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.
