaranteed hours

The Employment Rights Bill ('the Bill') does not ban 'exploitative zero-hours contracts' (as had been expected). Instead it sets out complex rules requiring employers to make an offer of guaranteed hours to a qualifying worker after the end of every reference period (expected to be 12 weeks).

Who does the right apply to?

The right to guaranteed hours will apply to qualifying zero-hours and 'low-hours' workers. 'Low-hours' workers will be anyone with a low number of guaranteed hours (to be set out in regulations) who works more than those hours in the reference period, meaning that employers cannot avoid the requirement by engaging workers on, for example, one-hour contracts. Workers will not need to be engaged continuously throughout the reference period to qualify.

Making an offer

Where the worker's 'reference period hours' exceed the minimum number of hours provided for under their contract, employers will have to offer a new or varied contract that reflects the hours worked during the reference period.

The offer must set out the days and times when the employer will make work available, or a working pattern of days and times. An offer must be made after the initial reference period and after each subsequent reference period (presumably, although this is not clear, until the worker no longer qualifies as a zero-hours or low-hours worker).

The offer can be made on a fixed term basis if it is reasonable to do so and there is a 'limiting event' e.g. the worker is needed for a specific task or until the occurrence of an event, or there is only a temporary work need (such as providing cover for another worker). This could potentially cover seasonal fluctuations in work and allow, for example, a fixed-term contract to be offered after a particularly busy Christmas period.

Response period

A worker will have until the end of a 'response period' to decide whether or not to accept the offer of a guaranteed hours contract. If they don't accept, it seems that the employer will need to make a new offer at the end of every reference period.

What is still unclear

A number of issues remain unclear and will be consulted on and set out in regulations, for example:

  • the length of the reference period
  • what constitutes a 'low-hours' contract
  • what constitutes 'reference period hours'
  • how employers should calculate the guaranteed hours to offer (is it just an average of the hours worked over the 12 weeks?)
  • what form the offer must be made in, when it must be made by, and how long it remains open for
  • how long the response period will be
  • how much a tribunal can award an employee who has not been offered the correct contract
  • exceptions to the duty to make an offer.

Right to reasonable notice of shifts and to payment for cancelled, moved and curtailed shifts

Currently any rights in relation to shift scheduling depend on the terms of the contract. Although it is not considered good practice, unless there is a term prohibiting it in the contract, employers can cancel work at late notice.

There is going to be a new statutory right to reasonable notice of shifts and changes affecting shifts. What amounts to reasonable notice will depend on the circumstances, and the government is to consult on what would be an appropriate specific minimum time period.

The Bill also requires employers to make payments to workers if they cancel, move or curtail a shift at short notice. Detailed information will be set out in regulations – following a consultation process - including what constitutes short notice, how much the payment will be, and any exemptions.

The consultation will also cover what contracts are in scope. Workers on irregular shift patterns, zero-hours contracts or low-hours contracts will be covered. Contracts based on a low level of guaranteed pay could also be included.

Tribunal claims

An employee will be automatically unfair dismissed if the principal reason for dismissal is that they accepted or rejected a guaranteed hours offer. A worker will have the right not to be subjected to a detriment on the ground that they accepted or rejected a guaranteed hours offer or declined to work a shift because they reasonably believed that their employer had failed to give reasonable notice.

Agency workers

At the moment the measures don't apply to agency workers, but the government has launched a consultation on whether / how to apply them to agency workers. One key aspect is whether the end user or the agency should offer the guaranteed hours. The government is proposing that both the end user and the agency should be responsible for providing reasonable notice of shifts, and that either or both can be liable to compensate. 

In practice

Although the Bill does not go as far as banning zero-hours contracts, it makes them – and low-hours contracts – considerably less flexible and may result in resourcing challenges in some sectors. The administrative and potential cost burden may result in employers looking to other working arrangements such as fixed-term contracts. Much will depend on the results of the consultation on the proposals.

There is no need for immediate action given that much of the detail is still to follow. The government has indicated that the new rights will not come into force before 2026. However, if you have a flexible workforce, it would be good practice to review your operations, in particular:

  • Audit the workforce to identify the numbers engaged on zero-hours and low-hours contracts, and in which areas of the business. What hours do they work? How long are they usually engaged for? How would a 12-week reference period impact them?
  • Review the extent to which fixed term contracts are used to deal with changing business requirements.
  • Monitor any known / regular fluctuations in demand. Are there periods in the year when you expect to have an increased or decreased requirement for certain work?
  • Review your process for scheduling work and cancelling shifts (including any AI tools you might use) to check whether workers are given appropriate notice.

For more information about anything discussed in this blog, please contact a member of the Brodies Employment and Immigration team.

Contributor

Julie Keir

Practice Development Lawyer