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The End of The Zero-Hours Contract?

What the changes in the Employment Rights Act 2025 could mean for your business.

As one of the most common contract types in retail, health & social care and hospitality sectors, the proposed changes to zero-hour contracts in the new Employment Rights Act 2025 will have significant implications for businesses.

What are Zero-Hour Contracts and Where Can They Be Used?

The term zero-hour contract is often used interchangeably with part-time contracts but there are specific and important differences. Currently, under most zero-hour contracts:

• The staff are “workers” not “employees” and have less employment protections;
• There is no statutory obligation to offer or accept shifts on either the business or worker;
• Shifts can generally be scheduled or cancelled at short notice, subject to contract;
• There is no right to compensation or minimum notice required for cancelling or changing shifts;
• There is no presumption that the shifts will be available or offered again.

Proposed Changes

Under the new Employment Rights Act 2025 there are broadly three changes which will have a significant impact on the use of zero-hours contracts:

• There will be a new requirement to offer staff “Guaranteed Hours”;
• There will be a new requirement to provide “reasonable notice” when offer shifts to zero-hour workers and other staff;
• There will be a new requirement to provide “minimum notice” of cancellation or change to shifts.

Each of these are further explained below.

Guaranteed Hours

Staff on either zero-hour contracts or “low-hours” contracts who have worked regular hours over a “reference period” must be offered a contract with guaranteed hours “reflecting” those hours. Within this requirement there are a number of points which the Employment Rights Act does not define:

• What is meant by “low-hours” contracts?
• What is defined as a “reference period”?
• How closely must the contract “reflect” the hours worked during the “reference period”?

These points will be clarified following a formal consultation with key stakeholders. It is anticipated that “reference period” will be between 12 weeks and 6 months but we will have to wait to see the final proposals, likely to be ready by summer this year.

Following the initial “reference period”, businesses must offer the worker the average number of guaranteed hours that they worked during the “reference period”. This must be under new contractual terms guaranteeing those hours, and on the days/times or working pattern that were worked during the reference period.

The worker will have the option to either accept the new offer, or to keep the flexibility of their existing zero-hour contract. Businesses will have to continue to assess the hours worked by staff while they have “low-hours” contracts, after each further “reference period”. The duty to offer guaranteed hours continues at future reference points.

The changes once implemented will require businesses to inform their staff of their rights under the new guaranteed hours regime and keep them informed while they qualify.

Reasonable Notice When Offering Shifts

Businesses will be required to give “reasonable notice” of shifts when offering them to zero-hour workers or shift employees. As with the guaranteed hours changes, the following details have not been defined:

• What is meant by “reasonable notice”; and
• What are the exemptions to the notice requirement.

These terms again will be defined following consultation, expected by the summer of 2026.

The new Act envisages setting a minimum amount of time that has to be provided when offering shifts to zero-hour staff. This however is not defined in the Act and the details will be part of the consultation process.

The requirement to provide “reasonable notice” will also apply to employees who are on rota shift contract, which is where the hours of work are set but the days and pattern of work can vary at the business’s discretion.

Where businesses fail to provide “reasonable notice” for the shifts, the worker can bring a claim to the Employment Tribunal and compensation will be assessed on what the Tribunal “considers just and equitable in all the circumstances to compensate the worker for any financial loss sustained by the worker which is attributable to the matter complained of.” This could lead to claims including bank overdraft charges or credit card late payment fees which the worker faces when a shift they expected is not offered to them.

Minimum Notice of Cancellation or Change

Under the new Act, businesses will have to provide “reasonable notice” of a change or cancellation of a shift which had been accepted by the zero-hour staff. Again, what is meant by “reasonable notice” is still to be defined.

In addition to the requirement to provide “reasonable notice” of changes or cancellation of shifts, the Act introduces the right to compensation for zero-hour staff if their shift is cancelled, moved or curtailed at “short notice”. The zero-hour staff will be entitled to a payment every time there is “short notice” of a cancellation or change of shift. Further, the payment will have to be paid to the staff within a specific time frame.

As with all of the above upcoming changes, the devil will be in the detail, and the Act is yet to define:

• What is meant by “short notice” when cancelling, changing or reducing a shift;
• What exemptions will apply to the “notice” requirement;
• What compensation payment amount will businesses have to make to staff for short notice cancellation and shift changes;
• How quickly businesses have to make the payment.

The Act does specify that “short notice” for cancelling a shift will be less than 48-hours before the proposed shift start time. The meaning of “short notice” when moving a shift or reducing a shift will be set by Government after consultation.

Who Is Covered By The Changes?

Businesses can still be caught by the new regime even if they do not use zero-hour or “low-hour” workers. The new requirements will apply equally to agency workers.

With agency workers, both the end user hirer and agency will have equal responsibility for providing the worker with the necessary notice of changes to shifts. However, the changes specify that is is the agencies which will be responsible for paying the agency worker and have the ability to recoup the cancellation and short notice fee from the end user, subject to the commercial terms of the agreement between the end user and agency.

Implementation Timeline

While the Employment Rights Act 2025 became law on 18 December 2025, the Government has confirmed they will not be implementing these changes immediately. There remains a significant number of specific details to be clarified. Under the Governments current timeline, which updated in February 2026, there is to be a period of consultation on these details, with the changes likely due to come into effect in 2027.

For further information on the Employment Rights Act 2025 and how it could impact your business, get in touch with our Employment Team.

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Removal of the Unfair Dismissal Compensation Cap: Rethinking Board Strategy

The UK employment tribunal compensatory award cap has until now limited financial exposure for unfair dismissal claims. That certainty is soon disappearing. Once the cap is removed, tribunals can award losses reflecting an executive’s actual full earnings including base salary, long notice periods, discretionary bonuses, and long-term incentives. For senior executives, claims could easily reach seven figures.

This change will fundamentally affect how Boards manage senior exits. Informal processes, limited performance documentation, and reliance on ‘loss of confidence’ are no longer safe. Tribunals will examine whether dismissals were reasonable and evidenced, and may ask what would have happened if the employer had acted fairly, considering potential performance outcomes, bonuses, and incentive awards. Even discretionary bonuses could now become part of claims.

The implications are Board-level, not just HR. So, what do Boards need to consider going forward?

• Performance oversight: Boards must ensure clear, measurable, and documented expectations for senior executives.
• Exit strategy: Settlement ranges and notice periods need to reflect potential uncapped liability.
• Bonus design: Timing and clarity of discretionary awards are critical.
• Governance discipline: Decisions must be evidence-based, documented and defensible.
• Board capability: NEDs must be confident in managing C-suite performance and challenging executive peers.
• Risk assessment: Employment litigation exposure and insurance coverage should be reviewed and well in advance of any conversations with the senior executive.

Boards which are unprepared for this shift risk material financial exposure, reputational harm, and potential for high-stakes litigation. The removal of the cap is not just a legislative change but a call for Boards to elevate performance management, governance discipline, and deeper risk assessments.

With significant experience in advising Boards on people-risk, executive remuneration, and governance, I see this as a pivotal moment for leadership accountability. Boards that act now will safeguard both people and organisational reputation, while strengthening confidence in making difficult but necessary leadership decisions.

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Family Friendly Leave: What’s New, What’s Coming and What Employers Should Do Now

Family-related employment rights are continuously expanding and becoming increasingly more detailed. With the Government set to introduce even more changes over the next two years, I have summarised the key details of what’s new and what to expect.

Recent Changes Already in Force

Neonatal Care Leave & Pay

Eligible parents whose babies meet the qualifying conditions and require specialist neonatal treatment have a right to take up to twelve weeks of leave from day one of employment.

What does this look like in practice? Where an employee has a premature baby that spends several weeks in hospital, they can take neonatal care leave on top of their maternity, paternity, adoption or shared parental leave.

What about the pay? Eligible employees will receive statutory neonatal care pay which is calculated using the standard statutory formula like maternity/paternity pay (i.e., the lower of £187.18 per week or 90% of average weekly earnings). This is designed to give parents genuine breathing room during what is often an overwhelming and emotionally difficult period.

When does it need to be taken? This leave is flexible and can be taken in blocks or as one period (depending on the regulations and employer policy). In reality, most parents take it immediately following a neonatal admission, but the rules allow the leave to fit around individual family needs.

Statutory Carer’s Leave

Employees now have the right to one week’s unpaid carer’s leave per year to provide or arrange care for a dependant with long-term care need. This right is available from day one of employment.

What counts as a long-term care need? A dependant with a long-term care need is someone that may have:

• an illness or injury requiring care for more than 3 months; or
• a disability under the Equality Act; or
• care needs related to old age.

Employers are required to grant this type of leave and may only postpone (not refuse) in exceptional circumstances, i.e., where taking leave at the requested time would cause serious operational disruption.

Many employers understandably confuse carer’s leave with other similar types of leave. There are clear distinctions between these types of leave as follows:

1. Carer’s leave: unpaid leave for planned or foreseeable responsibilities for someone with a long-term condition
2. Time off for dependants: unpaid leave for short notice or emergencies regarding dependants
3. Compassionate leave: discretionary leave to deal with traumatic events or bereavement. This can be paid or unpaid depending on the company’s policy.

Changes Under The Employment Rights Act

The Employment Rights Act (“the Act”) builds on these developments and signals a further strengthening of family-related rights. In December 2025, the Government passed the Act which expanded statutory protections as follows:

1. Enhanced protection against dismissal for pregnant against dismissal for pregnant employees / new parents

The Act proposes to strengthen protection against dismissal for pregnant employees, new parents and those taking statutory family-related leave, including neonatal care leave and pregnancy-loss bereavement leave.

In relation to pregnant employees and new mothers, the period of protected employment could be extended. The public consultation closed on 15 January 2026 with responses currently being reviewed to decide on the specific rules. It is still being decided whether the protected period spans 18 months from the birth of the child or 6 months from the return to work (i.e., the end of maternity leave).

The aim is to ensure that returning to work does not immediately place employees at risk of redundancy during a particularly vulnerable period.

2. Bereavement leave for pregnancy loss

One of the most prominent changes extends statutory bereavement leave to cover pregnancy loss, including miscarriages before 24 weeks. This new right would give employees formal time off to grieve, rather than relying on sympathetic managers or annual leave. The duration (beyond the one week minimum), notice requirements and whether the leave is paid are currently being finalised following the close of public consultation. This change is expected to take effect in 2027.

3. Paid carer’s leave

The government has committed to reviewing the proposal to convert the above current one-week unpaid entitlement into paid leave at the employee’s normal pay rate.

This may lead to increased payroll costs and a potential increase in employee’s taking carer’s leave. It is essential that employers have clearer systems for managing and recording care-related absences.

There is currently no confirmed implementation date for paid carer’s leave as it was not included as a mandatory requirement in the Act. A formal consultation is expected in 2026, with no implementation expected before 2027.

4. Day one rights for paternity and parental leave

The Act expands paternity leave and unpaid parental leave so that they become available from the first day of employment, removing the current service-based eligibility thresholds. These measures will take effect on 06 April 2026.

In practice, this means a new starter may qualify almost immediately which is something employers will need to factor into workforce planning.

5. Flexible working

Where an employer refuses a flexible working request, they must give a written and reasonable explanation for the refusal. The statutory 8 business grounds for refusing a request remain the same, however the requirement for justifying a rejection is a new development under the Act. This change is expected to take effect in 2027.

Therefore, the change reflects that flexible working will become the default from day one and a normal working arrangement unless there is a clear business justified reason to not allow it.

Implications For Employers

These relatively new changes under the Act represent a much more complex and protective family friendly framework.

Employers should ensure:

• their policies accurately reflect the recent changes of the new neonatal care regime and carer’s leave entitlement;
• payroll systems are adjusted to accommodate the revised statutory rates and eligibility rules for neonatal pay or carer’s leave when this change comes into effect;
• managers have appropriate training and clear guidance on how to respond to leave requests, particularly in sensitive circumstances such as neonatal care or pregnancy loss; and
• absence management procedures and record keeping are place and regularly updated.

To discuss the contents of this article, contact our employment team via the form below.

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