Casual worker reforms begin to take shape
The Employment Rights Act 2025 will change the way businesses engage casual labour – directly or via an agency. The changes are expected in 2027, and a lot of the detail is still to be confirmed. The government has now published a consultation which gives us a closer look at how the regime may operate in practice.
There are more questions than answers, but some shape is starting to emerge. This article looks at what the consultation does – and doesn’t – tell us. If your business relies heavily on casual workers, now is the time to start assessing the potential impact of these reforms and considering how you will prepare as further details emerge.
Guaranteed hours
The Act will require employers to offer guaranteed hours contracts to workers on zero- or defined “low-hours” contracts (including agency workers), to reflect hours actually worked over a reference period. Where an offer is made to an agency worker, they will then become directly engaged by the hirer.
So what do we now know about how these rules will work?
- Who will be eligible?
Workers will be eligible if they work under a zero-hours contract or have contractually guaranteed hours below a certain threshold. The consultation looks at what that threshold should be, indicating that the government is looking at a range of 8-20 hours per week. For agency workers, it is not yet clear whether the threshold will apply overall (i.e. looking at the hours offered by the agency) or will look at the hours guaranteed by each individual end-user.
- What will the reference period be?
The consultation distinguishes between an “initial reference period” – proposed to be set at 12 weeks – and subsequent reference periods which might be longer (26 or 52 weeks). The government is also consulting on whether reference periods should be consecutive. A longer reference period may go some way toward addressing concerns about workability (including for seasonal businesses), though the devil will be in the detail.
- What triggers the requirement to make an offer?
An offer must be made where the eligible worker “regularly” works more than their contractually guaranteed hours during the reference period. What “regular” means remains to be seen, with a proposal that the worker would need to work for/during a minimum proportion of the weeks within the reference period (e.g. 8 weeks out of the 12-week initial reference period, scaling up for longer reference periods). The government is also considering allowing some small margin above the guaranteed hours figure before an offer needs to be made.
- Any more detail on what the offer would need to consist of?
The consultation considers whether the guaranteed hours offered should be based on a mean or median average of the hours worked. Whether employers should be allowed a small margin of adjustment (e.g. to align offers with standard shift patterns) and what flexibility employers should have to spread hours over a week, month or year. A more flexible arrangement will obviously be welcome from employers’ point of view, helping to make the new requirements more workable in practice.
5. How does the regime deal with short-term requirements?
The Act makes provision for ‘limited term’ contracts to sit outside the regime where they respond to a genuinely temporary need. The regime has drawn criticism for not addressing the needs of businesses with seasonally fluctuating demand. Apparently picking up on these concerns, the consultation seeks information on situations that may not be covered by the existing provisions for limited term contracts. The indication that the government is alive to these concerns will be welcome, but there are no concrete proposals, so we will need to keep a watching brief for now.
- Will there be exemptions from the regime?
The consultation seeks input on whether certain types of workers (or agency workers) should be exempt from the regime, or whether employers/hirers should be exempt in certain circumstances (e.g. where a business is forced to close temporarily). The consultation does not include concrete proposals, but the indication is that any exemptions will be very narrow, and will be of limited assistance to businesses operating in the ordinary course.
Reasonable notice of shifts and payment for shifts cancelled, moved or curtailed at short notice
The Act will introduce a duty to give zero- and low-hours contract workers (including agency workers) reasonable notice of shifts, and to compensate workers where shifts are cancelled, moved or curtailed at short notice. For agency workers, the duty to give reasonable notice is shared between the hirer and the agency. The duty to pay workers for shifts cancelled, moved or curtailed at short notice will sit with the agency, though it will be able to recoup this cost from the hirer.
What do we know?
- Who will be eligible?
As under the guaranteed hours regime, workers will be in-scope if they work under a zero-hours contract or if their contractually guaranteed hours are below a certain threshold. While there is no government proposal on where the threshold should be set, the indication is that it would be the same for all rules relating to shifts, but may be different from the guaranteed hours regime (see above).
- What is “reasonable” notice?
That will depend on the circumstances, but there will be some guardrails. Regulations will set out what notice is “presumed” reasonable. Departures would need to be justified case-by-case. The consultation explores what “reasonable” notice should look like as a starting point, and proposals range from one to four weeks for directly engaged workers, and between ‘less than five days’ and four weeks for agency workers, giving us some idea of the range the government is looking at. The consultation also seeks input on circumstances where it might be reasonable to give longer or shorter notice, suggesting that some flexibility will be built into the system where, for example, a worker is being asked to cover an unforeseen absence.
- What is “short” notice?
It will not be more than one week, so moving or cancelling a shift on more than seven days’ notice will not attract compensation. Beyond that, the consultation provides no more clarity, simply seeking views on how ‘short notice’ should be defined. It does suggest that (i) the government may create a distinction between ‘short notice’ and ‘very short notice’, with the latter attracting a higher payment, and (ii) the period could be set differently for directly engaged workers and agency workers.
- What will employers need to pay workers?
The government indicates that the payment will be a percentage of the wages the workers would have earned – either at their normal rate of pay or at the applicable National Minimum Wage rate. The consultation gives a broad range on this percentage (between 10% and 80% for ‘short notice’ and between 30% and 80% for ‘very short notice’, if this option is taken forward), so the consultation does not provide meaningful clarity on the levels at which payments will be set. It does confirm that the payment will be calculated in the same way for directly engaged workers as for agency workers.
- Will there be exceptions to the obligation to make short notice payments?
Maybe. The government is seeking views on whether it would be appropriate to include exceptions, for example where shifts are cancelled because of an extreme weather event.
- How will short notice payments be enforced?
Primarily through the employment tribunals. However, the consultation also proposes giving the Fair Work Agency (FWA) powers to enforce short notice payments through the Notice of Underpayment regime. This regime (familiar from National Minimum Wage enforcement) would allow the FWA to issue an underpayment notice where necessary, together with a civil penalty which is proposed to be set initially at 50% of the underpayment amount. Bringing these obligations within the remit of FWA enforcement significantly increases the risk associated with underpayments, particularly where these result from errors replicated across a large population.
Final thoughts
The consultation contains more questions than answers, but the shape of the new regime in relation to zero- and low-hours contract workers is starting to emerge. A few things are clear:
- These new rules are going to create significant operational challenges and new administrative requirements for businesses that rely heavily on casual labour, and there may be knock-on effects (for example around employment status) that will increase risk on the use of casual labour models. Any business affected should be keeping an eagle eye on the changes, assessing the business impact as more detail emerges and reviewing operating models to ensure they remain fit for purpose.
- The changes will have a big impact on the relationship between hirers, agencies and agency workers. This is a complex, already quite heavily regulated, area and the government is consulting on whether the regulatory framework for agencies should be updated to take account of the new rules. In any event, however, if your business operates with a significant numbers of agency staff you should be auditing and reviewing your contracts with agencies, working through the potential implications of the changes and getting ready to renegotiate and update contracts to ensure that contractual protections are adequate.
The consultation will close on 25 August 2026 and we would expect concrete proposals later this year or early next. If you would like to discuss the potential impact of these reforms on your business, please get in touch with a member of our team.
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