Zero hours contracts can provide flexibility for employers in that work is not guaranteed, and also for employees in not having to accept any shifts offered by the employer. Often used in sectors such as hospitality, they might be popular amongst employees who are students or have caring responsibilities where they want to be able to work more hours some weeks and fewer hours in others.

Whilst recognising that there is a place for zero hours contracts, the Government believes that the flexibility they provide is too often one-sided and favours employers. As a result, it introduced changes in the Employment Rights Act 2025 to give employees greater protection. Ahead of the changes taking effect, the Government published a Consultation on reforms to zero hours and similar contracts, focused on how the new rules will work in practice. The Consultation closes on 25 August 2026.

What changes are in the pipeline

The Employment Rights Act 2025 gives the government the power to make regulations in the areas in the Consultation. The Consultation sets out three main new rights which are expected to be covered in the regulations when published: 

• the right to guaranteed hours for qualifying workers,
• the right to reasonable notice of shifts, and
• the right to payment for shifts cancelled, curtailed or moved at short notice.

These rights will apply to agency workers as well as those directly engaged by the employer.

Right to guaranteed hours

The right to guaranteed hours will see employers having to offer a guaranteed number of hours to qualifying employees who work regularly for the employer but have a contract (such as a zero hours contract) that does not reflect the hours they regularly work. 

Employers will have to look at the hours an employee works over a ‘reference period’. For new employees, this will begin when the employee starts working with the employer. For existing employees, the reference period will begin from when the rules come into force. The Consultation is asking for views on how long reference periods should be, but the Government’s preferred option is for the initial reference period to be 12 weeks.

To make sure that only those workers who work regularly have the right to guaranteed hours, the Consultation is looking at two possible ways of deciding whether an employee is working ‘regularly’. The first option is based on the number of hours worked each week, with the second option based on total hours worked during the reference period.

Although the employer may be required to offer guaranteed hours, the employee does not have to accept a guaranteed hours contract and could continue on a zero hours contract if they wish. However, if they continue to work regular hours for the employer, the employee must be offered guaranteed hours in subsequent reference periods. It is possible that the Government may exclude certain categories of worker from these rules, which will be confirmed when the final regulations are published.

Right to reasonable notice of shifts

The Government wants to give employees more certainty about when they will be working and their income, so they can plan their finances more easily, arrange childcare and other personal arrangements, and work for more than one employer (if they wish). The Consultation is asking for feedback on what would be a ‘reasonable’ period of notice of shifts, for both directly employed and agency workers.

Right to payment for shifts cancelled, curtailed or moved

Whilst there will be times when the need for employees to work will vary, cancelling, moving or shortening shifts at short notice can cause issues for employees, who may have paid for childcare or travel costs expecting to work the full shift as planned. The Government wants to give employees the right to receive a payment where this happens.

The Consultation is asking for views on what timescale could be seen as ‘short notice’ and also on the payment that should have to be made to employees where they have a shift cancelled, moved or shortened.

What happens if employers do not comply with the new rules?

Whilst employees will still be able to make a claim to an employment tribunal, the new Fair Work Agency is likely to be looking at whether employees are being paid for shifts cancelled, curtailed or moved at short notice. The Consultation also explores possible penalties that may be charged where employers have not made the required payment. The Government’s preferred option is that a penalty of 50% of the amount due to the employee should be charged, with a maximum of £5,000 per employee.

The importance of preparing

Whilst the details are still being worked out, it is clear that this is a case of when rather than if the new rights will come into effect. 

Employers will need to review their processes, how they record when shifts are allocated to employees and how they could adapt to having to offer guaranteed shifts or give employees more notice of shifts. 

There will still be a role for zero hours contracts, but the employee will have much more control over whether they remain on such a contract in future.

In more complex cases, it may be advisable for the employer to seek employment law advice, to ensure they comply with the new requirements once they come into force.

This article reflects the position at the date of publication shown above. If you are reading this at a later date you are advised to check that that position has not changed in the time since.   

We regularly publish articles on a range of tax and wider topical issues which affect employers. If you wish to subscribe to our monthly Employer Focus e-newsletter, please contact us.