Zero Hours Contracts Reform – How SMEs Can Prepare for Guaranteed Hours Requests

Zero Hours Contracts Reform are coming as part of The Employment Rights Bill 2024-25.  One of the most impactful changes for SMEs is the new right for workers to request guaranteed hours after a qualifying period of service, coming into effect in early 2026.

This article explores how the law is changing, how it affects SMEs, and what proactive steps small businesses should take to ensure compliance.

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What’s Changing Under the Employment Rights Bill?

Currently, zero-hours contracts allow businesses to employ workers without guaranteeing a minimum number of hours. While this flexibility suits many employers (and some workers), concerns about job insecurity have led to legislative reform.

Under the new law:

• Zero-hours workers will have the right to formally request a predictable working pattern (e.g., a set minimum number of hours per week) after a qualifying period.
• Employers must provide a written response and cannot refuse the request without a valid, objective reason related to the needs of the business.

Why Is This Happening?

The aim is to provide workers with greater financial security and work-life balance. Many employees in sectors like hospitality, retail, and healthcare rely on variable contracts but work regular patterns in practice. The government intends to ensure these workers can move to a more stable contract when appropriate.

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Why SMEs Should Take Notice

Many SMEs depend on zero-hours workers to cover:

• Seasonal demand fluctuations.
• Short-notice shift cover.
• Part-time or casual roles.

This reform will:

• Limit how long employees can be retained on indefinite zero-hours contracts without access to guaranteed hours.
• Potentially increase staffing costs if employees seek and are granted minimum-hour contracts.
• Increase the risk of disputes if requests are handled poorly or refused unfairly.

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Key Risks for SMEs

• Tribunal claims for unfair refusal: If requests for guaranteed hours are turned down without proper justification, SMEs may face legal challenges.
• Increased payroll obligations: SMEs may need to budget for minimum guaranteed hours during quieter periods.
• Scheduling constraints: SMEs may lose some of the flexibility they rely on when managing fluctuating demand.

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Step-by-Step SME Action Plan

1. Audit Your Zero-Hours Workforce

• Review current employment contracts and shift patterns.
• Identify which employees are on zero-hours contracts but are working regular hours in practice.
• Assess how many of your casual workers are likely to qualify to make a request.

2. Align Contracts with Actual Working Patterns

• Where workers are already doing consistent shifts, consider proactively moving them to minimum-hours contracts.
• Avoid mismatches between reality and written terms, as these could be flagged under the new rules.

3. Create a Formal Request Process

• Develop a standardised form and internal process for receiving and reviewing guaranteed hours requests.
• Outline clear timelines (e.g., employers may be required to respond within a set number of weeks under the finalised law).
• Define objective reasons for declining requests, such as:
  • Genuine operational uncertainty.
  • Unpredictable seasonal or project-based work.
  • Inability to guarantee hours due to fluctuating customer demand.

4. Communicate Clearly With Your Team

• Inform employees of their new rights in a clear and positive way.
• Be transparent about how requests will be reviewed and highlight areas where flexibility is still possible.

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What Options Will SMEs Have to Decline Requests?

Employers will still retain flexibility where appropriate but must:

• Consult with the employee.
• Provide evidence-based reasons linked to business needs.
• Show that they have properly considered the request.

Automatic refusals or blanket policies will expose SMEs to reputational risk and potential legal challenges.

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How Can SMEs Balance Flexibility and Compliance?

• Introduce hybrid staffing models (e.g., a mix of guaranteed-hours roles and casual workers).
• Consider annualised hours contracts to help smooth out seasonal variations while offering more stability to staff.
• Explore fixed-term minimum-hour contracts for busy periods.

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SME Benefits of Acting Early

✔ Reduce compliance risks by proactively managing your contracts.
✔ Build trust with your workforce, improving morale and reducing turnover.
✔ Protect business flexibility while meeting legal obligations.
✔ Strengthen employer brand by demonstrating fair and transparent working practices.

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Sectors Most Affected

SMEs in the following industries are likely to be most impacted:

• Hospitality (bars, restaurants, hotels).
• Retail (especially seasonal or part-time roles).
• Warehousing and logistics.
• Care and social services.

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Conclusion

The Employment Rights Bill 2024-25 will reshape how SMEs use zero-hours contracts. By preparing early—through contract audits, transparent communication, and robust processes—SMEs can continue to meet their staffing needs while protecting their business from costly disputes.

📥 For a complete checklist to stay compliant and proactive, download our free guide here:
👉 Employment Rights Bill Checklist

👉 Employment Rights Bill Checklist

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