Zero-hours contracts are one of the most misunderstood tools in a small employer’s kit. Used well, they let a café, shop or care provider cover peaks without carrying a wage bill through quiet weeks. Used badly, they create tribunal claims and unpaid holiday disputes. Around 1.23 million people in the UK were on zero-hours contracts in early 2026, according to ONS figures. This guide explains what your staff are owed today, and how to prepare for the guaranteed-hours reforms coming in 2027.
What is a zero-hours contract?
A zero-hours contract is an agreement under which you do not have to offer any minimum number of working hours, and the worker does not have to accept the hours you offer. GOV.UK puts it simply: the worker is on call when you need them, you do not have to give them work, and they do not have to accept it. Sometimes called casual contracts, they are common for on-call, seasonal and piece work. They are lawful in the UK — the Employment Rights Act 2025 does not ban them — but the flexibility runs both ways.
Employee or worker? Why status matters
Acas stresses that someone on a zero-hours contract can legally be an employee or a worker, and their rights depend on that status, not on the label on the contract. A worker gets the National Minimum Wage, statutory annual leave, rest breaks and protection from discrimination. An employee gets all of that plus unfair dismissal protection and statutory redundancy pay. Calling someone a “casual worker” does not settle it: a tribunal looks at the reality, including how much control you exercise. If someone works regular hours week after week, a tribunal may find they are an employee whatever the contract says. Get status right first — our guide to UK employment contract requirements explains what a compliant written statement must contain.
When zero-hours suits a small business — and when it does not
Zero-hours arrangements suit genuinely fluctuating demand: a restaurant covering weekend peaks, a retailer staffing the Christmas rush, or a care provider covering sickness absence. They do not suit running your core business. Acas advises against using them where someone is needed for regular hours over a continuous period, to avoid giving rights, or to staff the core operation rather than manage peaks. If the same person works the same 30 hours every week for months, that is a part-time job wearing a zero-hours label — offer a part-time contract instead.
What the contract must contain
Every worker, not only employees, must receive a written statement of their main terms on or before their first day. For a zero-hours worker it must state the pay rate, that no hours are guaranteed, the days and times they may be asked to work, how shifts are offered, holiday entitlement, sick pay and notice periods. Two points are non-negotiable. First, no exclusivity clause: since 2015 it has been unlawful to stop a zero-hours worker from working for another employer, and from 6 January 2026 the ban covers all zero-hours arrangements — any such clause is unenforceable. Second, keep the contract and the reality aligned: penalising people for turning down shifts undermines the arrangement. If the hours have settled into a regular pattern, move the person onto guaranteed hours before the law forces you to.
Scheduling: notice, changes and cancellations
There is no statutory minimum notice period for shifts in 2026, and no statutory compensation for a shift cancelled before it starts, unless your contract provides one. That is the position today — but it is about to change. Give as much notice as you can, put rotas in writing, and record when each shift was offered, changed or cancelled. Avoid last-minute cancellations: a worker who has turned down other work or arranged childcare and is then sent home unpaid will not stay. If you do cancel at short notice, consider paying something for the shift even though the law does not yet require it. Never use the rota as a punishment: cutting someone’s hours because they raised a complaint can amount to a detriment claim.
Pay: minimum wage, holiday pay and sick pay
Every hour worked must be paid at no less than the National Minimum Wage: £12.71 an hour for workers aged 21 and over from April 2026, £10.85 for 18 to 20-year-olds, and £8.00 for under-18s and apprentices. Our National Minimum Wage employer guide sets out the rates and the mistakes that lead to HMRC enforcement. Holiday is where small employers most often go wrong. Zero-hours workers get the same 5.6 weeks of statutory annual leave as everyone else. For leave years starting on or after 1 April 2024, irregular-hours workers accrue holiday at 12.07% of hours worked in each pay period, payable as rolled-up holiday pay of 12.07% on top of pay, shown as a separate line on the payslip, or paid when the leave is taken. Rolled-up holiday pay is lawful only for irregular-hours and part-year workers; folding it silently into a higher hourly rate is not lawful. Statutory Sick Pay also applies to most zero-hours staff: since 6 April 2026 it is paid from the first day of sickness, with no minimum earnings threshold, at 80% of average weekly earnings or £123.25 a week, whichever is lower.
The Employment Rights Act 2025: what changes, and when
The Employment Rights Act 2025 received Royal Assent on 18 December 2025. It does not abolish zero-hours contracts, but it adds three linked rights for zero-hours and low-hours workers: a guaranteed-hours offer reflecting hours actually worked over a reference period; reasonable notice of shifts; and payment when a shift is cancelled, curtailed or moved at short notice. None of the three is in force yet. The government’s timeline update of 25 September 2026 places them in 2027, with the exact date still to be set, and the detail — the reference period, the hours threshold, what counts as reasonable notice and how much short-notice pay is due — will be fixed in regulations not yet made. The government consulted from 2 June to 25 August 2026; a 12-week reference period was its stated preference, but that is a proposal, not law. Do two things now: track actual hours worked per person, per week, because the guaranteed-hours offer will be based on that record; and offer guaranteed hours voluntarily where hours have settled into a regular pattern.
Risks and tribunal pitfalls
The most expensive mistake is using a zero-hours contract to avoid rights the worker already has. Exclusivity clauses are unenforceable, and penalising a worker for taking other work can lead to a claim. Failing to pay holiday correctly is common: folding holiday pay into the hourly rate with no separate payslip line can leave you owing backdated pay. Getting status wrong is another: a worker you treated as casual may in fact be an employee with unfair dismissal and redundancy rights. Inconsistent treatment is a further risk: favouring some workers with shifts while giving none to someone who complained or took sick leave can support discrimination or detriment claims, which carry uncapped compensation. Keep the discipline you would apply to any staff matter — written records, a fair process, decisions explained in writing — the same standard a tribunal applies in a disciplinary procedure. Zero-hours staff can also request flexible working from day one; our guide to flexible working requests explains the two-month deadline and the eight lawful grounds for refusal.
Alternatives to zero-hours contracts
Zero-hours is not the only flexible option. A part-time contract with guaranteed minimum hours gives the worker security and you reliable cover; annualised hours suit seasonal businesses, and a fixed-term contract works for a defined project. For a first hire, the cleanest choice is usually a straightforward part-time or full-time contract; our guide to how to hire your first employee walks through the legal steps. Choose the contract that matches the work pattern you actually need.
A practical checklist for small employers
- Check the pattern first. If the hours are regular, offer guaranteed hours. Only use zero-hours for genuinely variable demand.
- Issue the written statement on or before day one. State clearly that no hours are guaranteed, and leave out any exclusivity clause.
- Pay correctly from the start. National Minimum Wage for every hour worked, holiday accrued at 12.07%, and rolled-up holiday pay — if you use it — as a separate line on the payslip.
- Keep rota records. When each shift was offered, changed or cancelled, and how much notice was given — the basis of the guaranteed-hours offer in 2027.
- Review every three months. If a worker’s hours have settled into a regular pattern, move them onto guaranteed hours.
Frequently asked questions
Are zero-hours contracts legal in the UK?
Yes. They are lawful, and the Employment Rights Act 2025 does not ban them. Workers keep minimum wage, holiday, rest breaks and other statutory rights.
When do the guaranteed-hours rules start?
The three new rights — a guaranteed-hours offer, reasonable notice of shifts and payment for short-notice cancellations — are in the Act but not yet in force. The government expects them in 2027, with the date and thresholds to be set in regulations after the consultation that closed on 25 August 2026.
Zero-hours contracts work when the flexibility is genuine and the paperwork is honest. Pay every hour, accrue the holiday, keep the rota records and review the pattern regularly.
Related reading: our guides to UK employment contract requirements, how to hire your first employee in the UK, the National Minimum Wage for employers, and flexible working requests.
