Employment Rights Act Update – Zero-hours contracts

Guaranteed hours

This is the headline provision of the new rules.  In short, from a date TBC in 2027 employers will be required to make a “guaranteed hours” offer to “qualifying workers” (see below).

This will involve looking back at the amount of work done by the worker over a certain “reference period” and offering a contract that reflects those hours on an ongoing basis. For example, if a worker has worked, on average, 15 hours per week across the reference period, then they must be offered a contract guaranteeing 15 hours per week going forward. Note that a worker does not have to accept the offer, and can remain on their existing terms.

For the purposes of calculating the guaranteed hours, the reference period will be key. The government has suggested a 12 week reference period, but the consultation has included the possible option of 52 weeks.

Once offered and accepted, the worker is then working under a contract that guarantees them those hours. That is not the end of the story.  If the worker is still a qualifying worker, then at the end of the next reference period the exercise needs to be repeated, and the worker must be offered a contract with guaranteed hours based on the latest reference period. Questions as to whether there will be a gap between reference periods, or whether subsequent reference periods will be the same length as the first one, remain open in the consultation.

The heaviest burden in relation to guaranteed hours is likely to fall upon those employers with significant seasonal variation in their requirement for workers, and in recognition of this, the consultation asks the question whether certain categories of workers or agency arrangements should fall outside the new framework.  Hopefully a pragmatic approach will be adopted, so that we avoid the spectacle of fruit pickers being guaranteed hours long after the harvest is finished, and retail staff manning empty shops after the Christmas rush.

Who is a qualifying worker?

There are expected to be some exceptions, but essentially a worker will be a ‘qualifying worker’ (or ‘qualifying agency worker’) if:

• during the reference period, they have worked either under a zero-hours contract or a low hours contract; or
• they have a number of hours guaranteed in their contract that is below or equivalent to an ‘hours threshold’ and they have worked in excess of those hours.

The threshold for how many hours a worker needs to work to cease being a qualifying worker, and/or no longer on a low-hours contract, has not yet been set, and forms part of the consultation. The government is looking to set the threshold anywhere between 8 and 48 hours, but has indicated that somewhere between 8 and 20 hours per week is their preference. For agency workers, the consultation also considers whether the threshold should relate to all work done for the agency, or for an individual end user hirer.

Reasonable notice of shifts

In addition to the provisions in relation to guaranteed hours, the consultation also covers the notice that must be given when shifts are cancelled. Regulations will be introduced under the ERA 2025 to provide that, where a worker’s shift is cancelled at short notice they will be entitled to a compensation payment.

Specific points covered by the consultation include:

• How much or little notice should qualify as ‘short notice’?
• Should there be a further category of ‘very short notice’, for which the compensation would be higher?
• How much should the compensation be, and how should it be calculated?
• Should there be any exemptions?

It is possible that breaches in relation to short notice payments will be dealt with by the newly introduced Fair Work Agency, to keep these sorts of claims out of an already overburdened tribunal system.

Looking ahead

Ultimately, the debate is no longer confined to whether workers should receive greater predictability, but how proposals can be delivered without undermining the flexibility that enables many businesses to respond to changing demands. As such, the detail of the final framework will be critical in determining whether that balance can be successfully achieved.

• The consultation closes on 25 August 2026 and the government should provide a response to the consultation before bringing in the new regulations. Although implementation is likely to be phased and subject to further consultation, employers should not wait until regulations are finalised to start thinking about areas of vulnerability across their business operations and consider any adjustments required.

How can Greenwoods help?

Our experienced employment law team would be pleased to provide further advice and support to help you prepare for the forthcoming changes. Please feel free to get in touch, and we can advise on a suitable way forward.