New rules for zero-hours contracts: What employers need to know

As an employer, you can use zero-hours contracts, and many businesses rely on the flexibility these create in their workforce.

However, there are new rules that strengthen the rights of workers on these arrangements, and you may have to offer guaranteed hours to some workers who regularly work consistent patterns.

In this article, we explain the new rules for zero-hours contracts and what they mean for your business.

What is a zero-hours contract?

A zero-hours contract is a flexible arrangement where a worker agrees to work for you, but with no set number of hours in a week or month. That means that their hours may vary significantly from week to week.

A regular employment contract might specify that an employee is contracted to work 35 hours per week (for example). The employer is tied in to giving the employee those hours, and the employee is contracted to work for a minimum of 35 hours in the week.

In a zero-hours contract, that figure is, of course, zero. It looks fairly odd when you see it written down. But in practice, it means that the employee may work one hour one week, then 20 hours the next week, then 5 the week after.

John Carpenter, Chief of Staff at 1st Formations, says:

Zero-hours contracts work well for some people, who want flexible, ad hoc work. But they can be unfair to other people who need guaranteed hours and a steady income. With the new changes, employers can give people the choice to remain on flexible contracts or commit to more regular hours if it suits them. These changes should bring clarity for both employers and workers, while retaining flexibility where it’s needed.

What are the benefits of a zero-hours contract?

One of the key benefits of a zero-hours contract is that it means the business has a flexible workforce, which can ramp up when the business is busy or scale down when there is less work to go around.

It works well in settings like hospitality. You may have asked three people to work on a Thursday evening in your restaurant. But when it gets to 8pm you realise you’re not as busy as you thought you would be, so you send one person home.

Zero-hours contracts are also popular in the retail economy. Sports Direct employ over 11,500 workers in the UK on zero-hour contracts, to reduce their costs while having enough people to run their stores. They’re also common for seasonal workforces, care workers, and people working in logistics.

The benefit for the business is that you’re not wasting money by paying staff you do not need. And there’s a reciprocal benefit for employees. The arrangement works well for workers who need or want flexibility and want to choose when they work.

Often, students favour flexible zero-hours contracts so that they can sign up for more hours during a reading week, and fewer hours during exam time. That’s just one example, but you can imagine various scenarios in which people with busy lives and multiple responsibilities don’t want to be tied to set hours of paid work.

Why have they come under scrutiny?

Zero-hours contracts came under scrutiny because there were concerns that they exploit some workers.

There was a question of fairness in the relationship: is it fair that the employer cannot guarantee work, but expects availability when work is offered, and denies the employee the ability to work elsewhere?

The government decided that the answer to those questions was ‘no’ and that working people needed extra protection.

What the Employment Rights Act 2025 means for zero-hours contracts

With that in mind, the government drafted the Employment Rights Act 2025, which became law on 18 December 2025. The Act introduces a variety of changes (which we’ll explain in more detail later). Some changes are in force already, while others are being phased in through 2026 and 2027.

The overarching aim of the legislation is to help employees have more security in work and tackle one-sided flexibility where the employer holds all the cards.

ACAS has a helpful overview of the Employments Rights Act 2025 and its staged implementation for all the changes, not just those relating to zero-hours contracts.

What changed in January 2026

From January 2026, new exclusivity rules came into force. The changes mean that you can’t stop a worker on a zero-hours arrangement from taking work elsewhere. This protection applies even if no written contract is in place.

You also can’t change how you treat a worker if you find out they’ve taken other work. For example, you cannot reduce their normal shifts or remove them from rotas. Make sure all of your managers and line managers are aware of this too, because it can be easy for biases to slip in.

Any exclusivity clauses in zero-hours contracts (and covered low-hours contracts) are unenforceable and should be removed.

If a worker feels like they’ve been given these types of ‘quiet sanctions’ because they’ve taken work elsewhere, they may be able to challenge this at an Employment Tribunal.

What is changing in 2027

From 2027, key reforms from the Employment Rights Act 2025 kick in. Employees on zero-hour contracts are expected to gain three new rights. These are the right to:

1. Guaranteed hours reflecting regular working patterns
2. Reasonable notice of shifts
3. Payment for shifts that are cancelled, cut short, or moved at short notice

These changes are expected to be in force from 2027, but a date is still yet to be set.

Right to guaranteed hours for regular working patterns

Workers who regularly work consistent hours over a “reference period” will gain the right to be offered a contract reflecting those hours. That’s quite a complicated way of putting it, so let’s look at it with a working example.

If one of your workers has worked 20 hours a week for the past 12 weeks, that means that you’ll have to offer them a written contract for 20 hours a week, instead of their current zero-hours contract.

The worker can choose to reject the offer and continue with the zero-hours contract if they want to. But every three months, you have to offer your workers a contract that guarantees them the hours that reflect the actual hours they worked in the last three months, until they are no longer a “qualifying worker.”

Reasonable notice of shifts

You must give workers reasonable notice of shifts, including date, start time, and number of hours.

We’re not yet sure what “reasonable” means, but this will be ironed out after it’s determined following the consultation; guidance and any detailed rules may appear in secondary legislation. Any illustrative examples should not be treated as binding until finalised.

Compensation for cancelled/changed shifts at short notice

If you cancel or change a shift at short notice, you will have to provide compensation. The amount will reflect the notice given and will not exceed what the worker would have earned for the entire shift.

Does this apply to agency workers?

Yes. These reforms extend to agency workers as well as direct workers. The end hirer (the business using the agency worker) will be responsible for offering guaranteed hours.

Both the hirer and the agency will be jointly responsible for providing reasonable notice of shifts. The agency is responsible for paying compensation when shifts are cancelled at short notice.

Operational details and responsibility allocation may be refined in secondary legislation.

What small business owners should do now

These changes are significant and will require a bit of planning before implementation in 2027. But if you need a flexible workforce, you can still use zero-hours contracts to achieve that.

Things that you should be doing now to prepare.

• Monitor actual hours worked by zero-hours and low-hours workers.
  This will make you aware of any regular patterns. You can then discuss with workers whether they want flexibility or certainty, anticipating the requirement to offer guaranteed hours. This will help you plan your workforce against the needs of the business in 2027 (subject to consultation outcomes, of course).
• Prepare systems to record hours accurately
  Ensure you can capture the hours that your employees are working, so make sure you have systems in place. This could be a clock-in and out system, or time-recording apps) to determine patterns over the reference period once finalised.
• Remove exclusivity clauses from contracts
  Review zero-hours and covered low-hours contracts and remove any clauses preventing workers from accepting work elsewhere.
• Train your managers
  Make sure that your managers understand the new protections and do not treat workers differently.

If you’re thinking about taking on your first employee, or expanding your workforce with flexible workers, find out how to comply with your employer obligations.

For help in setting up your business the right way, please visit 1st Formations, and our experts can help to keep you compliant.

The information in this article is provided for general information on UK employment law and is not legal advice. The law and guidance may change. If you’re unsure, you should obtain advice on your specific circumstances from a suitably qualified solicitor.