ERA reforms in depth: Zero/low hours and shift workers

These new rights are expected to come into force in 2027.

Further consultation is required to fully bottom out how these changes would operate in practice. The government has committed to consulting fully on these proposals, with consultation set to start in 2026.

Current position

Zero hours contracts are commonly used in many sectors where there is a variable and fluctuating demand for labour. Such contracts cannot include exclusivity clauses stopping a worker working for another employer but are otherwise lawful.

Workers do not currently have any statutory right to a set working pattern nor to notice of shifts (or compensation for the short notice cancellation etc of such shifts).

What is changing?

The Act sets out a new right for eligible workers to be offered a guaranteed hours contract (GHC). The details of this new right, to the extent that they are currently known, are set out below:

• Employers will be required to offer qualifying workers a contract guaranteeing them a minimum number of hours reflecting the work they carried out in a previous reference period (expected to be 12 weeks). A worker will be free to accept or refuse the offer but, if refused, the employer will need to make the offer again, on a rolling basis, at the end of each subsequent reference period. Importantly, the employer must offer the contract – it is not simply a right for the worker to request.
• The form of any GHC (including any working pattern or set days, hours etc) is still to be defined, as is how long any such offer must remain open for.
• The right will only be triggered if the hours worked in any reference period satisfy conditions, to be set out in regulations, as to their ‘number, regularity or otherwise’.
• What constitutes a ‘low’ number of hours is also still to be defined and will be a key factor in determining the breadth of this new right.
• There are some limited exceptions which will allow an employer to limit the terms of the GHC to apply for a fixed period only, for example, if the employer reasonably believes that there is only a temporary need for the worker to do the work.
• The new right will not apply where there is a collective agreement in place which excludes the right and includes a replacement mechanism, incorporated into workers’ contracts.
• The Act also contains measures which allow a worker to bring a claim where the employer has limited the workers’ hours to avoid triggering the obligation to make an offer of a GHC or to reduce the terms that must be offered under that GHC.

The Act also sets out new rights to reasonable notice of shifts and payment where shifts are cancelled or moved at short notice. The details of this right, to the extent that they are currently known, are set out below:

• The Act introduces a new right to reasonable notice of a shift a worker is required to work, setting out how many hours are to be worked and when the shift is to start and end. There is also a right to reasonable notice of any changed, cancelled or curtailed shift.
• What is ‘reasonable’ notice of a shift will depend on the circumstances, but there will be a presumption that notice will not be reasonable if it is less than a specified amount of time due to be set out in regulations.
• The right will apply even if an employer makes a request to multiple workers to work the same shift but does not need all of them to work that shift. This could potentially have wider implications in terms of workforce planning particularly in cases where urgent work or cover is required.
• The Act further introduces a duty on employers to make a payment to workers each time there is a cancellation, movement or curtailment of a shift at short notice. ‘Short notice’ is to be defined in regulations (as is ‘movement’). The amount of compensation will depend on whether it was a cancellation, movement or curtailment or a combined movement and curtailment.
• The right to compensation for a cancelled, moved or curtailed shift will only apply where a worker reasonably believed that they would be needed to work the shift.
• Both new rights will not apply where there is a collective agreement in place which excludes the rights and includes replacement mechanisms, as long as those replacement mechanisms are incorporated into workers’ contracts.

Following consultation and to ensure that agency work is not used by employers as a ‘loophole’ to avoid their obligations, the above rights will also be extended to agency workers. The key agency worker reforms outlined in the Act are set out below:

• The right to be offered a GHC will be extended to agency workers. The obligation to offer a GHC will rest with the end-user, but secondary legislation may place the obligation onto agencies or other intermediaries in certain scenarios.
• The obligation to provide workers with reasonable notice of shifts will also be extended to apply to agency workers, with both the end-user and agency being responsible for providing reasonable notice.
• Agencies will be responsible for making payments to workers which result from short notice cancellations, movements or curtailments of a shift, albeit the government anticipates that where ultimate liability for these payments lies is likely to be determined by the commercial arrangements in place between end-user and agency.
• Umbrella companies (intermediaries that employ temporary staff on behalf of agencies and end-users) will be regulated for employment rights purposes to ensure that workers have comparable rights and protections when working via an umbrella company as they do when taken on directly by an agency.

The above areas of reform will impact on employers in a variety of different ways, as we have explored below:

Guaranteed hours contracts

• If the ‘low’ hours provision is set too high, employers will have to continually assess which of a larger set of workers have the right to an offer of guaranteed hours (and with workers potentially having different reference periods this could be administratively difficult). The government has stated that full-time workers who occasionally pick up overtime will not be affected.
• It is not clear how the provisions will take account of sectors which have busy seasons and fluctuating levels of work. Will workers be able to lock in guaranteed hours based on busier periods and to what extent will employers be able to rely on the exceptions for limiting offers to fixed periods?
• There is a real risk that employers will be disincentivised from offering zero hours contracts at all and/or limiting the number of hours offered to workers for fear of having to convert those arrangements into guaranteed hours, noting that employers will need to be mindful of the anti-avoidance measure detailed above which allows a worker to bring a claim where their employer has limited their hours to avoid triggering the obligation to make an offer of a GHC.
• Employers with large numbers of zero hours/casual workers may want to consider reviewing those arrangements both to assess which workers might be caught by these changes and whether there may be alternative staffing models that, alongside existing arrangements, might help them better cover fluctuating work demands.

Notice of shifts

• These reforms will inevitably reduce flexibility for employers in how they resource their workforce demands and put more of a premium on better planning and communication of relevant working patterns to their workers.
• It will be interesting to see, once consultation is launched, what might be deemed ‘reasonable’ notice, and we can expect industry bodies to continue to lobby hard for qualifications here to ensure that employers can respond to often urgent and fluctuating work demands.
• Once further information about the notice requirements is known, employers may want to start considering how their shifts are rostered and how notice of them is given to relevant workers to see if any improvements and refinements can be made now and in advance of these rights coming into force.

Agency worker reforms

• The extension of the above rights to agency workers is very significant and would materially change the tri-partite relationship between agencies, end-users and agency workers.
• It is not yet clear exactly what the interplay will be between the end-user’s obligation to offer a GHC to an eligible agency worker and the existing mechanisms (such as temp-to-perm transfer fees and extended hire arrangements) that would kick in if the agency worker accepts the offer.
• Given agency workers are often on a higher rate of hourly pay, the extension of these provisions to agency workers appears to create a risk of a ‘two-tier’ workforce where agency workers accept GHCs. It could also undermine the end-user’s reasons for opting for agency staffing in the first place, including the desire to outsource the cost and time of having a direct contractual relationship with the individual.
• Whilst much of the detail is yet to be worked through, it is clear that the changes would have a big impact on the way in which end-users engage with employment agencies and agency workers and the commercial terms that would be in place. Employers should audit their agency arrangements and consider how these would be impacted by the reforms. This should include a review of the commercial terms that they have in place with agencies.