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Zero Hour Contracts

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Zero Hour Contracts

SECTION GUIDE

What are Zero Hour Contracts?

A zero hour contract is a type of employment agreement where the employer does not guarantee any minimum number of working hours. Instead, staff are engaged on a flexible basis: the employer offers shifts or tasks when work is available, and the individual can choose whether to accept them.

This model can be helpful for businesses facing seasonal fluctuations, unpredictable demand, or requiring extra cover at short notice. However, it also comes with important legal obligations and reputational considerations that every employer must understand.

Zero Hour Contracts in UK employment law

Zero hour contracts are recognised in the UK and remain legal under the Employment Rights Act 1996. Following changes introduced in 2015, exclusivity clauses – where employers prevented staff on zero hour contracts from working elsewhere – are prohibited.

Workers on zero hour contracts still benefit from key statutory rights, including:

  • National Minimum Wage or National Living Wage
  • Paid annual leave (accrued based on hours worked)
  • Rest breaks and compliance with the Working Time Regulations 1998
  • Protection against discrimination under the Equality Act 2010

The exact rights an individual holds will depend on whether they are classified as a “worker” or an “employee”:

  • Workers usually have more limited rights, focusing on pay and holiday.
  • Employees (those with more regular arrangements) may also gain protections such as notice periods, redundancy rights, and unfair dismissal protection once qualifying periods are met.

  • Why do Zero Hour Contracts matter for employers?

    Zero hour contracts can provide operational flexibility, which is particularly valuable for sectors such as hospitality, retail, social care, logistics, and education. They allow employers to scale staffing levels up or down in line with demand.

    However, their use must be carefully managed. Poor practice can create serious risks for your business:

    • Legal Risks – Failure to pay minimum wage, ignoring holiday entitlements, or applying exclusivity clauses could lead to claims at employment tribunal.
    • Employee Relations Challenges – Staff may feel insecure, undervalued, or disengaged if hours are unpredictable or communication is poor.
    • Reputational Damage – Misuse of zero hour contracts has been subject to intense media scrutiny. High-profile cases have highlighted the reputational risks of relying too heavily on this type of arrangement.

    Handled transparently and fairly, zero hour contracts can be part of a balanced workforce strategy. They allow businesses to cover peaks in demand, while offering opportunities to individuals who prefer flexible working arrangements.

  • Best practices for managing Zero Hour Contracts

    To avoid risks and get the best results, employers should adopt clear, consistent practices:

    Provide Clear Written Terms

    Make sure zero hour contracts clearly explain:

    • How and when work will be offered
    • The rate of pay and arrangements for holiday accrual
    • The individual’s status (worker or employee) and what this means for their rights

    Ensure Fair Scheduling

    • Avoid last-minute scheduling or cancelling shifts without good reason. Good practice includes providing as much notice as possible and setting out clear expectations around how shifts are allocated.

    Pay Correctly and Track Hours

    • Keep accurate records of hours worked to ensure compliance with minimum wage, holiday entitlement, and working time limits. HR software such as Breathe HR can simplify tracking and reduce errors.

    Review Regularly

    • Ask whether continued use of zero hour contracts is appropriate. If staff are regularly working fixed patterns, they may be entitled to a more permanent contract. Conduct regular reviews to stay compliant and avoid legal disputes.

    Communicate and Engage

    • Include zero hour workers in team communications, training, and recognition where possible. A sense of inclusion improves engagement and reduces turnover.

  • Zero Hour Contracts and workforce planning

    Zero hour contracts shouldn’t just be viewed as a stopgap. When used strategically, they can form part of a wider workforce planning approach. Employers can:

    • Balance permanent and flexible staff to meet predictable and unpredictable demand.
    • Develop a talent pipeline by offering zero hour opportunities to students, seasonal workers, or individuals testing suitability for longer-term roles.
    • Manage costs more effectively by avoiding unnecessary fixed salary commitments during quieter periods.

    However, over-reliance on zero hour contracts can harm workforce stability. Employers should consider how these arrangements fit into their long-term people strategy.

  • Recent developments in relation to Zero Hour Contracts

    Zero hour contracts remain a controversial topic in UK employment policy. While they are currently legal, government consultations and political debates often propose tighter restrictions or alternative arrangements. Employers should:

    • Stay alert to potential legislative changes, particularly around minimum guaranteed hours and predictability clauses.
    • Be mindful of trade union campaigns and employee activism that can influence public opinion and brand perception.
    • Review policies annually to ensure contracts and practices align with the latest legal guidance.

    By staying proactive, businesses reduce compliance risks and show employees that flexibility is being offered responsibly.

Best practices for managing Zero Hour Contracts

To avoid risks and get the best results, employers should adopt clear, consistent practices:

  • Provide Clear Written Terms

    Make sure zero hour contracts clearly explain:

    • How and when work will be offered
    • The rate of pay and arrangements for holiday accrual
    • The individual’s status (worker or employee) and what this means for their rights

  • Ensure Fair Scheduling

    Avoid last-minute scheduling or cancelling shifts without good reason. Good practice includes providing as much notice as possible and setting out clear expectations around how shifts are allocated.

  • Pay Correctly and Track Hours

    Keep accurate records of hours worked to ensure compliance with minimum wage, holiday entitlement, and working time limits. HR software such as Breathe HR can simplify tracking and reduce errors.

  • Zero Hour Contracts

  • Review Regularly

    Ask whether continued use of zero hour contracts is appropriate. If staff are regularly working fixed patterns, they may be entitled to a more permanent contract. Conduct regular reviews to stay compliant and avoid legal disputes.

  • Communicate and Engage

    Include zero hour workers in team communications, training, and recognition where possible. A sense of inclusion improves engagement and reduces turnover.

Your Questions Answered

FAQs on Zero Hours Contracts

  • What alternatives are there to zero hour contracts?Reveal

    Employers can consider part-time contracts, fixed-term contracts, or flexible working arrangements, which may provide stability while still offering flexibility.

  • What industries use zero hour contracts most?Reveal

    They are common in hospitality, healthcare, education, delivery and logistics, and seasonal businesses such as retail and tourism.

  • Can I dismiss someone on a zero hour contract?Reveal

    If the individual is classed as a “worker,” there is generally no requirement for notice, unless the contract specifies otherwise. However, if they qualify as an “employee,” dismissal procedures must be fair and lawful.

  • Do zero hour workers get holiday pay?Reveal

    Yes. Holiday accrues based on hours worked. Typically, this is calculated as 12.07% of hours worked, but employers should review the latest government guidance to ensure accuracy.

  • Are zero hour contracts legal in the UK?Reveal

    Yes. They are permitted under UK employment law, provided minimum rights (such as holiday pay and minimum wage) are observed and exclusivity clauses are not included.

  • How will the Employment Rights Bill affect zero-hours contracts?Reveal

    Workers will be able to request fixed or predictable hours. This could increase costs for employers who rely on casual arrangements but will reduce disputes and unpredictability.

Where to find out more A collection of hand-picked useful resources in relation to Zero Hours Contracts from impact HR and beyond

Need support with implementing Zero Hour Contracts?

Whether you’re updating HR policies, training managers, or handling complex employee issues, impact HR can help you stay compliant, confident, and in control. Request a callback to see how we can support your business.

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