Our latest Employment Rights Bill article, looks at the key changes proposed to zero-hours contracts.
What are zero-hours contracts?
Zero-hours contracts are a type of employment agreement where an employer is not obliged to guarantee a minimum number of working hours, and an employee is not required to accept any work offered. In the UK, over one million workers are employed under such contracts.
These contracts offer flexibility to both parties. Employees can choose when to work, and employers can adjust staffing according to demand without committing to fixed hours. However, such flexibility comes with challenges and workers can struggle with irregular incomes and a lack of guaranteed hours, prompting calls for stronger protections.
Current legal framework
Zero-hours workers have statutory employment rights, including entitlement to the National Minimum Wage, holiday pay, rest breaks, and protection against discrimination. Employees also have the right to take on other jobs without facing unfavourable treatment.
Despite these protections, there are concerns that the current system disproportionately benefits employers. For example, employers can offer or cancel shifts at short notice. This imbalance has led to the introduction of new rules around zero-hours contracts.
Key proposals in the Employment Rights Bill
The Bill introduces several important reforms to enhance fairness for zero-hours workers.
1. Guaranteed hours for qualifying workers
Employers must offer ‘qualifying’ workers guaranteed hours based on the hours they regularly work over a reference period, which is expected to be 12 weeks. The hours offered must correspond with the employee’s usual working patterns and be provided on terms no less favourable than before.
A ‘qualifying’ worker is someone who is employed under a zero- or low-hours contract, where guaranteed hours do not exceed a threshold yet to be set out. It is yet undecided whether this will be a ‘day one’ right.
Individuals can accept or decline these guaranteed hours, maintaining flexibility if they prefer.
It has been suggested that after the initial reference period and once an offer of guaranteed hours has been made, employees will be able to opt-out of further reviews and offers of guaranteed hours and would be able to opt back in to this at any time. However, this is currently under review.
2. Reasonable notice of shifts
Employers will be required to provide reasonable notice before shifts are scheduled, changed, or cancelled. What constitutes ‘reasonable notice’ is still under consultation, with Tribunals expected to consider factors such as an individual’s circumstances, for example, when making their assessment.
3. Compensation for last-minute shift changes
If shifts are cancelled, rescheduled, or curtailed at short notice, workers will be entitled to compensation. The compensation amount will be what is considered just and equitable based on the worker’s financial loss and will be subject to a maximum amount.
The definition of ‘short notice’ remains under review.
4. Provisions for agency workers
The Bill extends protections to qualifying agency workers and recognises that its application may need to be tailored to them.
End hirers (businesses using agency staff) must offer guaranteed hours to agency workers where they have regularly worked above their usual hours over the reference period. If accepted, the agency worker will enter into a contract to work those guaranteed hours with the end hirer directly, transferring employment from the agency to the end hirer.
Agencies and end hirers will share responsibility for providing reasonable notice and compensation for shift changes, and Employment Tribunals will apportion liability based on the responsibility of each party. In some circumstances agencies will be able to recover costs where compensation has been paid for short notice shift changes.
Implications and advice for employers
The reforms will significantly impact how employers manage their staff. Individuals who meet the qualifying criteria must be offered contracts with guaranteed hours, which may increase staffing costs and reduces the flexibility traditionally enjoyed under zero-hours contracts. Employers may also incur higher legal costs in reviewing and potentially updating contracts.
Employers must regularly review contracts, transparently manage scheduling, and provide reasonable notice for shifts, including any changes or cancellations. Importantly, employers may face more Tribunal claims if they are unprepared for the changes, particularly as the time limit for most claims will be extended from three to six months.
Employers will also have to make sure to keep track of which employees have opted in or out of the right to be offered guaranteed hours and ensure that offers are made in line with this.
The Bill also affects agency workers, with potential transfers of employment contracts. This will require careful handling to avoid claims and minimise the risk of compensation payments. Contracts should be regularly reviewed to understand where liability lies as regards individual agency workers.
Ultimately, employers must engage meaningfully with employees and workers to explain how contracts and shift arrangements will work in practice. Clear communication and mutual understanding are crucial for maintaining good working relationships and reducing the risk of litigation.
Need to know
The Employment Rights Bill aims to balance flexibility and fairness in zero- and low-hours contracts. Employers will need to adapt to new obligations around guaranteed hours, shift arrangements, and agency workers. To prepare, they should review workforce models, engage with staff, and seek legal advice where necessary to ensure the new rules are complied with, risks are minimised, and employees are supported.
Thorntons’ Employment Rights Bill series will provide expert insights and practical guidance on developments in the Bill’s implementation. You can get in touch with one of our experts by calling 03330 430150 or emailing us on [email protected]
