Restricting the use of zero hours contracts in the food and drink sector

Zero hours employment contracts can be contentious. Some see them as exploiting workers as it gives the employer complete control over whether to offer any work to the individual and the individual has no security as to work and income. Others see them as necessary in sectors where the demand can fluctuate, often at short notice.

A House of Commons research paper on zero hours contracts identified that 32% of all workers in the UK on zero hours contracts work in the accommodation and food sector. This reflects the nature of the sector, in that customer demand can fluctuate, from day to day, week to week and seasonally, think of Christmas and harvest time for example.

The use of zero hours contract reflects that hospitality is labour intensive. If front line employees are off sick or do not turn up for work, the employer will need to find someone else to work that shift in their place.

The Government has previously said that it wants to ban “exploitative” zero hours contracts.  It has now set out draft legislation to restrict the use of zero hours contracts.

The draft law does not ban zero hours contracts entirely. The Government recognised the need for some flexibility amongst employers, but the proposed legislation restricts the use of zero hours contracts and provides more rights for employees in relation to the cancellation of shifts and an entitlement to be given reasonable notice of being required to work a shift.

Guaranteed hours contracts

An employee working under a zero hours contract must be offered a “guaranteed hours contract” after an initial “reference period”. We are expecting the reference period to be 12 weeks. A guaranteed hours contract is a new contract which guarantees a minimum number of hours, and therefore pay, based on the hours that the employee worked during the prior reference period.

A worker does not have to accept the offer.  There will be those who wish to retain the flexibility that comes with a zero hours contract, such as staff who are studying or have caring responsibilities.

But where the offer is accepted, that worker has to be given the minimum number of hours guaranteed under the contract and overall the terms of the new contract cannot be less favourable for the employee.

The devil will be in the detail, which is out for consultation.  So we are yet to fully understand which arrangements will qualify for this right, as it is also going to extend to those on contracts which guarantee a small number of minimum hours.

There are some draft provisions about making exceptions for seasonal workers, which allows employers to offer a guaranteed hours contract for a fixed term only.

Notice of shifts and cancellations

A worker on a zero hours contract will be entitled to reasonable notice of a requirement to work a shift and also reasonable notice of a shift cancellation.  If the shift is cancelled without reasonable notice, then the employee will be entitled to be compensated up to the amount they would have been paid if they had worked the shift.

These provisions will extend not just to directly engaged workers, but also to agency workers used in the business.  This creates a number of complicated issues about who has to offer the worker the guaranteed hours contract and who incurs the liability if a shift is cancelled at short notice. It goes against the business model of a temporary work agency if they have to offer guaranteed hours to all of the workers on their books.

It is hard to see how the proposed changes will not increase costs for hospitality sector businesses.  Taking somebody on under a zero hours arrangement is going to come at greater cost and risk if, after an initial 12 week period, that individual has the right to be offered guaranteed hours which may not necessarily match the employers’ demand for labour.

The changes are expected to come into force in 2026.  In the interim the details of the new laws will be consulted upon and then published in regulations, which will give employers a better idea as to the impact they will have on the business.

If you have any questions about the topics discussed in this article, please get in touch.