The Bill does not ban the use of zero hours contracts. However, it does include proposals which will require employers to offer workers on ‘zero hours’ or ‘low hours contracts’ a new contract which guarantees them a minimum number of hours. That minimum will be set using a ‘reference period’ (likely to be 12 weeks, but this is subject to consultation).
The employer’s obligation to offer a minimum hours contract will be a continuing obligation, i.e. an employer must make a guaranteed hours offer to a worker after the end of every reference period, based on the number of hours worked in the relevant reference period.
The Bill will also permit the Secretary of State to make regulations requiring that the offer not only guarantees the same number of hours as in the reference period, but also the same days and times or working pattern as in the reference period.
An employee will not be required to accept the offer. So, in theory, an employee could wait until they have worked a period of optimum number of hours and on days that work best for them in any reference period, then accept a guaranteed hours contract based on this.
The new contract for guaranteed hours will be permanent unless the employer can show that the worker is only needed to perform a specific task or until a particular event. Claims may be made to the ET for an employer failing to make an offer of guaranteed hours when required or for failing to make the offer with the correct terms.
There will also be new rights for workers on a zero hours contract or flexible working hours contract to claim compensation where there is cancellation of a shift with no or insufficient notice. The details of this will be subject to consultation.
While the changes included in the Bill are significant, there are still some outstanding questions about how this will work in practice. For example, what is a ‘low hours contract?’. This has not been defined to date, but it has been made clear that criteria will be set to avoid the obvious loophole that employers may take to avoid the protection being applied to zero-hours contracts by guaranteeing just one or two hours of work.
Clarifying what a low hours contract is will be one of the issues that will be resolved in the forthcoming consultation process, along with the length of the reference period, and the terms and length of the new contract. These points remain uncertain.
However, what is certain is that these changes will inevitably result in zero or low hours contracts being regarded as burdensome and unattractive for employers. Increased time and cost will be required if these contracts are used including the need to work out the guaranteed hours offer that should be made to employees at the end of every reference period. In short, this change is likely to remove the benefit for employers of zero hours contracts on a long-term basis. We predict that as a result, employers may look at engaging individuals via different means, for example, hiring ‘temporary’ staff members through an agency. Having said that, this loophole may be closed as the Bill provides that the provisions may be extended to agency workers going forwards.
With this in mind, the position regarding zero-hours contracts is currently very uncertain and employers should wait until further consultations have taken place before assuming the exact detail of what the final position may look like.