Everything you need to know about zero hours contracts

On average, over one million people in the UK were employed on zero hours contracts throughout 2025. That’s almost 3% of the total working population.

It’s important to manage these types of contracts well to ensure your organisation is fully compliant with UK law. Zero hours contracts are a controversial issue, with the Labour government currently in talks to remove them with a new bill. These types of contracts can be beneficial for businesses who can’t plan too far ahead, but they’ve also become less favourable in recent years as they don’t guarantee steady work for employees.

In this guide, we delve into what you need to know about zero hours contracts as an employer, so you’re fully equipped to manage them effectively at your organisation.

What is a zero hours contract?

In a zero hours contract, workers aren’t contractually guaranteed a minimum number of work hours.

Zero hours contracts offer flexibility for both employees and employers. Organisations can contract people to work the hours they need them for, without needing to pay them during quieter periods. Workers also have the freedom to reject or accept shifts, allowing them greater flexibility.

This sets them apart from standard employment contracts, which provide set working hours and regular pay. On the one hand, standard contracts offer greater job and income security, but on the other, they’re not as flexible for either party.

Zero hours contracts are popular in sectors with fluctuating demands. Some examples include:

• hospitality (weekend bar staff)
• retail (during busy periods, such as during the holiday season)
• healthcare (care workers covering shifts)

A flexible contract may suit some people who need greater flexibility, helping them fit school runs and care responsibilities, or second jobs, studies and hobbies more easily around their workday. But when it comes to paying rent every month, or long-term financial planning, getting a mortgage or proving a steady income to a bank or lender, zero hours contracts can often make matters complicated.

A 2025 study from the Trades Union Congress also points out that zero hours workers typically earn a third less than the median hourly rate, and that employers end up with more control than employees over working hours. Workers also highlight the fear of being penalised for future shifts if they make complaints to bosses and cite high cancellation rates.

For these reasons, zero hours contracts remain a controversial practice, and a key talking point in the world of business and employment law. The Labour Government’s Employment Rights Bill includes measures to end “exploitative” zero hours contracts and offer workers greater protections.

How do zero hours contracts work?

In a zero hours contract, employers offer the shifts or hours available to work, and the employee chooses which ones they can do. Employees aren’t obligated to work any of them—they can choose to accept or reject as they please. And if they do reject, they can’t legally be penalised.

The Exclusivity Terms for Zero Hours Workers Regulations (2022) gave workers more rights, helping them avoid being tied to a single employer. This allowed them to take up hours elsewhere and gain more financial freedom.

It's important for HR departments to manage zero hours contracts with accurate hours tracking to ensure fair pay and easy payroll processing. Also, the communication with staff needs to be crystal clear so they understand their rights, including their right to refuse work, and receive the National Minimum Wage for the hours worked.

Who can be employed on a zero hours contract?

Zero hours contracts can be used for different types of workers, but legal rights vary depending on employment status. Understanding this is crucial for employers and workers to ensure fair and lawful employment. Below are some key employee category definitions to keep in mind:

• employee: someone who works on a contract of employment with a set pattern of work. This offers the highest level of protection, with redundancy pay, notice periods, and unfair dismissal claims.
• worker: workers provide services, but don’t have the same ongoing obligations as employees. They could work irregular hours or on a short-term basis while having the right to National Minimum Wage, holiday pay, and rest breaks. However, they do not have access to the full range of employee benefits.
• freelancer or contractor: these are technically self-employed and provide services to their clients under a commercial agreement, rather than a contract of employment. They do their own tax returns and don’t have access to employer benefits.

Worker rights under zero hours contracts

Zero hours contract rights depend on an individual's employment status and where they fall under in terms of being an employee, worker or contractor/freelancer.

Employee rights:

Employees in this category are entitled to full statutory employment rights if they meet the eligibility requirements. They include:

• notice periods
• redundancy pay
• statutory sick pay
• workplace benefits
• pension contributions
• maternity or paternity leave
• full protection under employment law for unfair dismissal and discrimination

Worker rights:

Zero hours workers are entitled to only the core employment benefits, including:

• National Minimum Wage,
• paid holiday, and
• rest breaks.

However, they aren’t entitled to:

• redundancy pay,
• notice entitlement, or
• limited sick pay.

Contractors/freelancer rights:

Contractors and freelancers are usually self-employed, operating under a commercial agreement rather than a full contract. They manage their own tax returns and insurance. They’re also not covered by statutory employment protections, like unfair dismissal or redundancy rights.

In the UK legal framework, eligibility and protections are defined under the Employment Rights Act 1996. ACAS and CIPD confirm that employees on zero hours contracts are entitled to rights such as minimum wage and paid holiday.

The pros and cons of zero hours contracts for employers

As well as offering flexibility for both employers and employees, zero hours contracts do come with some challenges. The table below outlines some pros and cons for both parties.

Zero hours contract holiday pay explained

All workers in the UK, including those on a zero hours contract, are entitled to holiday pay. The Working Time Regulations 1998 protects staff regardless of contract type. Even if hours vary week to week, zero hours contract workers can still accrue statutory holiday pay based on the actual hours they work. It’s paid “pro-rata”, a proportionate allocation on the days worked.

To calculate holiday pay on zero hours contracts, employers need to calculate workers’ average pay over a reference period—normally 52 weeks—minus the weeks not worked. This helps to determine the true average earnings, which ensures fairness. Employers can use the Holiday Entitlement Calculator to calculate the amount workers have earned for paid leave.

In practice, it means zero hours contract staff should receive holiday pay that matches their average pay rate. Below are some sample calculations:

Best practices for managing zero hours contracts

As an HR professional, it’s important to manage zero hours contracts with empathy and care. Your team on this type of contract needs to understand when they will be offered hours and what they can expect. Consider the following tips when introducing this type of contract:

• Maintain clear communication and transparency. Keep workers informed about what shifts are available and what’s expected of them. Remind them of the policy rules, too—this helps to build trust and avoid confusion.
• Keep accurate records and ensure compliance. Monitor the hours worked, pay rates, and accrued holidays to carefully meet the legal requirements under the Working Time Regulations.
• Use fair scheduling practices. Give as much notice as possible for shifts. Steer away from cancelling last minute, or late call-ups to build trust and reliability.
• Clarify employment status. Make it clear to employees which employment status category they fall under.
• Provide equal treatment. Zero hours contract staff are entitled to the same minimum wage and statutory protections as other staff.
• Plan for business needs. Manage business planning well in advance to ensure that busy periods have sufficient cover.
• Review contracts regularly. Ensure terms always remain fully compliant to current UK employment laws and ACAS guidance.
• Offer development opportunities. Give workers a chance to improve and develop through training and engagement. This can help with staff retention.

Zero hours contracts FAQs

This type of contract is one to consider carefully before offering to employees. We encourage you to do your research to decide if it’s right for your business.

Can workers quit immediately on a zero hours contract?

Yes, employees who are classed as ‘workers’ can quit immediately if they’re on a zero hours contract. Legally, they don’t need to give any notice. As shifts are given by the employer and accepted by the employee, workers can simply refuse shifts and stop working. If the contract specifies a notice period, workers can simply provide it and not accept shifts in that period.

Can zero hours contract workers get sick pay?

Yes, zero hours contract workers are entitled to sick pay if they meet the eligibility requirements. These include being categorised as “employed earner” and having a Period of Incapacity for Work (PIW) that lasts at least four days. They must earn an average of £123 per week before tax, with notification given to the employer. Statutory Sick Pay (SSP) applies for the days worked after the first three waiting days.

Can employees be sacked for no reason on a zero hours contract?

No, employees cannot be sacked for no reason, as that would result in unfair dismissal. Employees on zero hours contracts are still protected against this. Employers need to be careful to avoid legal issues and unfair dismissal claims.