Zero-hours contracts guide: Everything you need to know

What are zero-hours contracts?

Zero hours-contracts are a type of contract. It effectively means an employer doesn’t have to guarantee any set amount of working hours to the worker.

This also means that the worker doesn’t have to accept any work offered by their employer.

It’s against the law for employers to prevent staff on zero-hours contracts from working  for other employers, with an exclusivity clause.

For example, employers aren’t allowed to include a clause in the contract of zero-hours workers, stating they can only work for them.

Workers also shouldn’t be treated unfavourably if they do work for other employers.

Workers on zero-hours contracts have legal protections ensuring they can work for multiple employers without fear of discrimination. For example: 

• Employers cannot include exclusivity clauses that prevent zero-hours workers from taking other jobs. 

• Workers shouldn’t face unfair treatment if they choose to work elsewhere. 

What is the employment status of a zero-hours staff member?

Zero-hours staff are classified as employees or workers and should refer to their employment status as such. According to Acas, your rights are based on your employment status.

What are my rights under a zero-hours contract?

Your rights are determined by your employment status, not having a zero-hour contract. This means you should receive the same employment rights by law as full-time workers, including but not limited to

• National Minimum Wage and National Living Wage
• Paid holiday
• Rest breaks
• Protection from discrimination
• Receiving payslips

When might employers use zero-hour contracts? 

You might engage staff on a zero-hours contract basis if you need additional flexibility in parts of your workforce, or extra hands on deck at certain times of year. 

Some examples of sectors that might use zero-hours contracts are:

• Casual hours work (e.g. for students working during holidays)
• Care work
• Delivery driving
• Warehouse work
• Hospitality during seasonal peaks 
  
  

Can you refuse hours on a zero-hours contract?

Zero hour contracts, by nature, do not guarantee you'll receive work from your employer, however, you're also under no obligation to accept the work offered. For example, if for some reason you can’t work a shift being offered to you, you don't have to accept it while on a zero-hours contract.

Zero-hours contracts - what the law says

Under the new Employment Rights Bill, changes are being introduced to give workers more security while keeping the flexibility of zero-hours contracts intact. 

Here’s how it will work: 

• Choice and transition: Employers can initially hire employees on zero-hours contracts as usual. However, after a 12-week ‘reference’ period, employees will gain the legal right to request a fixed-term contract. This fixed-term contract would reflect the average number of hours worked during those 12 weeks. 

• Compensation for cancellations: The draft bill also introduces measures to protect workers from short-notice cancellations. If shifts are cancelled or reduced, employees will now be entitled to compensation, proportional to the notice given by their employer. 

These changes aim to strike a balance between flexibility for employers and fairness for workers. 

What do employers need to do next?  

Once the new law takes effect, employers will be legally required to grant fixed-hours contract requests from employees who’ve worked for more than 12 weeks. 

While it’s not mandatory, some employers might decide to proactively offer fixed-hours contracts or hire new employees on fixed-hours terms. This approach will remain optional and at the employer’s discretion.

When are these changes happening?  

There’s no exact timeline for these changes yet. Like other updates in the Employment Rights Bill, the new rules are expected to roll out gradually, starting in 2025. However, it’s possible the implementation could extend into 2026 or later. 

An important part of hiring zero-hours workers is understanding how holiday entitlement and pay are calculated. 

Do zero-hours contracts get holiday pay?

Zero-hours workers are entitled to take paid holiday, although they have limited legal rights. (We cover how to calculate holiday pay for those on zero-hours contracts in a later section of this guide). 

An employer can insist a worker take a holiday, as long as they provide twice as much notice as the holiday the worker is being asked to take. For example, 4 days’ notice would need to be provided for 2 days’ holiday.

How do you calculate holiday entitlement & pay for zero-hours contracts? 

The 2023 Employment Rights (Amendment, Revocation and Transitional Provision) Regulations introduce an optional way to calculate holiday entitlement for those with irregular hours and part-year work. This change affects holiday years starting on or after 1st April 2024. 

1. Holiday pay method from 1st April 2024 

Option 1: Holiday pay is worked out at 12.07% of actual hours worked during the pay period and paid when leave is taken.

The first 4 weeks should be paid at the ‘normal’ rate, and the remaining 1.6 at the ‘basic’ rate. (This is known as reference period holiday pay).  

Option 2: An extra 12.07% of pay for actual hours worked is added to each pay packet (with no additional pay when leave is taken). If this method is chosen, the entire amount of the worker’s leave will be paid at the ‘normal’ rate of pay. 

Employers can decide to offer one or both options for these calculations. 

2. Statutory holiday accrual method from 1st April 2024 

For irregular hours and part-year workers, there's a new accrual method starting from the first year of work - the 12.07% calculation. Holiday will be accrued at a rate of 12.07% of hours worked in a pay period. 

Statutory leave continues to accrue when these workers are off work due to family-related or sick leave (depending on their employment status). 

To determine your potential zero-hour contract holiday entitlement, Breathe’s Holiday Calculator can help work out your allowance in a few simple steps. 

Are staff on zero-hours contracts entitled to sick pay?

Workers on zero-hour contracts are entitled to Statutory Sick Pay providing they meet the eligibility criteria.

They will need to:

• Have been off sick for at least 4 qualifying days in a row. (The first 3 days are ‘qualifying days’ and this needs to be when they usually would be required to work. Statutory Sick Pay can be paid from day 4)
• Earn at least £123 a week (on average, and before tax)
• Have informed their employer they’re sick within the employer’s deadline, or within 7 days 

Whilst the weekly rate of Statutory Sick Pay applies to all employees and workers, the amount employers should pay workers for each day they’re off work depends on the number of qualifying days they work each week.

The government offers a Statutory Sick Pay calculator to help work out rates of sick pay for your workers.

Upcoming legal changes to SSP - what this means

Day-one statutory sick pay rights are set to change. SMEs should be aware of: 

• SSP from day one: Sick pay will now apply from the first day of an ongoing illness, instead of starting on the fourth consecutive day. 

• Lower earnings limit removed: SSP will be extended to cover the lowest-paid workers, removing the £123-a-week earnings threshold. 

These changes mean SSP will apply to more cases, particularly benefiting workers on lower earnings. 

What do I need to do as an employer?  

Review and update employee contracts to: 

• Remove references to SSP starting after the fourth day of sickness. 

• Remove references to the lower earnings limit for SSP eligibility. 
  
  

When do I need to make changes by?  

There’s no fixed timeline yet, but changes under the Employment Rights Bill are expected to roll out from 2025 onwards.  

How do notice periods work for zero-hours contract workers?

If you have a genuine requirement for a flexible pool of workers, or a business where demand fluctuates, then zero-hour contracts can work extremely well.

It’s important that SMEs understand notice periods for zero-hours workers – or essentially, the lack of them. 

There are no statutory rights regarding notice periods for zero-hours contract workers.

Theoretically, a zero-hours contract gives your worker the ability to ‘leave’ without ever giving notice. Since they don’t have to accept any work that you offer, nor give a reason for doing so, they could simply and permanently continue to turn work down.

Even where notice is given, your worker could still turn down any work offered during their notice period. Effectively, they can ‘leave’ as soon as notice is given. In practice though, every employer seeks a good working relationship and wouldn’t want this sort of situation to occur.

From an employer’s perspective, the issues are the same. Although you may give notice to a worker, provide a leaving date and follow the process (as per the zero-hours contract notice period you have outlined) you don’t then have to offer them any work during that time. 

Zero-hours notice periods & contracts

Employers need to be aware that a zero-hours contract will continue, even without providing work, until the contract is terminated either by themselves or the worker.

If no paid work has been completed within x number of weeks, the contract will come to a natural end. This clause will need to be stated in the contract. If that time does come, the employer must pay any accrued holiday that is owed.

Do you get a p45 on a zero-hours contract?

All workers, no matter the type of employment they undertake, should receive a P45 at the end of their employment contract.

Final considerations for SMEs & zero-hours contract notice periods

So, there are a couple of things to be aware of with zero-hours contract notice periods. 

Firstly, you shouldn’t rely on a zero-hours contract worker being available during their notice period. Secondly, you can’t expect that they’ll even give notice that they’re resigning. 

If you bear those points in mind, these contracts can be very useful for calling on ad-hoc workers as and when you need them.