How are zero hours contracts changing?

As of 2024, approximately 1.03 million people were working on zero-hours contracts in the UK. Down from 1.22 million in 2023.  Zero hours contracts guarantee no hours for the worker and give the employer flexibility to as when to offer work.  Such contracts have been the subject of criticism by trade unions for some years. In contrast many zero hours workers enjoy the flexibility of being able to choose when to work, allowing them to manage work around other commitments, such as study, childcare or other jobs.

Before the 2024 election, Labour promised to ban “exploitative” zero hours contracts.  It has now introduced legislation to restrict the use of such contracts, but not ban them.  The changes are in the Employment Rights’ Bill (ERB) currently making its way through Parliament.  This article considers the latest version of the ERB as it applies to zero hours contracts.  This will be of interest to any organisation that relies on casual labour.

Duty to offer guaranteed hours

The current statutory position is to allow these flexible zero hour contracts but prevent the inclusion of clauses into the contract which prevent or seek to prevent the worker from working elsewhere.

The main reform to zero hours contracts will be a requirement for employers to make an offer of guaranteed hours to workers on zero hours contracts after the end of a ‘reference period’, which at present is set to be 12 weeks.

The number of hours which are required to be offered will be in relation to the hours worked during the previous reference period. Workers who will need to be offered guaranteed hours will not only include those under zero hour contracts but will include employees with a ‘low number’ of guaranteed hours.  So will likely include those – for example – guaranteed 4 hours work on a Sunday at a particular company, although at present ‘low number’ has not been defined in the ERB. It remains to be seen how long the ‘offer’ of guaranteed hours will need to be left open for or what days or working pattern must be offered.

The ERB does allow fixed term contracts if they are ‘reasonable’, which could include where there is a ‘temporary work need’ or for a specific task such as on a construction site or on a farm. Further examples will be set out in regulations made under the ERB.

Zero hours contracts and to agency workers

It has now been announced that employers will not be able to get around the provisions relating to zero hours contracts by using agency workers.  The provisions of the ERB related to zero hours contracts will apply to agency workers.  It will be up to the end hirer to make the guaranteed hours offer and tribunal claims will be able to be brought against the end hirer by agency workers not offered guaranteed hours.

A worker or agency worker who is not guaranteed hours accordingly, will be able to bring an employment tribunal claim, with the maximum award to be set out in due course within the regulations. There is also a provision for workers to bring tribunal claims if employers have ‘manipulated’ work patterns in order to provide a work-around of the requirement to offer guaranteed hours according to a reference period. How this will work in practice is unclear and will likely be burdensome on employers in terms of keeping paper trails relating to work patterns.

Cancellation of shifts

In addition, the ERB brings in further requirements to give workers ‘reasonable notice’ of cancellation or changes to shifts, and compensation must be paid to the worker if a shift is cancelled, changed or moved at short notice.

We do not currently know what ‘short notice’ may be. Given that one of the rationales of zero hours contracts is flexibility for both worker and employer, it is difficult to see these changes in a positive light for the employer or, in some cases, the worker. The ‘reasonable notice’ requirement may, for example, prevent employers from covering shifts at short notice due to absence or an unexpected increase in demand and mean that workers may actually miss out on paid shifts.

Opt out via a collective agreement

The employer’s duty to offer guaranteed hours can cease to apply under a collective agreement.  Meaning that a zero hours worker could have fewer hours under the collective agreement than they would have had under a ‘reference period’.  It is difficult to think of a scenario where a union would agree to this though.

Important details are yet to be announced.  But it is clear that the Government considers that too much of the risk associated with a businesses’ fluctuating need for labour has been passed from employer to worker over the last 15 years.  If your business relies upon casual labour, it will be necessary to review the structure of your workforce and assess the costs of complying with these new laws, in order to make an informed decision as to how to proceed.

If you require any advice surrounding the current law on zero hours contracts or the proposed changes under the ERB, please get in touch and our experienced Employment team will be happy to assist.