Zero Hours Contracts: What the New Rules Really Mean for Your Business

Jun 03, 2026

Picture this. You have a member of staff who has been on a zero hours contract for two years. They work every Tuesday and Thursday, reliably, without fail. In your mind, it is a flexible arrangement that suits you both. In the eyes of the Employment Rights Act 2025, it is a regular working pattern — and from 2027, you will be legally required to offer them a contract that reflects it.

That is not a worst-case scenario. That is just Tuesday and Thursday, twice a week, for two years.

The rules around zero hours contracts are changing significantly, and the businesses most at risk are not the ones using them badly. They are the ones using them without thinking too carefully about what they actually look like on paper.

This post explains what is changing, when it kicks in, which businesses need to pay attention, and exactly what you should be doing right now to get ahead of it.

First, What Is Actually Changing?

Zero hours contracts are not being banned. The government considered it and decided against a full ban. What the Employment Rights Act 2025 does instead is strip away what ministers called "one-sided flexibility" — the kind where the business gets all the benefit of having staff available on demand, and the worker carries all the financial risk.

The Act received Royal Assent on 18 December 2025. You can read the official government summary on GOV.UK. The zero hours changes are part of a package of over 28 reforms rolling out between now and 2027.

Here is what the new rules introduce.

The new right	What it means in practice
Right to guaranteed hours	If a worker consistently works regular hours over a 12-week reference period, you must offer them a contract that reflects those hours. The offer must be repeated at the end of every reference period.
Right to reasonable notice of shifts	You must give workers advance notice of when they are required to work, including any changes to shift times. Calling people in at the last minute will not be acceptable as standard practice.
Compensation for cancelled shifts	If you cancel, curtail, or change a shift with insufficient notice, the worker is entitled to compensation. The exact amounts will be set in regulations, but the principle is clear: if the worker expected to work and you cancelled, that financial hit is not theirs to absorb.
Protection from detriment and dismissal	It will be automatically unfair to dismiss a worker, or treat them less favourably, because they accepted or rejected a guaranteed hours offer. These protections apply from day one of employment.

When Do These Changes Actually Take Effect?

The timeline is phased, which is genuinely helpful — it gives you room to prepare. But it also makes it easy to assume there is no urgency. There is.

Date	What happens
18 December 2025	Employment Rights Act 2025 becomes law. The obligation to prepare begins now.
7 April 2026	The Fair Work Agency launches — a powerful new enforcement body that can carry out workplace inspections, impose fines, and take legal action on behalf of workers. This is not a symbolic change.
2027 (exact date to be confirmed)	Guaranteed hours obligations, shift notice requirements, and cancellation payments all come into force. Workers can bring tribunal claims from this point.

Most of the detail — including the precise threshold for what counts as a "low hours" contract, the length of the reference period (expected to be 12 weeks), and how much compensation applies for cancelled shifts — will be set through government regulations following consultation. But the direction of travel is clear, and waiting for every detail before acting is a mistake.

A Real-World Example: When a Helpful Arrangement Becomes a Legal Liability

SCENARIO

Sarah runs a catering business. She has four staff members on zero hours contracts. Two of them — Marcus and Priya — work almost every weekend and have done so consistently for 18 months. She has never thought of them as regular employees because the contract says she does not have to guarantee them hours.

Under the Employment Rights Act 2025, Marcus and Priya will almost certainly qualify for guaranteed hours offers once the 2027 rules land. Their working pattern is regular and predictable, regardless of what their contract says.

When the law comes into force, Sarah will need to:

• Assess their actual hours over the reference period

• Offer each of them a contract that reflects those hours

• Repeat that offer at the end of every subsequent reference period

If she does not, Marcus or Priya can bring a tribunal claim. And if she were to reduce their hours or change their shifts to avoid triggering the obligation, that too could result in a detriment claim.

The good news: if Sarah starts tracking hours and reviewing her contracts now, she has time to handle this well.

Which Businesses Are Most at Risk?

You do not have to be in hospitality or retail to be affected by this. Any business that uses casual or variable-hours workers is in scope. Ask yourself whether any of the following is true:

You have staff on zero hours contracts who work a broadly consistent number of hours each week
You employ workers who have been on casual arrangements for more than a few months
You use agency workers to fill flexible or on-call roles
Your rotas are variable on paper but predictable in practice
You have never reviewed your zero hours contracts to check they are still fit for purpose

If any of those resonate, the new rules will apply to you. And the key thing to understand is that it is the working pattern that matters, not the label on the contract. A contract that says "zero guaranteed hours" does not override the reality of someone turning up every week for two years.

What About Agency Workers?

This catches a lot of businesses off guard. The new rules extend to agency workers, meaning you cannot use temporary staff to sidestep the guaranteed hours obligations.

Where you are the hiring business, the responsibility for offering guaranteed hours generally sits with you. Both you and the agency will share responsibility for giving reasonable notice of shifts. Compensation for cancelled shifts falls on the agency, but in practice they are likely to pass that cost back to you where you are the one making the change.

If you regularly use agency workers alongside your direct employees, it is worth taking a fresh look at how those arrangements are structured. Our employment contracts service can help you understand which contract type is right for each role and how to document it properly.

Your Zero Hours Contracts Action Plan for 2026

The full obligations land in 2027, but the businesses that handle this well will use 2026 to prepare properly. Here is what to work through.

	Action
1	Map your workforce. List every person on a zero hours or low hours arrangement, including agency workers. You cannot plan for what you cannot see.
2	Look at actual working patterns, not just the contracts. Pull back 12 weeks of rotas or timesheets and identify who is working regularly. These are the people most likely to qualify for guaranteed hours offers.
3	Check your existing contracts for exclusivity clauses. These are already unlawful. If yours still contain them, remove them now.
4	Review your shift scheduling processes. Can you give more advance notice than you currently do? Start building that habit now, before it becomes a legal requirement.
5	Update your policies and procedures to reflect how you manage flexible workers and casual arrangements. If your policies were written before the Employment Rights Act 2025, they are out of date.
6	Update your employee handbook. Workers have the right to be informed about these new protections, both when they start and throughout their employment.
7	Set up a system to track hours accurately on a rolling basis. When 2027 arrives, you will need 12 weeks of reliable data to determine who qualifies.
8	Think strategically about your staffing model. Are there roles where a fixed part-time contract would actually serve your business better? Getting ahead of this is easier than being forced into it.
9	Get specialist advice on anything you are not sure about. The detail is still emerging through consultation, and applying it correctly to your specific situation is where most mistakes happen.

What Is Actually at Stake If You Get This Wrong?

The Fair Work Agency has launched with genuine enforcement powers. It can carry out workplace inspections, pursue underpayments, and take legal action on behalf of workers. Tribunal time limits have also doubled from three months to six months under the Employment Rights Act 2025, giving workers more opportunity to bring claims.

If you fail to offer guaranteed hours when required, a worker can bring a tribunal claim for compensation. If you cancel shifts without adequate notice, the worker is entitled to payment. And if you dismiss someone — or reduce their hours — to avoid triggering the guaranteed hours obligation, that dismissal will be treated as automatically unfair.

Automatic unfair dismissal claims carry a basic award plus a compensatory award with no upper cap in some circumstances. Add in the ACAS early conciliation process, the time your managers spend on it, and the reputational cost, and a single claim is easily a five-figure problem.

THE THING MOST BUSINESSES MISS

The risk is not just from workers who are angry about the arrangement. It is from workers who leave for other reasons — a better offer, a change in circumstances, a disagreement over something unrelated — and then realise, sometimes with the help of a solicitor, that they had rights they were never offered.

Getting your contracts and working pattern records right now removes that vulnerability completely.

Should You Move Away From Zero Hours Contracts Altogether?

Not necessarily — and that is important to say clearly. Zero hours contracts still have a completely legitimate place. If you genuinely have unpredictable demand, and the people you employ actively want the flexibility, these arrangements can work well for everyone.

What the new rules are targeting is the situation where the flexibility is, in practice, entirely one-sided. Where the worker turns up every week, plans their life around the work, but has no security because the contract does not reflect the reality.

For some businesses, working through this process will reveal that a mix of part-time contracts and a smaller casual pool actually makes more operational sense. For others, the answer is simply better records and updated contracts. Either way, the starting point is the same: know what you have. Our policies and procedures service and employee handbook service are good places to start if your documentation has not been reviewed recently.

Not Sure Where You Stand? Let's Talk It Through.

The honest truth is that most business owners using zero hours contracts are not doing anything wrong. They just have not had the time or the reason to look closely at whether their arrangements reflect the reality of how their teams actually work.

That is exactly the kind of thing we help with. We will look at your workforce, your contracts, and your working patterns, tell you where you are exposed, and give you a clear plan for sorting it out before the 2027 rules land.

Book a free 15-minute consultation call and we will talk through your specific situation. Or if you prefer, get in touch via our contact page and we will come back to you directly.

Zero hours contracts can still work. They just need to work properly — for you and for the people who rely on them.

Do you need help with your people management?

Whether you’ve got a specific HR query, you need your HR foundations in place, or you’re looking to build on those foundations and create a team that can function without you, we’d love to talk about how we can help you make it happen.

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