Flexibility curtailed but not lost as government consults on zero hours reforms

Jon Fisher of Pinsent Masons was commenting after the UK government launched its long‑awaited consultation on how it will implement new rights for those on zero- and low-hour contracts under the Employment Rights Act (ERA) that are due to take effect next year.

• Read more: how the Employment Rights Act will impact your business – and when

The consultation, which closes on 25 August, seeks views on the detailed regulations needed to give effect to three new statutory rights: the right to be offered guaranteed minimum hours; the right to reasonable notice of shifts; and the right to payment when shifts are cancelled, moved or curtailed at short notice. These rights will also extend to agency workers.

Although the government has not announced exactly when the zero and low-hour protections are due to come into force in 2027, Fisher said the consultation provides a significant expansion on what the “new landscape” for flexible workforces might look like.

While the reforms are intended to address “one‑sided flexibility” in the labour market, the consultation indicates that the government is still considering how businesses may retain flexibility within the new framework – a move which Fisher said potentially leaves employers with “some room for continued flexibility in workforce models”.

The centrepiece of the proposals is a requirement for employers to offer guaranteed hours to qualifying zero- and low- hours workers, reflecting the hours worked over defined reference periods. The government continues to favour an initial 12‑week reference period for the first assessment. However, it is more actively considering longer subsequent reference periods of 26 or 52 weeks, which could reduce the administrative burden of repeated assessments.

The definition of “low hours” remains one of the most significant unresolved issues. The consultation suggests a preferred threshold of between eight hours and 20 hours per week. The level ultimately adopted will determine the breadth of the regime.

Eligibility for guaranteed hours offers will also depend on “regularity” requirements. These may include a requirement for workers to have worked a minimum number of weeks in the reference period and to have worked a minimum number of additional hours above their contractual minimum.

The consultation also examines how guaranteed hours should be calculated, with options including mean or median calculations based on hours worked during the reference period. The government is also considering whether offers of guaranteed hours can be averaged across longer periods, such as a month, rather than being fixed on a weekly basis.

Commenting on the proposals, Fisher said: “The impact of the proposals will depend to a large degree on what hours threshold the government chooses – if the bar is set at 20 hours then they will be much more onerous for employers than if the bar is set at eight. Employers who are concerned about these measures should consider responding to the consultation to make their views on this issue known.”

Limited‑term contracts are another area of focus. The government is seeking views on when it should remain reasonable to engage workers on contracts shorter than the relevant reference period. While the legislation refers to specific tasks or events, the consultation explores whether additional circumstances, including seasonal fluctuations, should be recognised.

The consultation also outlines proposals for the new right to reasonable notice of shifts. This right will apply to workers whose guaranteed hours fall at or below a specified threshold, which may differ from the threshold used for guaranteed hours. A range of thresholds between eight and 48 hours per week is under consideration.

Rather than imposing a single fixed notice period, the government proposes a presumption‑based approach. A defined period, with options between one week and four weeks, would be assumed as reasonable, while allowing employers to argue that a shorter period is reasonable in particular circumstances. The government is also consulting on the factors that should be taken into account when determining whether notice is reasonable.

The third element of the proposed framework concerns payments for shifts that are cancelled, moved or curtailed at short notice. Workers who qualify for reasonable notice protections will also qualify for these payments.

The consultation proposes different options for what constitutes “short notice”, with suggested timeframes ranging from one day to seven days. Payments for short notice may be based on a percentage of what the worker would have earned from working the shift at either their actual hourly pay rate or at the minimum wage. The government is also considering whether there should be a higher level of payment for “very short notice” changes.

The government has indicated that it considers the Fair Work Agency (FWA) to be well placed to enforce short-notice payment obligations given that failure to make a short-notice payment is a clear and measurable event with a defined financial impact.

As well as requiring payment of arrears, the consultation proposes financial penalties for non‑compliance. Its preferred option is a penalty set at 50% of the arrears owed, with a minimum of £100 and a maximum of £5,000 per worker.

Notably, the consultation also seeks views on whether any exemptions should apply to the new rights, including whether particular workers or employer circumstances should be excluded. However, it makes clear that any exemptions are likely to be extremely narrow.

The consultation confirms that the new rights will apply to both directly engaged and agency workers. However, it also recognises that agency working arrangements may require a different approach. In particular, the government is considering whether different thresholds or qualification criteria should apply to agency workers, reflecting the role that agency labour plays in maintaining flexibility in the labour market. The consultation also seeks views on how responsibilities should be divided between employment businesses and hirers when implementing guaranteed hours obligations.

As the consultation continues, Fisher said employers should use this time to get ahead of the new protections coming into effect in 2027. “The starting point for any employer will be an audit of which workers could fall within the scope of the new protections and what hours they are actually working,” he said. “Employers should also be alert to the risk that ‘casual staff’ who have been characterised as self-employed may, on closer examination, be workers or employees for legal purposes and so covered by the new rules – as well as other important rights, such as holiday pay.”

From a compliance perspective, Fisher said it would also be important for employers to identify potential “trigger points” and gather real-time data around guaranteed hours offers and minimum hours thresholds within their organisations. “Employers also need to assess whether their current HR and payroll systems can generate the data they need, and what investment will be required to close that gap before the new obligations take effect,” he added.