Key Changes Under the Employment Rights Bill in Zero-Hours Contract

Zero-hours contracts have become an essential topic of discussion in the UK workplace. According to the latest data from the Office for National Statistics approximately a million people in the UK are working under these contracts. (Source: Labour Force Survey. This represents 3% of the population.

While the zero-hours contract provides flexibility it brings job uncertainty for the employees. Furthermore, the opinions on these contracts have been mixed with employees arguing that these contracts only bring financial instability. On the contrary employers think that they help in meeting the workforce demand while keeping people in employment.

However recent changes in the zero-hours contract under the employment rights bills published on 10th October 2024 have significantly impacted the business and employees working under these contracts.

Under the new proposed bill, the employee will have:

• Guaranteed working hours are available for those who regularly work more hours than stated in their contract.
• Compensation for last-minute shift changes or cancellations.
• Providing notice for the shifts.

These zero-hours contract changes provide employees financial protection against sudden changes within the workforce.

Do you want to learn more about these key changes? Then this blog is for you. Here we will cover everything from the changes to implications and legal considerations.

Come on! Let's get started!

What is the Zero-Hours Contract?

Before we dive into the guide the question is what is a zero-hour contract?

A zero-hours contract is an employment agreement where employers are not obligated to guarantee working hours to the employees. Similarly, workers are not bound to accept the shifts they don't want to do.

These contracts offer flexibility for both the workers and employers. For example:

• Companies can adjust their workforce based on the demand hiring workers under this contract on minimum wages during busy days.
• Similarly, workers who don't want to commit to the 9-5 and want to pursue other job opportunities can only work when they want to.

These contracts are mostly used in fields like Hospitality and Retail where the demand is based on the season. While the zero-hours contract is gaining popularity in the UK because of its flexibility, uncertainty remains a big issue for employers.

Why?

They have a limited say in their work schedule. Furthermore it also causes financial instability due to a lack of guaranteed hours. If you want to learn more about what a zero-hours contract is consider reading the blog What are ZERO-Hours CONTRACT? Definition Advantages & Disadvantages.

However recently the new employment rights bill was passed which aims to address the key zero-hours contract issues ensuring both workers and employers can benefit equally.

Overview of New Employment Rights Bills

The New Employment Rights Bills 2024 aims to change the working time legislation in the UK. To make sure that workers under different agreements like Zero Hours Contract receive all their rights and are treated fairly, they introduced new reforms like flexible working hours, sick pay and unfair dismissal against their employees.

While for now it's just a bill it's expected to become law in early summer 2025. However not all the reforms will be in effect until the year 2026.

For employers, the zero-hours contract now includes the guaranteed minimum working hours and notice period to protect workers from shift cancellations.

Let's discover more about it below.

Key Changes in Zero-Hours Contract

The key changes under the employment rights bill have a significant impact. In fact, it has completely redefined the meaning of the zero-hours contract. According to VWV it's a huge step to provide job security for those under these contracts. Below are some key changes we can expect to see in 2025:

1. Reasonable Shift Notice

One of the reforms that the rights bill introduces is the reasonable shift notice.

Well, what does it mean, and how can it help the employees?

This means that employers have to provide workers with notice about any changes in their shifts within a limited timeframe. The government has yet to give more details about this.

However, implementing this change is essential for employers or workers to bring a claim against the company for a decision on whether the notice period was reasonable or not.

The best thing for workers is that if the tribunal succeeds, they will be compensated based on their financial loss.

2. Guaranteed Hours

For now, the zero-hours contract doesn't include any guaranteed hours. However, this will be changed because the contract for guaranteed working hours has been included in the employment rights bills.

That means those under such contracts will typically have guaranteed hours based on how many hours they typically work in a week. Moreover, those who want to work under flexibility without any fixed hours can continue doing so.

3. Shift Compensation

Another key change under this bill is that employers must compensate the workers if they cancel change or reduce their shift at short notice.

For now, the government has yet to release details about what constitutes the notice period, the compensation amount, and if there will be exemptions.

While the key changes under the employment rights bill in the zero-hours contract have significant benefits for the employees, there are some implications that both workers and employers need to follow. This ensures that neither party feels like they are being mistreated.

Implications for the Employees

For workers under the zero-hours contract here is what they need to know about the changes brought by the employment rights bills.

They include:

• Clear Expectations: This bill introduces guaranteed working hours and a notice period. This way, employees have clarity on their working hours. Additionally, they can know the exact amount they will be paid in that exact timeframe.
• Financial Stability: Through these changes the workers will receive financial benefits if their shifts get canceled or reduced on very short notice.
• Choice to Remain On Zero-Hours Contract: Employees who prefer flexibility over guaranteed working hours can still opt for this. The good news is that they will still be entitled to the protections if they meet the criteria.
• Makes them Feel Comfortable: These changes not only benefit them financially but also boost their confidence. Understanding their rights and knowing they are being treated fairly makes them feel comfortable in the workplace.

Implications for the Employers

Employers currently offering zero-hour contracts need to look closely at them and tailor them according to the new employment rights bills. Here is what they should consider:

• Adjust the contract: They should thoroughly review and adjust it by adding guaranteed hours along with the notice period. Furthermore, once the government announces changes it's the employer's responsibility to keep track of their contracts.
• Consult the Workers: The employers must consult with the employees about their working hours so those who want to remain flexible can choose to stay like this.
• Review Work Patterns: They should also review their work patterns to identify those eligible for the guaranteed hours contract and provide appropriate offers.
• Impact on workforce planning: They must change their staffing practices and other workforce-related planning to adjust to the new contract terms. For this they can train their leaders and managers to adapt to these changes.

What are the legal issues with the Zero-Hours Contract?

While the key changes under the employment rights bill in the zero-hours contract aim to offer flexibility, some legal issues and concerns need to be addressed.

They include:

1. Impact on Business Flexibility

Many businesses like retail and hospitality depend on zero-hours contracts to meet the demands of their workforce.

Implementing these changes around the guaranteed working hours and notice periods can impact business flexibility as they might not be able to respond to urgent demands.

For example, a restaurant experiencing a surge might be unable to call the staff for a short period.

Due to this, the balance between worker security and employer flexibility remains a big concern.

2. Lack of Clarity

One of the legal issues regarding these changes is the lack of clarity. The exact definition for the notice period shift changes guaranteed working hours and compensation amount is yet to be announced by the government. Once done, employers might have to review them carefully and analyze each one.

The lack of clarity can cause inconsistent enforcement across the different industries.

3. Compliance Burden

While these changes offer the employees perks under the zero-hours contract they increase the compliance burden for the employers.

They may have to manage the worker's shifts carefully ensuring compliance with the new rules. This not only increases their administrative workload but also causes potential workplace disruptions. It is even time-consuming.

Moreover, if not appropriately implemented employers might have to face legal issues. Some businesses might even be hesitant to use the flexible business model.

4. Potential Loss of Jobs

According to the report by FSB around two-thirds of small businesses fear that they might have to reduce their staff if the bill is implemented without any potential changes.

Some even warn that these changes might unintentionally reduce employment opportunities. Those facing higher costs and legal risks might reduce their zero-hours contracts. Additionally, they might even have to switch to full-time or part-time jobs.

5. Conflict with Workers Preferences

Not all workers oppose the zero-hour contract. Some even enjoy the flexibility they get under these contracts, especially those students and parents.

Some workers enjoy the flexibility of choosing their working hours. Well, this can reduce the opportunities for those.

How to Overcome These Issues?

These changes under the employment rights bill in zero-hours contracts have legal issues. But that doesn't mean that the employers can't overcome them.

Here are some possible solutions that they can use:

Analyse the current contracts to identify potential workers who qualify for the guaranteed working hours’ contract.

Create policies about how reasonable notices will be calculated. Furthermore, develop strategies to communicate with them.

Provide training to potential managers and HRs on how to implement these changes.

Communicate with the employees about their zero-hours contracts and address any queries they might have.

Wrapping Up!

That's a wrap! The Employment Rights Bill marks a crucial shift in the UK's labor laws aiming to reduce working hours and provide fair practices for those under zero-hours contracts. Key changes like compensation notice period and guaranteed working hours provide much-needed stability. But they also introduce legal issues for the employers.

Small businesses are concerned about the increased costs impact on business flexibility compliance burden potential loss of jobs and conflicts with the worker's preferences.

Achieving a fair balance is essential. This way both employers and employees can benefit from these bills. Thus the government needs to refine the bill, provide clear definitions and create sector-specific regulations that encourage good practice without overburdening the business.

The changes to the zero-hours contract will affect both businesses and workers. But whether it would be positive or negative depends on how the reforms perform.