Zero-hours contracts guide: Everything you need to know

Zero-hours contracts can offer valuable flexibility for employers and workers alike, particularly where there is only a temporary need for additional staff, or where businesses are managing fluctuating demand. However, concerns about unfair or one-sided use have driven significant reform, reflecting wider government plans to improve fairness and predictability at work.

With major employment law reforms coming into force from April 2026, and further changes expected in 2027 under the Employment Rights Act 2025 (previously introduced as the Employment Rights Bill), it’s more important than ever for UK SMEs to understand how zero-hours arrangements and low-hours contracts will be regulated going forward.

This guide explains:

• how these flexible contracts currently work, including where agency workers are engaged alongside directly hired staff

• how upcoming reforms will affect employers using agency workers as part of their workforce

• what’s changing from April 2026 (including day-one Statutory Sick Pay and family and bereavement leave)

• what’s expected to change in 2027 (including guaranteed-hours offers, reasonable notice, reasonable notice of shifts, and compensation for cancellations)

Each section focuses on what the law says now, what’s expected to change, and what employers, HR teams and line managers should do next.

What is a zero-hours contract?

This type of contract does not guarantee a minimum number of working hours, and work is offered as needed. The individual can usually accept or decline shifts.

These arrangements are commonly used alongside low hours contracts where businesses require flexibility, rely on temporary staff or agency workers, but still need a degree of predictability.

Can staff work elsewhere under flexible arrangements? 

Yes. Employers cannot prevent individuals engaged under zero-hours arrangements from working for other organisations. Exclusivity clauses are unlawful, and staff must not be treated unfairly for taking work elsewhere - a key safeguard designed to prevent exploitative zero-hours contracts.

Employment status: worker vs employee 

People engaged under these contracts may be classed as workers or employees, depending on the reality of the working relationship. This can include individuals classed as a low hours worker, where work is regular but limited.

• Employees typically have broader rights, including unfair dismissal protection and redundancy pay.

• Workers have core rights such as minimum wage, paid holiday, rest breaks and protection from discrimination.

From April 2026, several new day-one rights will apply to workers, making worker and employee protections more aligned in practice.

Zero-hours contract in 2026-2027: key changes at a glance

What stays the same 

• Flexibility to accept or decline shifts

• No exclusivity - individuals can work for multiple employers

• Probation periods depend on employer guidelines

Changes from April 2026 

• Statutory Sick Pay from day one

• Removal of the SSP lower earnings limit

• Day-one eligibility for family leave and bereavement leave

Changes expected in 2027 (timing TBC)

• Guaranteed hours following a reference period (expected 12 weeks)

• A legal duty to offer guaranteed hours where regular patterns exist, following a qualifying reference period

• A new right to reasonable notice, including reasonable notice of shifts, with compensation for short-notice changes and agency workers

• Unfair dismissal qualifying period expected to reduce to six months

Many of these changes will be confirmed through further regulations, setting out the detailed rules employers will need to follow.

Guaranteed hours: moving to fixed-term contracts (expected 2027)  

This is one of the most significant reforms affecting flexible working models and zero or low-hour arrangements.

Under proposed reforms, qualifying individuals must receive a guaranteed hours offer reflecting the average hours worked, calculated using the hours worked over a reference period (expected to be 12 weeks).

This assessment focuses on how many hours someone has actually worked in practice, taking individual circumstances into account.

This may also apply where agency workers have been working regular patterns with the same business over the reference period and may apply equally to a low hours worker whose role has developed into a set working pattern over time, under existing arrangements.

Key points employers should understand:

• Employers must offer guaranteed hours once a worker qualifies under the reference period rules

• The guaranteed hours offer is expected to repeat on a rolling basis, meaning employers may need to reassess working patterns during each subsequent reference period

• Individuals may decline the guaranteed hours offer and remain on flexible terms

• Accepted offers will usually result in a guaranteed hours contract, typically set up as one of the employer’s fixed-term contracts with guaranteed hours

• A limited opt-out may be available where a recognised trade union agrees alternative benefits, such as a higher hourly rate, potentially through a collective agreement, in place of guaranteed hours, in specified circumstances.

Any such collective agreement would need to clearly set out the alternative benefits offered and how these compare to a guaranteed hours contract.

What employers should do now

• Audit zero-hours and low hours contracts across the business

• Review working patterns to identify when you’ll need to offer guaranteed hours - and track hours worked so you can evidence patterns accurately and consistently. See how Breathe can help.

• Prepare fixed-term contracts and templates for guaranteed hours in advance

Scheduling shifts: notice and compensation (expected 2027) 

Currently, shift scheduling under flexible contracts is largely governed by contract terms, allowing changes to be made at short notice, particularly where employers are responding to fluctuating demand. This will change as clearer notice requirements are introduced.

Under the new rules, guidance is expected to clarify how much notice employers must give in different situations.

This guidance is likely to follow government consultation with employers and worker representatives.

It will form part of a new right to reasonable notice and may also set out any further exceptions that apply in specific circumstances.

The definition of reasonable notice is expected to vary by industry and will be clarified in guidance.

• Employers must give reasonable notice when scheduling work

• Reasonable notice of shifts will also apply to changes and cancellations

• Where reasonable notice is not given and changes are made at short notice, including where shifts cancelled at short notice leave someone without work because an employer fails to give sufficient notice, compensation will be payable proportionate to the notice given.

• These rules apply to agency staff as well as directly engaged workers, including where shifts are changed or cancelled at short notice and where agencies provide workers to cover peaks in demand.

• Under new rules affecting zero-hours workers and agency workers, once an agency worker accepts a shift, employers must give reasonable notice of shifts, changes and cancellations.

In practice, businesses will need to demonstrate consistent use of clear scheduling practices, including reasonable notice of shifts, to avoid compensation claims.

What employers should do now

• Review rota processes to ensure reasonable notice can be given

• Train managers on the financial impact of making rota changes at short notice and failing to give reasonable notice of shifts

• Update scheduling policies well ahead of 2027, including new notice requirements.

Notice periods and dismissal (expected 2027)

Individuals engaged on such contracts can usually stop accepting work without providing working notice, and employers are not required to offer work during a notice period - even where changes happen at short notice.

Maintaining a positive relationship through clear communication remains important, particularly as dismissal protections strengthen.

The key change expected in 2027 is:

• Unfair dismissal protection expected to apply after six months, rather than two years

Practical tip

You can't rely on withholding shifts to end an agreement. Many employers include a clause stating that if no paid work is completed within a set number of weeks, the contract ends naturally, with accrued holiday paid.

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

Do zero-hours contracts get holiday pay?

Holiday rules have begun to change, but not all at once.

From April 2024, new rules apply to irregular hours and part-year workers (including many zero-hours workers). Under these reforms, holiday entitlement for these workers can now be calculated using the 12.07% accrual method, applied as hours are worked. However, existing leave years that began before April 2024 continue under the previous rules.

You can find full details of these reforms on the GOV.UK holiday pay and entitlement reforms guidance.

Regardless of working pattern, workers remain entitled to 5.6 weeks’ paid holiday per year, calculated on a pro-rata basis where applicable.

If you require staff to take holiday (for example, during a shutdown period), you must still give notice of at least twice the length of the leave required.

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

Holiday entitlement is commonly calculated as:

Hours worked × 12.07%

Holiday pay should reflect a worker’s average pay over the previous 52 paid weeks. If there are unpaid weeks, you should use earlier paid weeks (up to a maximum of 104 weeks) to calculate a fair average.

Further changes affecting zero-hours and irregular-hours workers may be introduced under the Employment Rights Act 2025, meaning holiday rules are evolving gradually rather than changing all at once.

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.

Legal changes to SSP from April 2026

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. 

This means more people working on flexible, zero or low hour contracts, including zero-hour workers and low paid workers, will qualify for SSP.

What do I need to do as an employer?  

Review and update employee contracts to: 

• Update contracts referencing SSP waiting days

• Ensure sickness is recorded from day one

• Review payroll systems and budgets

When do I need to make changes by?  

The changes to Statutory Sick Pay (SSP) that will affect zero-hours contract workers must be ready by April 6th 2026 in line with the Employment Rights Act 2025. 

From April 2026, day-one rights are expected to apply to Statutory Sick Pay and paternity leave, with unpaid parental leave also available from day one. From 2027 a new unpaid bereavement leave entitlement (details subject to guidance).

What this means:

• Family leave and bereavement leave eligibility from day one

• Pay eligibility for maternity and paternity leave remains subject to qualifying rules

Some details around bereavement leave are still being finalised, so employers should monitor guidance carefully as further details emerge (including whether any qualifying conditions will apply to paid bereavement leave).

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

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

It’s important for SMEs to understand notice periods for zero-hours workers – or, in many cases, the lack of them.

For genuine zero-hours workers, there are no statutory notice period requirements. This is because workers are not obliged to accept work, and employers are not obliged to offer it.

In practice, this means a zero-hours worker could stop accepting work without ever formally giving notice. As they are free to decline shifts without providing a reason, they could simply and permanently stop accepting work.

Even where notice is given, a worker can still refuse any work offered during that notice period. Effectively, they can disengage as soon as notice is given. In practice, however, most employers aim to maintain positive working relationships and avoid this situation.

From an employer’s perspective, the position is similar. Even if you give notice to a zero-hours worker and set a leaving date in line with the contract, you are not required to offer work during the notice period, unless the contract says otherwise.

It’s also important to note that employment status matters. If a zero-hours individual is classed as an employee rather than a worker, statutory minimum notice rights may apply.

Looking ahead: the Employment Rights Act 2025

While there are currently no statutory notice period requirements for genuine zero-hours workers, this area is evolving. Under the Employment Rights Act 2025, zero-hours and irregular-hours workers will gain new rights designed to improve predictability and security at work.

Although the Act does not introduce specific notice period rules for zero-hours contracts, it may increase the likelihood of individuals being classed as employees over time - which could bring statutory notice rights into play.

Employers relying on zero-hours arrangements should regularly review contracts and working patterns to ensure they remain compliant as the law develops.

Zero-hours notice periods & contracts

A zero-hours contract will usually continue to exist even when no work is offered or accepted, until it is formally terminated by either the employer or the worker.

Some contracts include a clause stating that the agreement will end if no work is undertaken within a specified period. Where this applies, the clause must be clearly set out in the contract. If the contract does end, the employer must pay any accrued but untaken holiday.

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

Yes. All workers, regardless of contract type, should receive a P45 when their employment ends and they are removed from payroll.

Final considerations for UK SMEs 

These contracts are not being banned, but they are becoming more structured under the Employment Rights Act, including stronger protections around scheduling and cancellations - with clearer expectations around fairness, predictability and compliance.

Employers should prepare for:

• Regular reviews to determine when to offer guaranteed hours, including the option to move onto a guaranteed hours contract, after regular working patterns emerge

• Increased use of fixed-term contracts with guaranteed hours

• Greater reliance on reasonable notice when planning and managing work schedules

• More structured scheduling and cancellation processes, particularly where a cancelled shift or last-minute change affects staffing or pay

• More administration around SSP and family leave

• Shorter qualifying periods for unfair dismissal claims (expected 2027)

Getting ahead of these changes will reduce legal risk and help businesses move away from exploitative zero-hour contracts while retaining flexibility.

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Disclaimer: This guide reflects information available as of January 2026. Employment law is subject to change. Always seek professional advice for your specific circumstances and speak to one of Breathe's HR Partners.