At a Glance
The Government has opened a new consultation on the significant zero hours contracts measures in the Employment Rights Act 2025 (‘ERA 2025’), with responses due by 25 August 2026.
The consultation seeks views on the detailed rules that will underpin three new rights for qualifying workers (and agency workers): a right to be offered guaranteed hours, a right to reasonable notice of shifts, and a right to payment where shifts are cancelled, curtailed or moved at short notice. The stated policy aim is to reduce insecurity for zero hours and low hours workers while preserving enough flexibility for businesses to respond to changing demand.
Much will depend on where the Government lands on the detail and the options in the consultation are broad and leave open a number of key questions.
Businesses should consider how these proposals might affect their resourcing models and may wish to consider responding to the consultation.
In Detail
Guaranteed Hours Offers
The ERA 2025 reforms will introduce a requirement for employers to make guaranteed hours offers (‘GHO’s) to qualifying workers reflecting the hours that they regularly work over a reference period. To qualify, the worker must be on a zero hours contract or on a contract that guarantees a low number of hours under a certain threshold. The ERA 2025 does not set out the detail of this, but instead regulations are required to determine who falls within scope and how the GHO is calculated. The first part of the consultation seeks views on some of the key points.
Hours threshold
The consultation seeks views on where the “hours threshold” for a low hours contract should be set, as workers with guaranteed hours at or below the threshold will be in scope of the requirements.
The options are wide ranging, from 8 to 48 hours per week, with the Government’s preference somewhere between 8 and 20 hours. Where this is eventually set will make a substantial difference to the number of workers in scope.
Reference periods
A GHO is to be calculated based on the number of hours a qualifying worker has worked during an “initial” reference period. A GHO will be required to be made by an employer where over that reference period a low hours worker has exceeded the minimum number of hours under their contract.
This is not a one-time only duty, and employers will have to repeat the assessment of whether a new GHO is required at the end of each “subsequent” reference period until the qualifying worker no longer meets the criteria for a GHO.
The Government’s preferred option is a 12-week “initial” reference period, although it is consulting on 26 and 52 week alternatives. It is also seeking views on having longer subsequent reference periods, and the possibility of a gap between reference periods, for example 26 weeks. A shorter reference period may capture short-term peaks and create more frequent obligations to make offers, whereas a longer period may smooth out fluctuations but be less responsive to genuine changes in working patterns.
Regularity requirements
The proposals under the consultation highlight how complex the detailed rules could become. Workers will only qualify for a GHO if their hours in the reference period are sufficiently regular. Two alternative calculation models are proposed to determine the regularity requirements. The first would require that the hours worked during the reference period must be distributed across a minimum number of weeks out of the total reference period; the second would combine this with a requirement that the worker has also worked a minimum number of hours in excess of their contracted hours.
The consultation includes worked examples, but the calculations are not straightforward and if these proposals are carried through into the regulations, employers are likely to need robust guidance and time-recording systems to determine whether workers qualify.
Seasonal work and temporary need
The GHO provisions have been criticised for how they may potentially impede employers who used limited-term contracts to manage seasonal work. The consultation states that an employer will not need to make a GHO where a limited-term contract is shorter than the relevant reference period, provided it is reasonable for the arrangement to be limited term (e.g. where the worker is only needed for a few weeks to perform a specific task and the contract terminates once completed).
For a limited term contract to be reasonable under the ERA 2025, it must be where the worker is only needed (1) to perform a specific task, or (2) until the occurrence of an event or (3) there is a “temporary need”. Views are sought on what kinds of “temporary need” should be covered in the regulations above the circumstances in (1) and (2). Ensuring the provisions cater for genuine seasonal fluctuations in demand is a key concern for a number of sectors (such as retail and hospitality) and the consultation is an opportunity for stakeholders to input their views on these measures.
Calculating the GHO
The consultation contains further questions on how the hours in a GHO should be calculated. It proposes two options: (1) a mean average and a (2) median average. It also asks whether employers should have the flexibility to decide the period over which hours are allocated (i.e. weekly, monthly or other) or whether the Government should impose a standard period. The Government also suggests that employers could use an adjustment margin for minor calculation errors to help protect employers against theoretical legal liability arising from minor calculation errors.
Exclusions
The Government has the power to make exemptions from the duty to make a GHO or exclusions from the right to receive one. Questions are posed in the consultation asking for input on the scope of any exclusions or exemptions, although the tenor of the consultation suggests exemptions are intended to be rare and limited to exceptional situations, such as workplace flooding. Employers that rely on flexible labour should therefore be cautious about assuming that broad carve-outs will be available.
Reasonable Notice of Shifts
The second part of the consultation focuses on the ERA 2025 measures which introduce a requirement on employers to give eligible workers ‘reasonable notice’ of shifts, including of any cancellations or changes to shifts.
Hours threshold
Again, an hours threshold will determine which workers will be eligible for reasonable notice of shifts, which may be set at a different level to that for GHOs. However, the Government proposes that the threshold will be the same for both the right to reasonable notice and the right to payment for shifts cancelled, curtailed or moved at short notice (see below). Broad options are included ranging from 8 to 48 hours per week and the Government has not indicated a preference.
Reasonable notice of shifts
The consultation seeks views on how much notice should be presumed reasonable when shifts are offered or changed. This will be the starting point for tribunals to decide whether notice was reasonable in any given case. Where less notice is given and a worker brings a tribunal claim, it will be for the employer to establish that it was reasonable in the circumstances. The Government is also expected to set out factors for tribunals to consider when deciding whether notice was reasonable, and the consultation seeks views on this.
For directly engaged workers, the options range from one to four weeks’ notice. For agency workers, the Government considers if a shorter period may be needed, with less than five days given as a possible option. The consultation also asks if some circumstances should require a shorter or longer notice, for example where employers need last-minute cover. It also asks if certain types of hirers should not be liable for failing to provide reasonable notice, although it appears the intention is for this to be limited.
This part of the regime is likely to be particularly significant for employers in sectors where staffing needs change quickly, because it may require rethinking how rotas are issued and how contingency cover is organised.
Payment for Short-Notice Shift Changes
Under the ERA 2025, if an employer fails to provide sufficient notice of a cancelled, moved or curtailed shift (i.e. it does so on ‘short notice’), the worker will be entitled to compensation. The consultation seeks views on the definition of ‘short notice’, the payment amount and possible exceptions. The Government also clarifies that the requirement will not apply where the worker initiates the change or voluntarily swaps shifts with another worker.
Short notice
The Government is considering a two-tier system: one for ‘short notice’ changes, potentially between one and seven days, and another for ‘very short notice’ changes, potentially between one and five days, with a higher payment due in the latter case.
Level of payments
The consultation proposes two methods of calculation for the payment due to the worker, either requiring a percentage of what the worker would have earned for working the shift, or a percentage of what they would have earned had they worked it at the National Minimum Wage rate. The percentages being consulted upon range from 10% to 80% for short-notice changes and 30% to 80% for very short notice changes.
Exceptions
As with GHOs, the consultation asks about exceptions where an employer won’t be required to make a payment. However, the examples given suggest these will be confined to extreme circumstances, such as extreme weather events or widespread power outages. Where an exception applies, the worker would not be eligible for a payment but must be given an ‘exception notice’ explaining why.
Employers should therefore be preparing on the basis that ordinary fluctuations in demand or operational inconvenience are unlikely to fall within the exceptions.
Enforcement
The consultation also addresses enforcement. In addition to the ability for workers to bring employment tribunal claims against their employer for breaches, the Government is considering whether the Fair Work Agency (‘FWA’) should also have powers to enforce the short notice payment regime.
The proposal is that the FWA’s role would be limited to that aspect of the reforms, with powers to issue Notices of Underpayment requiring arrears to be paid to workers alongside a financial penalty to the Government. The proposal is that the penalty would be equal to 50% of the arrears due to the worker, subject to a maximum of £100 per case and £5,000 per worker. If this goes ahead, it will add an additional layer of regulatory enforcement risk on top of the potential for individual litigation.
Agency Workers
The consultation covers the applicability of the zero hours measures to agency workers throughout, including respect of GHOs, notice of shifts and payment for short notice shift changes. The consultation recognises that the provisions may need to be applied differently given the nature of the agency relationship. In general, the provisions put the onus on the end hirer to make GHOs to agency workers they engage, however views are sought, for example, on whether there should be any cases where the duty to make a GHO should be placed on the agency or another intermediary instead.
The consultation also asks whether the Conduct of Employment Agencies and Employment Businesses Regulations 2003 should be amended so that agencies must give hirers information to support them in complying with the new measures.
Impacts for Employers
Given the breath of the consultation proposals, the final shape of the regime remains uncertain and will be subject to regulations. What is clear, however, is that the new rules are lengthy and complex and could be administratively time consuming and costly for employers to implement in practice. Employers should start seeking to understand how the new rules operate and how they will impact their business resourcing models and budgets.
Employers that use zero hours, low hours or variable-hours arrangements should start assessing which parts of the workforce could fall within scope of the changes under the different threshold options, assess whether their time and attendance data is able to be recorded in a way to support the proposed calculations, review rota-setting and cancellation practices, and consider whether payroll systems could handle short-notice payments.
Businesses with seasonal peaks or significant use of agency labour may also wish to think about whether to respond to the consultation, given the importance of the unresolved questions on the hours thresholds, regularity, temporary need and exceptions.
The consultation is open until 25 August 2026, and responses can be submitted online here.
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