Government consultation on reforms to zero hours contracts

The Government has published its consultation, Ending one-sided flexibility: reforms of zero hours and similar contracts, seeking views on the implementation of the related provisions of the Employment Rights Act 2025 (the Act).

Currently expected to come into force in 2027, in summary, the Act provides in-scope workers (including agency workers) with: (i) a right to guaranteed hours, based on the hours regularly worked during a reference period; (ii) a right to reasonable notice of shifts; and (iii) a right to payment where shifts are cancelled, curtailed or moved at short notice. However, the Act leaves much of the detail, including some fairly fundamental questions like to whom the rights will apply and when, to further legislation.

This consultation seeks views on those points of detail, and also provides some insight as to where the Government’s thinking may already be on some of these. Reflecting the complexity of the underlying provisions of the Act, the consultation questions and the accompanying explanations are not always easy to follow, so below we focus on the key questions posed by the consultation and the likely position.

Right to guaranteed hours

The low hours threshold

• Those eligible for this right will include workers on zero hours and 'low hours' contracts.
• A key question is where the Government will set the ‘low hours’ threshold.
• In the consultation, the Government seeks views on a wide range of thresholds, up to 48 hours a week. However, it states its preference is to set the threshold somewhere between 8 and 20 hours per week. Obviously, the higher the threshold, the more workers will be caught by the right. For example, if the threshold is set at 20 hours, then anyone with fewer than 20 guaranteed hours in their contract, who regularly works in excess of these hours, will have the right to be offered a contract at a greater number of guaranteed hours. A low threshold may well also see a move to employers offering low fixed-hours contracts to avoid the right, where operationally possible.

The reference period

• A guaranteed hours offer must reflect the average hours a worker works during a specified reference period.
• The Government has long stated a preference for a 12-week initial reference period, although 26 and 52 weeks remain options under consideration.
• A key question is whether the number of guaranteed hours to be offered to the worker should be calculated using a mean or median average. Each option could lead to very different results, where workers work significantly varying hours in different weeks of the reference period.
• The duty does not end after the initial reference period - employers will be required to issue further guaranteed hours offers to qualifying workers whose contracted hours remain under the low hours threshold at the end of each subsequent reference period (even if an offer has previously been made and rejected).
• The consultation asks whether subsequent reference periods should be 12, 26 or 52 weeks, and whether there should be a gap between reference periods. The longer the subsequent reference period, and/or the bigger the gap between periods, the lesser the administrative burden on employers of having to regularly make such offers, but conversely the less protection the right will likely afford workers.

Regularity requirements

• The intention is that only workers who work regularly for their employer will be entitled to this new right.
• The consultation covers two options:
  • Option A: a weekly distribution requirement, under which hours worked must be distributed over a minimum number of calendar weeks during the reference period (for example, 8 weeks in a 12-week reference period); or
  • Option B: a weekly distribution requirement plus a total hours requirement.
  • Under Option A, for example, a worker working a significant number of hours, but only across 7 of the 12 weeks, would not qualify for the right. Under Option B, the worker would not only need to work their hours across a specified number of weeks, but also work more than a specified number of hours, in excess of any guaranteed hours, to qualify.

Seasonal work

• The Act provides an important limitation on the right for ‘seasonal workers’, allowing for guaranteed hours contracts to be for a limited term where the limited term contract is shorter than the relevant reference period, and it is reasonable to do so.
• ‘Reasonable’ in this context is where: (i) the worker is needed only to perform a specific task; (ii) the worker is needed only until a particular event occurs or does not occur; or (iii) there is a "temporary need" that does not fall within (i) or (ii), with that concept to be defined in regulations.
• The Government is seeking views on whether there are examples of temporary need, not related to a specific task or event, that should be addressed through regulations. This will be a key provision for employers in retail, hospitality and other seasonal sectors, especially where demand fluctuates but is not necessarily tied to a specific event or task.

Right to reasonable notice of a shift, and payment if shifts are cancelled or curtailed at short notice

The “hours threshold”

• As with the right to guaranteed hours, the rights to reasonable notice and payment for shifts cancelled, curtailed, or moved at short notice will only apply to zero hours workers, or workers with guaranteed hours up to and including an 'hours threshold'.
• For example, if the threshold was set at 16 hours a week, a worker who is guaranteed 18 hours a week would not be entitled to reasonable notice or a cancellation payment under these provisions. Confusingly, the Government has indicated this hours threshold may not be the same as the low hours threshold set in respect of the right to be offered guaranteed hours.

Reasonable notice of shifts and changes to shifts

• Regulations will set a period of notice that is "presumed reasonable". The consultation proposes options ranging from one to four weeks, noting that current analysis suggests that a significant percentage of workers are given less than one week’s notice of shifts and at times less notice for changes. If shorter notice is given than the amount presumed reasonable, the employer will need to establish that it was reasonable in the circumstances.
• A worker may present a complaint to an Employment Tribunal where reasonable notice has not been given, which, if successful, would result in the worker being awarded compensation of an amount the Employment Tribunal considers just and equitable to compensate the worker for any financial loss sustained by the worker, subject to a specified capped amount.

Payment for shifts cancelled, moved or curtailed at short notice

• Separately from the claim a worker may bring for failure to give reasonable notice of a shift, the Act also provides for workers to be entitled to a payment where shifts are cancelled, moved or curtailed at short notice.
• The Government is considering a two-tier structure, distinguishing between "short notice" and "very short notice" cancellations, movements and curtailments, with a higher payment for the latter. The Act caps the short notice period at a maximum of seven days. The payment will be a percentage of what the worker would have earned had they worked the shift or the relevant hours. The consultation seeks views on the percentage, with options ranging from 10% to 80% for short notice payments and from 30% to 80% for any very short notice payment, and also whether the percentage should be calculated based on the worker's actual rate of pay, or the National Living/Minimum Wage rate.
• The Government also proposes that the Fair Work Agency (FWA) could enforce short notice payments, as this right involves a discrete and measurable underpayment, while the rights to guaranteed hours and reasonable notice are likely to require more complex assessments, better suited to the Employment Tribunal system.
• The Government's preferred penalty for non-compliance with short notice payments is 50% of arrears owed, with a minimum penalty of £100 per case and a maximum of £5,000 per worker, with unpaid sums owed to a worker recoverable for a period of up to 6 years from when the payment became due.

What should employers be doing?

• Employers who are affected by these measures are advised to respond to the Government’s consultation, which is open until 25 August 2026.
• Whilst we await the details of the additional legislation, employers should audit and review their current use of zero hours, low-hours and agency workers to consider what impact these measures may have on their business.
• As a centralised system will be required for tracking (i) hours worked over the reference period and (ii) when an employee exceeds the threshold and is eligible for a guaranteed hours offer to be made, employers should be considering how they can adapt their current reporting and payroll systems or whether they need to implement new systems.
• When the final details are published, managers of zero and low hours workers will need training on how these changes impact the operational requirements of their business, including the organisation of their work schedules, the cost of changing rotas and the impact of cancellation. 

If you would like to discuss any of these issues, please contact your normal CMS employment team contact.

Co-authored by Kainat Shah, Trainee Solicitor