Zero-hours contracts

This briefing discusses zero-hours contracts: a type of contract used by employers where workers have no guaranteed hours and agree to be potentially available for work. They are used by companies seeking labour flexibility and by workers seeking flexibility around their other commitments.

Opinion on zero-hours contracts has been mixed. Employee organisations tend to argue that the contracts result in financial insecurity for workers who lack key employment rights; employer organisations stress their utility when seeking to meet fluctuating demand and argue that they play a vital role in keeping people in employment.

Legal issues

The fact that someone is working under a zero-hours contract does not itself determine what employment rights they do or do not enjoy. Rather, that depends on their employment status, for which a range of legal tests exists – see the Library briefing Employment status for more details.

However, zero-hours contracts can make it challenging to establish someone’s employment status and their qualification for certain employment rights. ‘Mutuality of obligation’ – the mutual obligation to offer and accept work – is a key legal test for being an ‘employee’. With some zero-hours contracts it can be hard to establish whether such mutuality of obligation exists or not.

Similarly there is a difficulty for some zero-hours contract employees in building up enough uninterrupted continuity of service to qualify for certain employment rights, such as unfair dismissal. This is because a week’s gap without work can be enough to reset the timer on their continuity of service.

Since 2015 employers have been banned by section 27A of the Employment Rights Act 1996 from inserting ‘exclusivity clauses’ into zero-hours contracts, which try to stop employees with such contracts from also working elsewhere.  

Statistics

The Office for National Statistics (ONS) collects statistics on zero-hours contracts as part of the Labour Force Survey.

According to ONS, over a million people were employed on a zero-hours contract in April to June 2024. There was a marked increase in the reported use of zero-hours contracts from 2012-2016, though it is likely this was due to increased awareness of such contracts at the time. Since then, the rate of zero-hours contracts has increased by a smaller amount, from around 2.5% to 3.5%.

Based on a small survey of businesses by the Chartered Institute of Personnel and Development (CIPD), businesses report that they are most likely to use zero-hours contracts to manage fluctuations in demand.

According to a combination of the ONS and CIPD research, People on zero-hours contracts are more likely to be:

• aged 16-24
• female
• working part time
• from London and the South East
• employed in the accommodation and food sector
• on average, paid slightly less than those not on zero-hours contracts (around 6% less in hourly pay)
• reporting lower opportunities for career progression

Policy debate and possible reform

The perceived increase in zero-hours contracts in recent years has prompted expressions of concern both inside and outside of Parliament, although many support their use. A series of Private Members’ Bills aiming to ban or regulate zero-hours contracts have been introduced in recent years, though only one – the Workers (Predictable Terms and Conditions) Bill 2023 – received Royal Assent and no commencement order to bring this act into force has been made.

Instead, following the 2024 general election, the newly elected labour government has pledged to ban “exploitative zero-hours contracts”, as part of a promised Employment Rights Bill, as noted by the King’s Speech 2024: background briefing notes which committed to:

banning exploitative zero-hour contracts, ensuring workers have a right to a contract that reflects the number of hours they regularly work and that all workers get reasonable notice of any changes in shift with proportionate compensation for any shifts cancelled or curtailed. This will end ‘one sided’ flexibility, ensuring all jobs provide a baseline level of security and predictability.