Zero-hours contracts have been one of the most debated topics in UK employment law for over a decade. For many SMEs, they offer genuine flexibility. For others, they have become a default staffing model that may not survive the reforms now making their way into law.
Whether you currently use zero-hours contracts or are considering them, you need to understand both the current legal position and the significant changes coming under the Employment Rights Act 2025.
What is a zero-hours contract?
A zero-hours contract is an agreement where the employer is not obliged to provide any minimum number of working hours, and the worker is not obliged to accept any hours offered. Despite the name, zero-hours workers are not without rights. They are classed as "workers" under UK employment law, which means they are entitled to a range of protections. The contract simply does not guarantee a set number of hours each week.
Zero-hours contracts are used across many sectors, including hospitality, retail, social care, and events. According to the Office for National Statistics, around one million people in the UK are employed on zero-hours contracts at any given time.
Current rights for zero-hours workers
Even under the existing rules, workers on zero-hours contracts have more rights than many employers realise. These include the right to the National Minimum Wage for all hours worked, the right to paid annual leave calculated at 12.07% of hours worked in each pay period (see our guide to holiday entitlement), the right to rest breaks under the Working Time Regulations 1998, protection from discrimination under the Equality Act 2010, protection from being treated less favourably for refusing to sign an exclusivity clause, and the right to an itemised payslip.
The distinction between a zero-hours worker and an employee matters here. Most people on zero-hours contracts are workers rather than employees, which means they do not have access to the full range of employment rights such as unfair dismissal protection or redundancy pay. However, if the reality of the working relationship looks more like employment, a tribunal may find that the individual is in fact an employee regardless of what the contract says. Our guide on employment status explains how tribunals assess this.
The exclusivity clause ban
Since May 2015, exclusivity clauses in zero-hours contracts have been banned. An exclusivity clause is any term that prevents the worker from working for another employer or requires them to get permission before doing so.
This means you cannot stop a zero-hours worker from taking on other work during periods when you are not offering them hours. If a worker brings a claim for detriment because you penalised them for working elsewhere, you could face a tribunal claim.
In practice, this is straightforward. If you use zero-hours contracts, check that they do not contain any restriction on working for other employers. If they do, remove it.
Major changes under the Employment Rights Act 2025
The Employment Rights Act 2025 introduces the most significant reforms to zero-hours contracts since the exclusivity ban. These changes are expected to come into force in 2027, and they will fundamentally change how zero-hours arrangements work. The full timeline of changes is covered in our guide to employment law changes in 2026 and beyond.
Right to guaranteed hours
Workers on zero-hours contracts (and those on low-hours contracts that do not reflect their actual working pattern) will gain the right to be offered a contract with guaranteed hours. The guaranteed hours must reflect the hours the worker actually worked during a 12-week reference period.
This does not mean zero-hours contracts are being banned. It means that if a worker regularly works 20 hours a week over a sustained period, they can request a contract reflecting those hours, and the employer must offer one. Workers can choose to remain on a zero-hours arrangement if they prefer the flexibility, but the offer must be made.
Right to reasonable notice of shifts
Workers will gain the right to reasonable notice of their shifts. While the exact notice period is still being defined in secondary legislation, the principle is clear. Last-minute scheduling with little or no warning will no longer be acceptable as standard practice.
Right to compensation for short-notice cancellation
If a shift is cancelled or curtailed at short notice, the worker will have the right to compensation. Again, the detail of what constitutes "short notice" and the level of compensation will be set out in regulations, but the direction of travel is unmistakable.
When zero-hours contracts are and are not appropriate
Despite the reforms, zero-hours contracts will still have a legitimate role. They work well for genuinely casual or seasonal work where demand is unpredictable and short-lived, for workers who want maximum flexibility (such as students or semi-retired individuals), and for covering one-off events or emergency cover.
However, they should not be used as a way to avoid employment rights or keep staff in a permanent state of uncertainty. They are not appropriate when the worker does regular, predictable hours week after week, when you rely on the worker as a core part of your team, when you use the contract as leverage (for example, reducing hours as an informal disciplinary measure), or when the worker has no genuine choice about the arrangement.
The key question is whether the arrangement genuinely suits both parties. Using zero-hours contracts inappropriately creates legal risk, damages morale, increases staff turnover, and makes it harder to recruit good people.
How to prepare for the new rules
Even though the guaranteed hours reforms are not expected until 2027, there is plenty you can do now to get ready.
Audit your current arrangements. Review every zero-hours contract in your business. For each worker, look at the hours they have actually worked over the past 12 weeks. If the pattern is regular and consistent, consider whether a fixed-hours contract would be more appropriate.
Review your scheduling practices. How much notice do you give workers of their shifts? If the answer is less than a week, start working towards longer notice periods now. The transition will be easier if you build better scheduling habits before the law requires them.
Check your contracts. Make sure your zero-hours contracts are legally compliant. They should not contain exclusivity clauses, and they should accurately describe the nature of the arrangement. Our guide on what to include in an employment contract covers the essentials.
Talk to your workforce. Some workers genuinely value the flexibility of a zero-hours arrangement and will want to keep it. Others would jump at the chance of guaranteed hours. Understanding what your people actually want will help you plan the transition.
Consider the costs. Moving workers to fixed-hours contracts may increase your obligations around holiday pay, sick pay, and notice periods. Factor this into your financial planning.
How Rebox HR can help
If you use zero-hours contracts or are unsure whether your current arrangements are compliant, we can help. Our team works with SMEs across the UK to review contracts, update policies, and prepare for legislative changes.
Whether you need a one-off contract review through our ad-hoc HR services, a full audit of your workforce arrangements as part of an HR health check, or ongoing support through our retained HR packages, we are here to help you get it right.
Book a free consultation with our team today, or call us on 01327 640070.
