Authors
The Labour government’s proposed changes to zero hours contracts are one of the most notable within the new Employment Rights Bill. Under the current law, such contracts place no obligation on an employer to offer work, nor does the employee have an obligation to accept any work offered to them. Zero hours contracts allow for a flexible and non-committal working relationship between the employer and employee and are relied upon heavily by businesses in certain sectors where work is not constant. Such sectors include farming and hospitality, in which work can be seasonal, and construction, where work is dictated by fluctuating and often unpredictable project timelines.
While zero hours contracts are utilised heavily (the ONS estimates that more than one million people work under such a contract), they have been the subject of criticism far before the Employment Rights Bill was put forward by the Labour government in its 2024 election manifesto. Criticism of these contracts centres around their lack of certainty, as the employee cannot be sure if they will be offered work and therefore receive payment. Under such contracts, employers are free to offer work and subsequently cancel it without notice and equally, employees can cancel a shift at short notice. While this flexibility can negatively impact both employers and employees, generally employers are more likely to have the necessary resources to absorb any negative impacts. They may, for example, have a pool of alternative employees they can call on at the last minute and are more likely to have a reliable financial buffer. As such, while many employees enjoy the benefits of zero hours contracts, it is generally considered that the risks associated with zero hours contracts are more burdensome on the employee, with the Labour government even going so far as to describe them as ‘exploitative’ in some circumstances.
Proposed changes
Previous attempts to protect employees working under zero hours contracts have been made, including a ban on exclusivity terms in May 2015 to ensure employees are free to find work elsewhere, and more recently the former Conservative government’s Workers (Predictable Terms and Conditions) Act 2023, which intended to introduce an employee right to request a predictable working pattern, subject to a number of grounds for refusal by the employer. The government has recently confirmed that this will not be brought into force as planned in Autumn 2024, and instead will seek to bolster employee protection by way of two key measures outlined in the Employment Rights Bill.
- Guaranteed Hours
The Employment Rights Bill will introduce an obligation on all employers to offer guaranteed hours to those who are on zero hours contracts, or who have a low number of hours guaranteed in their contracts but who regularly work more than those hours.
The number of hours guaranteed should reflect the number of hours the employee regularly works, which it is anticipated will be based on a 12-week reference period. As well as the number of hours, the employer should also provide an indication of the days and times when these hours will be made available to the employee.
- Right to reasonable notice of shifts and payment for shifts cancelled or curtailed at short notice
The Employment Rights Bill will require employers to give reasonable notice of shifts which are required or requested to be worked. The Bill will also introduce an obligation on employers to make a payment to employees should their shift be cancelled or curtailed at short notice.
What next?
On the face of it, the proposed measures expand on the protections in the Workers (Predictable Terms and Conditions) Act 2023, which provides seven rather broad grounds on which an employer may reject an employee’s request for a predictable working pattern. However there is much detail to be ironed out in the new proposals, with the government intending to consult with businesses and trade unions on many of the key details. It is envisaged that exceptions to the general provisions will be established, bringing the new law closer to the Conservative’s previous proposals.
Details to be consulted on include the definition of a “low hours contract”, what constitutes “regular hours” and how “guaranteed hours should be ascertained by employers, what shall be deemed “reasonable notice” in the context of the offering, cancelling and curtailing of shifts and the factors tribunals should consider when determining the issue of “reasonableness”. The government will also need to decide which individuals the proposals should apply to, particularly given the government has previously intimated a desire to merge the employment status of employee and worker into a single category, which enjoy the same rights. A consultation on how these measures may apply to agency workers commenced on 21 October 2024 until 2 December 2024, to assist the government in finding the sweet spot between employer flexibility and employee job security.
Reaction to the proposals
With so many elements of the proposals yet to be decided on, any discussion over the merits of the proposals must be taken with a pinch of salt. However, it is worth noting that there has been significant concern raised over the potential unintended consequences of the proposals from an array of sectors. On the one hand, businesses may overpredict the amount of labour required and therefore overhire, resulting in surplus workers who will need to be paid compensation if their shifts are cancelled, as well as administrative costs in managing this burden. Such additional costs may impact employee salaries or could lead to an increase in the costs of goods and services. On the other hand, businesses may take a cautious approach and underhire, resulting in layoffs and possibly leading to additional pressure on retained workers and worker burnout. Due to this, we may see standards of service reduced in the hospitality and retail sectors and bottlenecks and delays in construction as businesses will no longer have a pool of employees to rely on at short notice.
Despite the lack of detail in the current proposals, it appears that accurately predicting the number of workers required at a particular point in time will become critical for businesses. Businesses which currently rely on zero hours contracts would be wise to pay close attention to patterns in labour requirements in the lead up to the Employment Rights Bill being introduced, in order that they can effectively prepare for the changes.
The changes to zero and low hours contracts will significantly impact a number of businesses, particularly in sectors that currently rely heavily on casual workers. To discuss how these changes may impact your organisation, please contact Robert Forsyth and Heidi Brown.
Authors