Table of Contents
In Short
- What is a zero-hours contract? It’s a flexible work arrangement where employers don’t guarantee hours, and workers can choose whether to accept work offered.
- Key legal obligations: Pay at least the NMW, ensure health and safety, and avoid discrimination. Workers also have specific rights based on their status and length of service.
- Upcoming changes (2026): Workers will gain rights to guaranteed hours based on work patterns and compensation for short-notice shift cancellations.
Tips for Businesses
When using zero-hours contracts, ensure compliance with current legal requirements, such as fair pay and avoiding exclusivity clauses. Clearly define worker status and expectations in the contract. Prepare for 2026 changes by reviewing reliance on casual workers and adapting workforce planning to mitigate risks linked to guaranteed hours obligations.
All employers will have different requirements in terms of staff, and this is not always as simple as needing a specific number of employees regularly. For example, suppose you have just started your own business. In that case, you may not want to recruit several full-time employees until your workload becomes consistent. If your business caters to the holiday industry, there may be a time when you need additional staff and other times of the year when you need very few staff. If you cannot commit to offering your employees a guaranteed minimum number of hours for work, then hiring staff on a zero-hours contract (also known as a casual contract) works for you.
This article will explain zero-hours contracts, how they work in practice, when they may be used, the rules regarding them, and what the actual contract might include. As the Labour government is set to introduce new employment law legislation by 2026, this article also touches upon the proposed changes to the zero-hours contract regime and how these changes may affect your business.
What is a Zero-Hours Contract?
A zero-hours contract is not a legal term. Instead, it describes an employment relationship in which an employer is not obligated to provide a set number of work hours to a worker. Workers engaged in this kind of employment relationship are often called ‘casual workers’.
As the number of working hours is not guaranteed, if you offer work to a casual worker, it is up to the casual worker to decide whether or not they wish to accept the offer of work.
Why Might You Use Zero-Hours Contracts?
Zero-hours contracts are helpful for employers whose workload fluctuates. This is especially true in the leisure, catering, and hospitality sectors.
Zero-hours contracts could also be helpful for:
- new businesses still sourcing enough regular customers;
- seasonal work, such as shop work during the Christmas period;
- staff cover when employees are suddenly sick;
- special events such as catering for weddings; and
- testing new services you can offer.
Whilst zero-hours contracts can benefit you as an employer, you should not use them where you cannot justify them. Therefore, where a worker has regular hours, there should be no reason you cannot offer them a standard employment contract rather than a zero-hours contract.
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What Are the Rules About Zero-Hours Workers?
1. Advertising a Vacancy
When you advertise a vacancy for a zero-hours contract, you must clarify that it is a zero-hours contract and what that means.
2. Rights and Responsibilities Associated With Zero-Hours Contracts
If you have workers on a zero-hours contract, you must still pay them an hourly rate of at least the National Minimum Wage (NMW) or National Living Wage (NLW).
You are responsible for the health and safety at work of someone on a zero-hours contract. You are also responsible for paying the zero-hours contract holders’ wages through a PAYE scheme.
What Are the Entitlements?
In addition to you paying the NMW and NLW, your worker has the right to:
- statutory rest breaks, which include at work, between workdays and shifts, as well as weekly rest periods;
- not work more than 48 hours a week unless they wish to and have opted out of the 48-hour rule;
- protection if they disclose wrongdoing in the workplace;
- not to be discriminated against on the basis that they are part-time;
- not have unlawful deductions from their wages;
- statutory maternity, paternity, adoption and shared parental pay, where they meet the relevant conditions;
- paid statutory holiday leave; and
- protection against discrimination.
Your employee has the right to all that a worker has the right to. However, depending on the length of time you have employed them and them meeting certain conditions, they may also have the right to:
- statutory sick pay;
- statutory maternity, paternity, adoption, and shared parental pay and leave;
- a minimum notice period regarding dismissal and the right not to be unfairly dismissed;
- the right to ask for flexible working;
- the right to take time off if there is an emergency; and
- statutory redundancy pay.
A person on a zero-hours contract also has the right to be paid for any travel related to their work and for being ‘on call’ where it is classed as work.
3. Offering Work
It is advisable to offer work with as much notice as possible to accommodate the non-working lives of those on the zero-hours contract.
Also, you should be transparent regarding your method for offering work to those on zero-hours contracts.
4. Breaks in Employment
Zero-hour contracts often result in breaks in employment, given the non-guaranteed nature of work under this arrangement. This makes it difficult for casual workers to build up a period of ‘continuous service’ where work is not offered or performed for at least seven continuous days, ending on a Saturday.
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If this happens, you must pay the person for any accrued but not taken holidays. You may also be required to pay notice pay and outstanding wages. This applies if the contract states so or if you have employed the person for over one month.
What Should a Zero-Hours Contract Look Like?
As an employer, you need to have a clear zero-hours contract with your employees or workers. This ensures they understand their rights and expectations.
You may wish to include the following in your zero-hours contract:
- whether the person has employee or worker status, as different rights are associated with each;
- the statutory employment rights which will be accrued for someone who is an employee;
- how work will be offered and state that they are not obliged to take it; and
- how the zero-hours contract can be terminated, such as the amount of notice you and your worker or employee should give or whether it ends after a task or an assignment.
You must not include an exclusivity clause on a zero-hours contract. An exclusivity clause prevents the employee from accepting or seeking work with another employer. Due to the nature of zero-hours contracts, individuals will likely need to take on other work to ensure they always have enough work. If you insert one, enforcing it against the individual will be difficult.
You should also not include an exclusivity ban in a zero-hours contract. This is where you require the person to ask for your permission if they wish to take on or look for other work.
Changes to zero-hours contracts
The new Labour government introduced a new Employment Rights Bill (the “Bill”). This effectively spells the end of zero-hours contracts as we know it. The Bill seeks to introduce the following changes:
- Guaranteed Hours: Zero-hour workers will be entitled to guaranteed hours based on their work patterns over a ‘reference’ period; and
- Compensation: These workers will gain a new right to compensation when you cancel or rearrange a shift on short notice. They can also seek recourse in the employment tribunal and potentially be awarded further compensation.
As these changes are set to come into effect from 2026, there is still time to enjoy the benefits of the current regime. However, where your business currently relies on casual workers, these changes will require employers to rethink how such casual workers are engaged in the long run to mitigate the risk of creating the obligation of guaranteed hours similar to the standard employer-employee contracts.
Key Takeaways
With the stipulated legislative changes anticipated to come into force in 2026, you can still reap the benefits and flexibility of zero-hour contracts. Under the current regime, if you have staff on zero-hours contracts or are considering doing so, this article highlights some key considerations you should be aware of. Of course, in light of the changing legal landscape concerning zero-hour contracts, you must be prepared to evaluate your current and long-term business needs and resulting workforce requirements to ensure compliance with the shifting landscape.
If you need help understanding zero-hours contracts in England and Wales, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. So, call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
A zero-hours contract is when you hire or hire someone to work for you. You are not required to guarantee them any work. Instead, you can offer them work as needed, and they can take what they wish.
Employers must abide by certain areas of employment law regarding their staff on zero-hours contracts. Some parts, such as paying the NMW, apply to all zero-hours contracts. Other parts will apply depending on whether the person is classified as a worker or an employee and how long they have worked for you.
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