Zero Hours: Guaranteed Hours Contract

The Government’s employment law reforms tackle, what they consider to be, the ‘exploitative practices’ with zero hours contracts. Whether you agree with this characterisation or not, you cannot ignore the new zero hours provisions. 

One plank of the Government’s response are the guaranteed hours provisions. Our technical zone note looks to provide more detail on those provisions and the impact of guaranteed hour contracts.

The Current Law:

The Employment Rights Act & the Exclusivity Terms in Zero Hours Contracts Regulations currently protect employees and workers. Zero hour employees and workers current protections include:

Ban on Exclusivity Clauses in Zero-Hours Contracts

Employers cannot stop workers from taking other jobs when they do not offer any commitment to those workers. The legislation explicitly states that exclusivity clauses are not enforceable (where there is no similar commitment from the employer) against workers under ‘zero-hours’ contracts.

Protection from Detriment for Ignoring Unenforceable Clauses

A worker is protected from suffering a detriment because the employee did not abide by an unenforceable exclusivity clause in the contract.

Unfair Dismissal Protection for Employees

An employee is protected from being unfairly dismissed because the employee did not abide by an unenforceable exclusivity clause in the contract.

The Change to Guaranteed Hour Contracts:

The Bill includes a new right for ‘qualifying workers’ to be offered new or varied contract terms with ‘guaranteed hours’. These are to ‘reflect’ hours regularly worked at the end of every ‘reference period’:

Definition of Qualifying Workers‘

Qualifying workers’ include those engaged under one or more zero-hours contracts, one or more zero-hours arrangements, or a worker’s contract with a minimum number of hours (‘low-hours’ contract) which the worker has exceeded.

Requirements for Job Offers

The offer must be for permanent employment unless it is otherwise reasonable to offer a limited term instead. If a new contract is offered, then it must be no less favourable than their previous terms, when ‘taken as a whole’.

Timelines for Job Offer Process

There will be prescribed periods for offering and accepting (or rejecting) an offer.

Note: Following consultation, agency workers will come within the scope of the zero hours provisions.  Further detail on how the provisions will apply to agency workers is yet to be provided.

What’s Missing:

There are still a number of important details missing from the Bill and the following remain unknown:

• What constitutes ‘low hours’.
• The duration of a ‘reference period’ (although the Next Steps policy paper does refer to a 12-week reference period although it is currently unknown whether the same will apply to subsequent periods);
• What it means to ‘reflect’ hours regularly worked and how this should be calculated during the reference period.
• How long the ‘offer’ and ‘response’ periods will be.
• What the tribunal can award as a statutory minimum compensation for failing to make a prescribed offer.

It is anticipated that numerous consultations will be carried out in 2025 to clarify the above details and more.

Focus Points:

The government is taking steps to close loopholes in zero-hours legislation by extending protections to low-hours contracts and agency workers.

Closing Loopholes in Low-Hours Contracts

From a legal perspective, extending the right to ‘low-hours’ contracts constitutes a move by the government to counter employers inserting a very low hourly obligation to circumvent the new zero-hours legislation.

Applying Zero-Hours Protections to Agency Workers

With the government now deciding (following consultation) that the zero hours provisions will apply to agency workers, we now await the detail.  The government has already recognised that tripartite agency relationships are inherently different and as such, the zero hours provisions may have to be applied differently.  It remains to be seen how extensive any differences as to how the zero hours rules apply to agency workers will be.  

Action Points:

Given the above, it is essential that employers who use zero-hours contracts consider:

Auditing Their Workforce 

Use audits to get accurate figures on the number of zero-hours workers (including zero-hours arrangements with minimum hours and agency workers).

Assessing Labour Costs 

Employers should assess labour costs as the new measures are likely to increase them.

Reviewing Admin Processes

Contracts and other employment-related paperwork will need to be reviewed at the end of every reference period, therefore you should review the admin process. This is especially important if the government decides that the 12-week period will apply to all reference periods.

Preparing for change, when more information becomes available, employers will need to consider drafting new contracts and will need to further consider their recruitment needs (and may need to consider different modes of engagement). For tailored advice, please reach out.

Frequently Asked Questions (FAQs)

We answer frequently asked questions on Zero Hours and Guaranteed Hours Contracts

1. What are the changes on zero hours contracts?

Qualifying workers will have the right to receive a guaranteed hours contract. This is to reflect the hours worked over a reference period.  

In addition, they will have the right to a reasonable notice of shifts and changes to shifts. As well compensation for cancelled, moved or curtailed shifts.

2. What categories of individuals fall within the changes?

Anyone who is an Employee, Worker and Agency Worker falls within the changes.

3. What will make them qualifying workers?

There are a variety of definitions depending on the particular right. However, they can be broadly classified as the following:

An individual will need to be working under a:

1. Zero hours contract
2. Zero hours arrangement
3. Low hours contract.

4. Zero hours contracts – do U18 and Over 18 years olds have the same rights?

Yes. At present there are no provisions distinguishing qualifying workers based on their age.

5. What’s the difference between a zero hours contract, zero hours arrangement and low hours contract?

The difference between these three forms of contract and arrangements are:

• A zero hours contract is one where the individual undertakes work when an employer makes it available. However, there is no obligation on the employer to make work available.
• A zero hours arrangement is an agreement between an employer and a worker. The employer offers work, and the worker agrees to do it. However, neither side has to offer or accept work.
• A low hours contract (our term) requires the employer to provide a minimum number of hours. This is during a set time period and does not exceed a certain number of hours.  We do not know what the specified number is yet.

6. When will I need to offer a guaranteed hours contract?

The employer must offer a guaranteed hours contract when a Qualifying Worker works the Reference Period Hours. The second finalised legislation will confirm the reference period and how to fully calculate it. However there are suggestions of a 12 week period.

7.  How much notice of shift will I need to give?

The secondary legislation will determine this. At present the Bill states that notice must be ‘reasonable’. If the notice is less than the ‘specified amount of time,’ its presumed to be unreasonable. Details of what constitutes the ‘specified amount of time’ will come later.

8. What details need to be included on the notice?

The notice must include the hours to work, along with the start and end times of the shift.

9. Will the zero-hours rules for agency workers be different?

Maybe! The government has recognised the tripartite relationship inherent in an agency workers contract. Meaning the rules will need to apply differently in practice. We will wait to see whether the government sees this through.

10. I’m an end-client that uses an agency. Will I be responsible for paying the agency worker for cancelled shifts at short notice?

Under the legislation the agency has the responsibility to pay agency workers for short notice cancellations or curtailments. The legislation does allow for agencies to recoup this via commercial agreements with clients.