The Employment Rights Bill 2024: Ending One-Sided Flexibility and Tackling Exploitative Zero-Hours Contracts

Zero-hours contracts have been in use for decades, particularly in industries with fluctuating demand, such as healthcare, hospitality, and retail. Historically, businesses maintained a pool of bank or relief staff available at short notice without any guarantee of set hours.

The rise of the gig economy in the 1990s led to a surge in zero-hours contracts. As the Employment Rights Act 1996 did not specifically address this type of work, zero-hour contracts grew unchecked. However, concerns over exploitation came to the forefront in 2013 with the Sports Direct scandal, which exposed poor working conditions. This led to the Small Business, Enterprise and Employment Act 2015, which banned exclusivity clauses in zero-hours contracts. In response, some employers shifted to minimum-hours contracts, which continued to lack job security, income stability, and fair treatment overall.

The Government's Plan to Make Work Pay

The Government's Employment Rights Act 2024 will not eliminate zero-hour contracts; instead, it will introduce additional restrictions to improve job security for affected workers.

Expected to take effect in Autumn 2026, the Act introduces a "right to guaranteed hours." Under this provision, individuals on zero-hours contracts who work a regular number of hours over a 12-week reference period will be entitled to a guaranteed-hours contract. This requirement also applies to minimum-hours contracts.

Additionally, employers will be required to:

• Provide reasonable notice for any shifts they offer to casual employees.
• Compensate employees if shifts are cancelled, shortened, or moved at short notice.

An End to Flexibility?

Notably, the Act does not force casual workers to accept a guaranteed-hours contract if they prefer to remain on a zero-hours contract. This ensures flexibility for individuals balancing work with study, other employment, self-employment, or caregiving responsibilities.

However, employers must offer a guaranteed-hours contract after each 12-week period, even if they already know the employee does not wish to accept it. This could become an administrative burden, and further guidance will be needed to clarify the consequences for employers who do not comply with this new legislation.

Businesses in seasonal industries, such as retail and leisure, may also face challenges. They may experience regular hours during peak periods but reduced demand at other times. As a result, we anticipate a rise in annualised hours contracts and clauses distinguishing between "peak" and "off-peak" working periods.

A greater concern for businesses is the requirement to compensate employees for short-notice shift cancellations, curtailments, or changes. At this stage, there is no guidance on how compensation will be calculated or what constitutes "short notice." Employers will need to carefully monitor their workforce planning to avoid both revenue losses and additional financial penalties. Investing in an advanced rostering system could help businesses adapt before Autumn 2026.

Maintaining Best Practice

The changes introduced by the Act align with long-standing best practices for managing zero-hours contracts. Employers have always been encouraged to monitor working patterns to prevent accidental contractual obligations from forming. Consistently offering the same shifts to the same workers can blur the distinction between "worker" and "employee" status - an issue the Act also aims to address.

While businesses are not yet legally required to compensate staff when unexpected scheduling changes occur, fair treatment remains key. Transparent work allocation fosters a more engaged and motivated workforce, leading to greater flexibility, dedication, and effort from employees.

The Make Work Pay Programme

Stay ahead of the upcoming changes to zero-hours contracts and the Employment Rights Act 2024 with our new Make Work Pay Programme. This programme is designed to help you shape a people strategy that prepares your business for key changes, including zero-hours contracts, day-one unfair dismissal rights, and much more.

For further details, please click here or contact our team on 023 8063 9311 or email us at enquiries@warnergoodman.co.uk.