What is a zero-hour contract?
A zero-hour contract is a type of employment agreement where no minimum number of working hours is guaranteed. Individuals are essentially engaged to work only when required, meaning they’re paid only for the hours that they actually work.
Legally, workers on this type of contract may be classed either as employees or as workers, depending on the nature of their arrangement and responsibilities. Those classified as employees have broader employment rights, including protection from unfair dismissal and access to redundancy pay, while workers have more limited entitlements. Employers must make this distinction clear in the written terms, as it also affects how benefits like sick pay and holiday leave are calculated.
What rights do employees have under a zero-hour contract?
People working under this type of contract still have several employment rights protected by law. These include:
- National Minimum Wage and National Living Wage
- Paid annual leave
- Rest breaks and limits on working hours
- Protection from discrimination
- Protection for whistleblowing
- The right not to suffer detriment for working for another employer
Alongside these, individuals on This type of contract can turn down work that is offered without penalty, unless stated otherwise in their contract. They’re also free to work for other employers without exclusivity clauses, unless a valid business reason exists that is legally justified. Since there’s usually no set schedule or guaranteed work, these contracts also don’t require a formal notice period for the worker to resign.
Because these contracts are open-ended, the employee is classed as being employed even when they’re not being offered or accepting hours. It’s therefore good practice to include a clause in your HR policy that automatically ends the agreement after a specific period of inactivity to avoid administrative burden and confusion.
How to calculate holiday entitlement for zero hour contracts
Individuals on these contracts are still entitled to paid holiday. The easiest way to calculate this is to award 12.07% of hours worked as paid holiday entitlement. This calculation is based on the statutory minimum of 5.6 weeks’ holiday per year, and applies to casual or irregular workers, too.
Upcoming changes to zero-hour contract employee rights
The UK government has outlined plans to introduce new protections for individuals working under a zero hour contract. One of the key changes to zero-hour contracts will give workers the right to request a more predictable working pattern if they’ve been with the same employer for a set period. This is part of the broader Employment Rights Bill, which also proposes updates to flexible working and redundancy protections.
Although the exact date that these changes will take effect is still uncertain, early estimates suggest that roll-out could begin in 2025. However, it’s entirely possible that implementation may stretch into 2026 or beyond.
In addition to the above, there are also planned updates to Statutory Sick Pay entitlements, particularly for irregular or part-time workers. These updates aim to bring greater balance to working conditions while preserving the flexibility that makes these arrangements appealing to some businesses.
When would an employer use a zero hour contract?
This type of contract offers employers the flexibility to scale their workforce up or down depending on demand. This is ideal for businesses that experience unpredictable workflows, variable customer demand, or frequent changes to staffing needs that would rule out regular shift patterns. At the same time, it allows individuals to earn an income around their availability, making this model mutually beneficial when used correctly.
Let’s take a look at some examples of when an employer might use these contracts .
New businesses
Startups or newly launched ventures may find these contracts helpful as they manage initial cash flow and staffing requirements. It enables them to scale without the financial pressure of full-time salaries until the business stabilises.
Casual hours
For roles that only require occasional support, such as covering lunch shifts or specific tasks, zero-hour contracts provide a low-risk way to meet these needs without overcommitting. They’re also used for short-term employment, such as a student taking on a temporary job outside of term time.
On-call or bank work
In sectors like healthcare or security, having staff available on an on-call basis is essential. This type of contract supports this by allowing workers to remain part of a ‘bank’ of available staff without being scheduled continuously.
Seasonal peaks
Retail, hospitality and event-based businesses often see demand spikes around holidays or summer months. These contracts gives them access to a flexible workforce to meet these seasonal fluctuations.
Care work
Care providers often need to adapt quickly to patient needs or last-minute absences. This type of contract helps providers to ensure adequate staffing while offering carers flexible hours.
Delivery and warehouse
With delivery services booming, a contract of zero hours allow businesses to respond to peaks in order volumes without suffering the effects of overstaffing during quieter periods. Similarly, fulfilment centres that deal with fluctuating inventory and dispatch volumes may use This type of contract to bring in staff during particularly busy times.
Gig economy work
Platforms that connect freelancers or gig workers with customers, such as food delivery or ride-sharing apps, rely heavily on the flexibility of these contracts, as they cannot guarantee regular shifts or a set number of hours.
Unexpected sickness
Having a pool of staff on these contracts allows employers to quickly fill in for unplanned absences or sudden illness, ensuring service continuity without having to rely on third-party services like temp agencies.
Special events
Weddings, conferences, festivals and other one-off events often require short-term staff. Using this type of contract enables event organisers to bring in help only when it’s needed.
Alternatives to using zero-hours contracts
While these contracts offer flexibility, they’re not always the most appropriate solution. There are several alternatives that may offer better legal protections for workers while still meeting business needs.
Offering overtime to current employees
Rather than hiring new staff, consider offering overtime to existing employees during busy periods. This approach is often easier to manage, helps to boost morale, and avoids the uncertainty associated with these contracts.
Recruiting part-time employees
Part-time contracts give workers guaranteed hours each week, albeit fewer than full-time. This creates stability for employees and predictability for employers while still allowing for some flexibility.
Using a fixed-term contract
If additional help is needed for a specific project or period, a fixed-term contract might be a better choice than this type of contract It clearly defines the employment period and gives both parties clarity on expectations.
Offering annualised hours contracts
This model spreads a set number of hours across the year, giving flexibility in scheduling while offering staff a degree of certainty. This approach is particularly useful for roles that are busier during certain months and quieter in others.
Hiring agency staff
Using an agency allows businesses to access trained, vetted staff at short notice. This can be more expensive, but it also removes some administrative burden and ensures compliance with employment law.
Manage employee contracts effectively with PeopleHR
When managed well, zero-hour contracts can be a practical and flexible solution for both employers and employees. Understanding what they are, how they can be used, and your legal obligations as an employer is essential to ensure fairness and compliance. Whether you're using this type of contract to meet seasonal demands, fill unpredictable shifts, or cover for last-minute absences, clarity and consistency are key.
Our HR software helps employers to handle everything from contract templates to compliance monitoring. With PeopleHR, you can manage every type of employment arrangement at once, whether you're using a zero-hour contract, part-time schedules or annualised hours.
To see how our software makes it easier to stay organised and legally compliant, get in touch with us or request a demo and we’ll be happy to show you our tools in action.
