The Employment Rights Bill (the Bill) introduces measures to combat "exploitative zero hours contracts". It aims to end "one-sided flexibility, ensuring that all jobs provide a baseline of security and predictability".
The Bill contains two different measures for doing this: ensuring that workers have the right to have a contract that reflects the number of hours they regularly work for their employer based on a reference period, and ensuring that workers get a reasonable notice of their shift patterns, and of any changes to these patterns, with compensation for shifts cancelled at short notice.
The new measures are unlikely to come into force until 2026 and much of the detail of the new zero hours regime will be the subject of consultation over the coming months. For the moment though it's worth being aware of the Bill's provisions.
Right to guaranteed hours
There will be a new obligation on employers to offer a contract which reflects the hours that workers regularly work over a reference period. There will be a statutory requirement for employers to calculate the hours that each of the workers in scope is entitled to, once they reach a threshold period of working with their employer (the reference period), and to then offer them guaranteed hours of work.
The employer will be under an obligation to offer guaranteed hours to workers in scope. The worker can then choose either to accept or reject the offer. There will then be a further reference period, at the end of which the employer will again have to offer guaranteed hours should the worker remain or become eligible. This obligation to make an offer will continue on repeat until the worker no longer qualifies for the right. If a new or varied contract is accepted by the worker which has guaranteed hours which exceed the "low" number threshold (see below), the employer will no longer need to monitor their hours or make further offers.
Employers will be able to treat an offer of guaranteed hours as rejected if a response is not received within the period designated for the worker to give a response.
It's worth noting, as mentioned above, that there's no obligation on a worker to accept the offer of guaranteed hours; it can be rejected within the response period, but the employer will still be obliged to keep making offers at the end of each subsequent review period which is bound to create an administrative burden for employers. It may well be the case that a worker is happy to work on a zero hours contract and so rejects all offers which will then prove a bit of an exercise in frustration for the employer.
Which workers are in scope?
Those who qualify for the new right will be on zero hours contracts or will work under a "zero hours arrangement", or they will have a low number of minimum guaranteed hours but will work more than those hours in the reference period (which is likely to be 12 weeks). Extending the right to low minimum hours contracts is an anti-avoidance measure to stop employers putting workers onto contracts of, for example, one or two hours a week.
Zero hours contracts are a type of casual work contract; the term covers short-hours contracts, annualised hours contracts and bank staff.
A worker does not need to have been engaged continuously throughout the reference period, and they can be employed under one or more contracts during the reference period.
The government is also looking at extending the zero hours rights contained in the Bill to agency workers and is currently carrying out a 'Consultation on the application of zero-hour contracts measures to agency workers' which closes on 2 December. If you'd like to respond to our survey on the agency worker measures then please do.
Will there be an opportunity to change other terms?
Will there be an opportunity for employers to change other terms when they make an offer of guaranteed hours? The Bill provides that only minimum hours can be varied, and so employers won't be able to vary any other terms and conditions. However, it will be possible to propose terms and conditions relating to matters other than working hours and length of employment, that are no less favourable on the whole than the terms and conditions the qualifying worker had when working for the employer during the reference period. So the new contract will not be able to offer a lower rate of pay, or remove benefits offered previously.
There is a distinction to be drawn between the situation outlined above and a situation where a qualifying worker has, during the relevant reference period, worked for the employer under more than one contract (or under a contract which has been varied as described above) and during this period did not have the same terms and condition relating to matters other than hours and length of employment. In this instance it will be possible for the employer to propose new terms (provided they don't relate to hours or length of employment) that are less favourable than the most favourable terms the qualifying worker enjoyed during the reference period. This is subject to the proviso that, taken as a whole, they are no less favourable than the least favourable terms enjoyed during that period. In addition, the employer will have to show that the proposal of those terms constitutes a proportionate means of achieving a legitimate aim.
Are there any exceptions?
The Bill contains a provision which enables an employer to offer a qualifying worker a "limited term" (i.e. fixed term) contract. This will be reasonable if an employer reasonably considers that:
- the worker is only needed to perform a specific task and the contract provides for termination when the task is performed;
- the worker is only needed until the occurrence of an event (or failure of an event to occur) and the contract provides for termination on the occurrence of the event (or failure of the event); or
- there is only a temporary work need for a qualifying worker and the contract provides that it will be terminated when the employer reasonably considers that need has come to an end.
In the Next Steps document, the government has said that where work is genuinely temporary, there will be no expectation on employers to offer permanent contracts. It remains to be seen whether seasonal work, holiday cover, or cover for someone's absence will fall within this provision. Ultimately, it will turn on an employment tribunal's interpretation of reasonableness.
We will have a clearer idea of how all these provisions will work once more detail is available, and the government has committed to consulting before making secondary legislation. This secondary legislation will deal with what constitutes "regularly" for the purpose of the hours that a worker works, how the guaranteed hours will be determined to reflect these hours and whether there will be any "situational exemptions".
What is certain though is that the obligation to offer guaranteed hours will have a massive impact on an employer's ability to flex its business to accommodate changing demands and needs. It will really impact on sectors that have already been hit hard by recent changes in the budget.
What are the sanctions?
It will be possible for a worker who is not offered hours on the required terms to bring an employment tribunal claim. There will be a 3-month time limit (though this may be subject to change in view of the government's plans to extend time limits more generally). If the claim is successful, the tribunal must make a declaration and may make an award for compensation. The compensation awarded will be capped (details of this will be set out in regulations) and will be that which is just and equitable based on the individual's financial loss (which is likely to be based on the guaranteed hours that should have been offered).
Workers will have a right not to be subject to a detriment because they accepted or rejected any offer. Any dismissal of an employee for accepting or rejecting an offer will be automatically unfair. The usual rules for unfair dismissal compensation will apply.
Potential problems with overstaffing
Employers will potentially end up being overstaffed because they've had to increase hours across the board. The new provisions mean that it's going to be much harder for employers to flex their workforce in the way that they are currently able to. There is no scope at the moment to unilaterally reduce the number of guaranteed hours that form part of a guaranteed hours agreement, so unless something changes as a result of consultation this has the potential to be a real issue.
In this situation employers will have to consider whether they can reduce the use of workers who are left on zero hours contracts or agency staff. If this isn't possible then making redundancies may be the only option. This, in itself, may be far from straightforward if the workers who have been offered guaranteed hours become employees. If this is the case they will have a day one right to unfair dismissal under the Bill. As redundancy will be carved out of the probationary period "lighter-touch" dismissal process it won't be possible to go through a quick dismissal procedure to avoid the risk of claims. This will then place a huge additional burden on employers.
Another thing to bear in mind if workers do become employees, is that employers will need to be careful about dismissing guaranteed hours employees as the dismissal will be automatically unfair if the principal reason for dismissal is because they accepted a guaranteed hours offer.
Right to reasonable notice of shift patterns and payment for shifts cancelled, moved or curtailed at short notice
The Bill provides for the right to reasonable notice of shifts and of shift changes or cancellations. There is also a right not to suffer a detriment for exercise of these rights.
A notice of a shift will have to include the hours to be worked, the time they will be worked and the day on which they will be worked. Regulations will state how much notice should be "presumed reasonable". Obviously, the length of notice required will make a huge difference in terms of the feasibility of compliance for employers; all we know so far is that it won't be more than seven days.
What is reasonable will depend on the circumstances. Regulations will set out a specific minimum time before the shift is due to start. If less than the minimum amount of notice required is given, then it will be presumed to be unreasonable unless an employer can show otherwise. The government has stated that it will set out the factors that an employment tribunal should look at when determining whether the notice was reasonable or not.
The remedy for breaches of the reasonable notice of shifts requirement is yet to be determined but we do know that individuals won't be able to 'double count' losses, so for example if a worker receives compensation for short notice of a change of shift, they can't also receive compensation for not receiving notice of the same shift.
There is a duty on employers to make a payment to workers each time a shift is cancelled, moved or curtailed at "short notice". The payment will not need to be made in "specified circumstances" but it's not yet clear what these circumstances will be. If a payment isn't necessary, then the employer must give the worker a notice explaining why they believe a payment is not needed.
Claims can also be brought if payment for a cancelled, moved or curtailed shift is not made in full, the worker hasn't been given the correct notice explaining why payment hasn't been made, or the notice is inadequate or untrue.
Workers can't be subject to a detriment because they refused to work a shift where the worker had a reasonable belief that the correct notice was not given. For example, an employer couldn’t stop offering hours or reduce hours because of their refusal. Workers also can’t be subject to a detriment because they bought a claim. Unlike the right to be offered guaranteed hours there is no right to automatic unfair dismissal rights for dismissals related to a worker’s refusal to work a shift because reasonable notice was not given. However, any dismissal will be a detriment entitling a worker to make a claim.
The purpose behind these reforms is stated by the government's impact assessment to "allow workers to better plan their lives and finances in advance and not be subject to sudden changes in weekly hours and pay". It's undoubtedly the case, as forecast in the impact assessment, that employers will be incentivised by these changes "to invest in their workforce planning"!
Practical points
It's hard to give definitive advice when so much detail remains to be filled in, but there are a few general steps you can take in order to get prepared:
- Carry out an audit of your workforce to see how many zero hours workers you currently use.
- Look at their contractual working pattern and any peaks and troughs in demand to see if you will be able to argue that there is only a temporary need.
- Review your use of limited/fixed hour contracts.
- Carry out an audit of the way you schedule shifts and how much notice is given of these shifts and consider whether these practices will need to change.
