• Hospitality
• Retail
• Logistics and distribution
• Creative industries
• Social care

Or, perhaps you are using an agency to supply workers when you need them? They might be on zero hour contracts (ZHCs). As you know all too well, workload varies throughout the year e.g., Black Friday, or it’s based on winning tenders so a big win means all hands on deck for a short but accutely busy period.

From April 2027, the flexible labour market is going to change. The Employee Rights Act came into law in December 2025. This blog is the first part of a series dealing with the impacts.

I work with SMEs in Hackney. The Borough has strong hospitality and creative sectors so, when I heard about the end of ZHCs as we know them, I did some research …

Did The Government Just Ban ZHCs?

In 2015, 10 years ago, the Labour Party pledged that they would “introduce a right for those working under ZHCs to request a “standard” contract from employers after 12 weeks“. Labour re-introduced this promise in the New Deal for Working People in 2023 (see banner image above taken from ). And in 2024: “Labour will end ‘one sided’ flexibility and ensure all jobs provide a baseline level of security and predictability, banning exploitative zero hours contracts“.

Last December, the Employment Rights Act became law.

This is the first part of the Plan to Make Work Pay – a labour market shift with 70 separate measures to make finding, keeping and progressing in work in the UK more stable, predictable and productive. 28 of those measures have now made it into law. The first changes come into effect from April this year (see the box below ‘Phase One’).

In anticipation of the Bill becoming law, in November 2024 the FSB surveyed their members to find that 67% would recruit fewer staff as a result. Exactly 0% said they would consider employing more staff as a response. 24% said that they would try to automate in an effort to reduce the number of staff.

80% of British SMEs say the Employment Rights Bill is a positive step forward for staff.

In August 2025, BreatheHR asked 500 UK SMEs about their feelings. 68% of SMEs surveyed felt that there would be a positive impact on staff productivity. However, 61% felt there would be a significant increase in the time and effort it will take to manage the changes.

What Does The Act Say About ZHCs?

The Act places significant restrictions on ZHCs.

It does not “ban” ZHCs, but it gives workers who have worked a regular pattern for a set period (probably 12 weeks) the right to request a predictable working pattern. Employers can only turn down that request on very specific grounds.

Importantly, this measure includes agency workers.

“The Bill has the potential to lift 1.2 million people out of severe insecurity at work, and improve job security for nearly four million workers.” Ben Harrison, Director of the Work Foundation at Lancaster University

What Does The Government Mean By Exploitative ZHCs?

Workers complain they are “struck off” shifts for taking too many toilet breaks. Some report finding bottles which colleagues have used to pee into to prevent them having to leave their station. Staff report searches as they leave to ensure they have not stolen anything but that the time it takes, up to 15 minutes per shift, is unpaid.

Others report employers cutting shifts short if business is slow. and only paying up to the time they finish or the opposite – facing undue pressure to work last minute shifts when demand is high.

Some high profile employers like Sports Direct and JD Wetherspoons now offer guaranteed hours but a quick search online finds that there are still cases where a manager asks an employee to use their holiday during quiet times. Or, they do not work their guaranteed hours and do not get paid.

“You can think of it in terms of it being employer-driven or worker-controlled flexibility, but, for the worker, it’s really experienced as insecurity,” says Dr Alex Wood, an assistant professor in economic sociology at the University of Cambridge

How Did We Get Here? The Current Labour Market

In 2006, the Office of National Statistics suggested that fewer than 150,000 workers were on these kinds of demand-driven, “If there’s work available, we’ll give you a call,” contracts.

Then came the financial crash of 2008. The recession that followed led a lot of businesses to do everything they could to reduce their costs. They didn’t want employees on the books with little work available to keep them busy. Flexible work became more popular while, at the same time, the government was keen to keep unemployment figures low (see the box, No Work Makes Jack a Dole Boy)

As of early 2026, about 1.2 million people in Britain are reliant on casual contracts to earn a wage. There are now 508,000 young workers aged 16-24 on ZHCs. This is the highest level on record.

Statista.com

“We’ve got 15 million people living in poverty in Britain – over half of whom are in work.” Paul Nowak, Trades Union Congress (TUC), Oct 2024

What Is The Guaranteed Hours Offer (GHO)?

In 2023, 92.5% of ZHCs workers would have qualified to be offered guaranteed hours.

Employers must offer a guaranteed hours contract to workers on zero-hours or “low hours” contracts if they regularly work more than their contracted hours. Some details are not yet confirmed e.g., the definition of ‘consistently working’. Employers can, however, still provide fixed term contracts.

Rights against dismissal after 6 months:

Employers can no longer use ZHCs as a ‘de facto’ probationary period. Related to this is another part of the Act. From July 1, 2026 new employees gain full protection against unfair dismissal if they are still employed on January 1, 2027. Employers will not have the traditional two-year period to assess whether to offer a full-benefits contract.

An ‘opt-in’ for stability:

Eligible workers have the right to request or accept these guaranteed hours, but they are not obligated to do so; they may choose to remain on a ZHC if that flexibility suits their personal circumstances. When JD Wetherspoons trialled their guaranteed 70% of average hours contracts in 2016, at least two thirds took them up. Recent reports (2024/2025) indicate that 96.6% of hourly-paid staff are now on guaranteed-hour contracts.

Shift predictability:

Workers must be offered reasonable notice of shifts (probably 7 – 14 days with trade unions lobbying for at least 2 weeks), with compensation if a shift is cancelled, moved, or shortened at short notice. For ‘reasonable notice’, based on European trends and Acas recommendations, anything less than 7 days will be hard to defend.

Extension to Agency Workers:

All the new rights regarding guaranteed hours and shift notice will also apply to agency workers.

Anti-Avoidance Protections:

The Act includes provisions to prevent employers from intentionally limiting a worker’s hours during the reference period to reduce the average. The Fair Work Agency begins its work this April. They will have the power to require action from an employer, to enter premises and access files and computers, to bring tribunal action on behalf of an employee and to issue notices of payment and penalties. Employers will be able to appeal to an employment tribunal.

Phase One – April 2026

Many existing entitlements only available to employees after a period of service will become “Day One” rights:

• The right to Statutory Sick Pay (SSP) from the first day of sickness. No more Lower Earnings Limit for the receipt of sick pay.
• The right to Paternity and unpaid Parental Leave.
• The right to at least one week of Bereavement Leave. An expansion to include pregnancy loss before 24 weeks.
• The enhanced right to protection from dismissal for Maternity and up to 6 months after returning to work.

What Do SMEs Need To Do Now About Their ZHCs?

If you’re offering ZHCs, many of the administrative and compliance burdens are the same whatever the size of your business. If you do not have a dedicated HR function,you will face more risk of ‘vexatious’ claims. This is due to an expansion of employees’ rights and a shortening of full-benefit timeframes.

• You will need to track hours worked precisely and get ready to manage ‘guaranteed hour offers’.
• Start monitoring shift patterns and how regularly flexible workers receive shifts over 12 week periods to understand what your responsibilities will be.
• Give clearer and earlier notice of shifts. Begin to provide at least seven days’ notice for shifts to avoid the risk of compensation claims cancelling shifts late.
• Train managers or Team Leaders on how the new requirements affect shift allocations and shift changes.

Retail And Hospitality Focus

Trade body UK Hospitality says that 17 per cent of workers in the sector are on ZHCs – the highest proportion of any industry – and that research suggests these contracts are the desired way of working for the majority of people who are on them.

“Hospitality businesses have absolutely no more capacity to absorb costs and the Government must not increase the sector’s cost burden once again.” UK Hospitality, July 2025

In October 2026, new laws on transparency around employer tipping policies come into effect. Employers must consult to create a first draft and must review the policy every 3 years.

Add to this the changes to National Minimum Wage and business rates (see my blog on the Autumn Budget), the sector is facing a huge amount of pressure.

No Work Makes Jack A Dole Boy

For a long time, unemployment stayed at surprisingly low levels. In 2019, just before the pandemic hit, unemployment was around 3.6% of the UK’s available labour pool.

However, the low percentages were only half the story. Studies of this trend conclude that the results were a focus on getting people into any kind of work rather than matching them to quality work. The majority are helped into find low-paid, high-volume employment sectors e.g. supermarkets, social care, warehouse work.

Prospects for advancement are low – a measly 15% of low-paid workers escape this low-pay trap. Roughly a quarter of the whole labour market face a cycle of periods of finding a job followed by periods of unemployment.

Macrotrends.net

APPetite For Change: ZHCs And The Gig Economy

What are the likely results to be of this change? A greater flow of people to the gig economy. Typical examples are delivery couriers, ride-hailing drivers, parcel couriers, on-demand cleaners, carers and handymen. Some hospitality and retail shift‑workers are already booking in via apps, thereby volunteering for single shifts, jobs, or tasks.

There is still an appetite for hiring on flexible, insecure contracts. Will the raised minimum requirements for all employers encourage them not to employ at all? Instead, could they move to gig platforms instead?

“The side effects could be, potentially, that instead of having lots of people working fewer hours, you’ll have fewer people working more hours. That puts a bigger burden back on the state if more people are unemployed.” Simon Fennell, Shoosmiths

Will smaller teams work permanent contracts?

Will employers expect work to be completed in unpaid overtime?

Unspoken pressure from employers not to accept GHOs?

One thing everyone seems to agree on – we are going to see businesses restrict their recruitment and, where possible, reduce their headcount. Whether the security that these new contracts gives leads to productivity, growth and more jobs to be filled remains to be seen.

If you want to find Clarity and enjoy research-based customer insights, Clarity offers in person customer interviews for SMEs in Hackney. We offer a package of 5 half hour interviews per month and promise 5 actionable insights from each interview, providing you with authentic, independent customer feedback and a suite of marketing materials to build your reputation and word of mouth referrals.

The post Have the Government Just Banned Zero-Hour Contracts? appeared first on Clarity.