Zero-hours contracts under the Employment Rights Act 2025: preparing for 2027

The latest ONS data suggests that the use of zero hours contracts is rising, with 1.23 million workers in the UK now on zero-hour contracts in their main employment. Zero hours contracts are widely used in certain sectors, such as hospitality, retail and social care.

In 2027, we expect to see changes to the way in which zero hours contracts are used, with the Employment Rights Act 2025 (ERA 2025) set to reform the regime and provide greater security and predictability to zero hours workers.

These rights may be practically challenging for some employers to implement, increasing both the administrative burden and cost of using zero and low hours workers. Whilst much of the detail of the rights is yet to be determined, starting to prepare for these changes at an early stage will assist employers in assessing the impact on their business.

Summary of changes to zero-hours contracts under ERA 2025

The expected changes coming in 2027 that employers should be aware of are:

• A duty to offer guaranteed hours reflecting the hours regularly worked over a reference period (expected to be 12 weeks).
• A duty to provide reasonable notice of shifts, as well as separate duties around cancellations and change to shifts.
• A right to payment where shifts are cancelled or moved at short-notice.

Why zero-hours contracts are changing: moving away from ‘one-sided flexibility’

Whilst the benefits of work flexibility to both employers and employees are widely recognised, concerns have been raised in recent years in relation to the use of zero hours contracts, in particular the lack of job security and guaranteed income.

The intention behind the changes to zero hours contracts under the ERA 2025 is to retain genuine flexibility, whilst preventing arrangements where the employer carries little risk, but the worker has little predictability of hours and earnings (referred to as ‘one-sided flexibility’).

The stated aim is to create a ‘baseline of security and predictability so people can plan’ childcare, transport and finances, alongside ensuring a ‘level playing field’ for employers who already schedule work responsibly.

Who is likely to be affected?

The reforms are expected to apply not only to zero-hours contract workers but also those working low-hour and annualised hours arrangements.

Therefore, you should start planning if your organisation uses any of the following:

• Zero-hours contracts
• Low-hours contracts
• Annualised hours contracts
• Agency worker models

The three core changes to zero hours contracts

1. Duty to offer guaranteed hours

Employers will be required to offer eligible workers and agency workers a guaranteed-hours contract that reflects the hours they regularly work over a reference period (expected to be twelve weeks, with final detail to be specified in regulations). Workers will be able to choose to reject the offer and remain on their existing arrangement if they prefer the flexibility that the zero hours contract affords.

• It is a repeating obligation: the duty is designed to apply after the end of each reference period while the individual remains a qualifying worker.
• Scope is broader than ‘pure’ zero-hours: it can also capture low-hours contracts where guaranteed hours are below a threshold (to be set by regulations) and the worker regularly works above that minimum, and annualised hours contracts that have a total number of guaranteed hours but are lacking in detail as to their allocation.
• Anti-avoidance is built in: there are provisions intended to prevent manipulation of offered hours (for example, artificially reducing hours made available) to lower or avoid a guaranteed hours offer.
• Information about rights: employers will be required to take reasonable steps to ensure that workers are given specified information in relation to their rights to guaranteed hours during an ‘initial information period’ (to be set out in regulations).

2. Duty to provide ‘reasonable notice’ of shifts

Employers will have to provide workers and agency workers with reasonable notice of shifts they require them to work. What counts as ‘reasonable’ will be shaped by regulations.

• It’s not just the first booking: separate duties apply to giving reasonable notice of cancellations and changes to a shift once agreed.
• Likely to cover ‘irregular’ shifts on low-hours contracts: where a contract sets some hours but additional shifts fall outside the contractual pattern.
• Procedural matters: the form/manner of notice and when notice is treated as given may be set out in regulations.

3. Right to payment when shifts are cancelled, moved or curtailed at short notice

Where a worker or agency worker has been told to work a shift or agrees to work it, and the employer cancels it, moves it or curtails it at short notice, the employer will generally have to make a payment. The detail—including what counts as ‘short notice’ and the amount payable—will be set by regulations. The framework will cap compensation so it cannot exceed what the worker would have earned for the shift.

Agency workers: shared responsibilities and potential passing on of costs

The Government anticipated that agency working could be used as a loophole if the rights were not extended to include agency workers. The rights that will be afforded to agency workers under the new regime are broadly the same as to workers generally, with some amendments to reflect the tripartite nature of the relationship between the worker, agency and hirer.

As a default position, the hirer will be expected to carry the obligation to offer guaranteed hours, whilst both the agency and hirer will be able to share responsibility for giving reasonable notice of shifts. Agencies will generally be expected to make short-notice payments to agency workers, with scope to recoup costs from hirers in some scenarios.

Protections from dismissal and detriment

To support enforceability, the guaranteed-hours regime is expected to be backed by strong protection against retaliation.

A worker (and, where relevant, an agency worker) will be able to bring a claim for automatic unfair dismissal where they are dismissed because they exercised, sought to exercise, or asserted their statutory right to be offered guaranteed hours (or because the employer believed they might do so).

Alongside this, workers will have a statutory right not to suffer a detriment—for example, loss of shifts, reduced work allocation or other unfavourable treatment—because they took steps connected with their guaranteed-hours rights (such as accepting or rejecting an offer or raising concerns about non-compliance).

Collective agreements may modify the default regime

The ERA 2025 includes a mechanism for certain collective agreements to contract out of (or tailor) these measures. Where there is a recognised union in place, employers can consider whether a collectively agreed approach could better reflect operational reality, whilst still meeting the policy goal of reducing one-sided flexibility.

Preparing for 2027 changes to the zero hours regime

Although key details are yet to be determined and will be laid down in regulations in due course, organisations need to start auditing working patterns now and understanding the impact of the changes.

1.     Audit your workforce

Identify who is on zero-hours, low-hours, and annualised-hours contracts. Monitor actual hours worked over time and model what guaranteed hours offers might look like if the reference period is set at twelve weeks.

2.     Review scheduling processes and systems

Document how shifts are offered, accepted, swapped and cancelled; determine what controls you need to put into place, including whether any systems will need to be updated to manage this.

3.     Assess payroll capability

Ensure systems will be in place to calculate and pay short-notice compensation.

4.     Prepare to update contracts

Allocate responsibilities for amending template wording for guaranteed-hours variations closer to the changes coming into effect, and once more detail has been finalised within regulations.

5.     Train managers

Rota owners will need to understand that late changes can trigger pay and other liabilities.

6.     Engage with agencies early

Where your audit determines agency workers will be affected, confirm who will do what (in terms of notices, offers, and payments) and how costs and data will flow.

7.     Keep an eye on developments

As a lot of the key detail is subject to further consultation and regulations, keep an eye out for further updates.