What Is a Zero-Hour Contract? A Business Owner’s Guide (UK)

Short Answer: A zero-hour contract is a UK employment arrangement where you, as the employer, don't guarantee any minimum working hours. You offer shifts when you need them, and the worker can accept or decline. They're still entitled to holiday pay, the National Minimum Wage, and rest breaks, but you can't tie them down with exclusivity clauses. From 2027, the Employment Rights Act 2025 will require guaranteed-hours offers for regular workers.

Key Takeaways

• A zero-hour contract means you don't owe the worker a minimum number of hours, and they don't owe you acceptance of every shift offered.
• Workers on zero-hour contracts are still entitled to holiday pay, National Minimum Wage, and statutory rest breaks.
• You cannot stop a zero-hour worker from taking work elsewhere, even if your contract says otherwise.
• Holiday pay is calculated using average earnings over the last 52 paid weeks (not calendar weeks), or, for irregular-hours workers, paid as rolled-up holiday pay at 12.07% shown separately on the payslip.
• From 2027, the Employment Rights Act 2025 will require you to offer guaranteed hours to workers with a regular pattern.
• "Status drift" is one of the biggest risks: treat someone like a full-time employee for long enough, and a tribunal might agree with them.

A record 1.23 million people in the UK were on zero-hour contracts December 2025, a rise of 91,000 in a single year, according to ONS data.

If you're running a business that leans on flexible staffing, whether that's a café covering weekend rushes or a construction firm bringing in extra hands for a big job, you're part of a workforce model that's growing fast and getting more legal scrutiny by the year.

I've worked with enough small business owners to know that "zero hours" often gets treated as a free pass: no guaranteed work, no real obligations, simple as that. It isn't. You still owe these workers holiday pay, National Minimum Wage, and protection from unfair treatment. Get the basics wrong, and you're looking at tribunal claims, back-pay, and a headache with HMRC you really didn't need.

This guide walks through exactly what a zero-hour contract is, where the legal tripwires sit, and what's about to change under the Employment Rights Act 2025. No jargon, no fluff, just what you need to run this properly.

What Is a Zero-Hour Contract?

A zero-hour contract (sometimes called a casual contract) is an agreement where you, the employer, don't guarantee any set number of working hours. Instead, you offer work as and when it's available, and the worker decides whether to accept it.

In practice:

• You're not obligated to offer any shifts.
• The worker isn't obligated to accept shifts you do offer.
• Pay is based purely on hours actually worked.

That's the textbook version. The reality, as plenty of business owners find out, is messier. If you end up rostering the same person every Monday to Friday for six months, the "zero hours" label on paper starts to look very different from the working relationship in practice, and that gap is exactly where legal risk builds up.

What Is a Bank/Zero-Hour Contract?

A "bank contract" is essentially a zero-hour contract under a different name, most commonly used in healthcare and care work settings.

Here's how it works:

• Workers join a "staff bank": a pool of available workers you can call on as and when needed
• Typical use cases include covering sickness absence, seasonal demand spikes, or irregular shift patterns
• There's no set schedule; you contact them when you need them, and they choose whether to accept

Legally speaking, bank contracts sit in the same position as standard zero-hour contracts. That means:

• No guaranteed hours; you're not obligated to offer work
• No guaranteed income; workers only earn when they work
• Full statutory entitlements still apply, including holiday pay, National Minimum Wage, and Working Time Regulations protections

The key thing to watch? Just because it's called a "bank contract" doesn't mean it carries any less legal weight. If a bank worker starts taking on regular, predictable hours, even informally, the same status drift risks apply as with any zero-hour arrangement.

What Are the Downsides of Having a Zero-Hour Contract?

Flexibility cuts both ways. Here's what tends to catch business owners out:

Choose a zero-hour contract if your demand is genuinely unpredictable, think seasonal hospitality or event staffing. Avoid it if you already know you need someone five days a week; a part-time or minimum-hours contract will protect you better in the long run.

Can an Employee Refuse Hours on a  Zero Hour Contract?

Yes. This is actually the defining feature of a genuine zero-hour arrangement, not a loophole. The worker can turn down shifts you offer, just as you're not obligated to offer them any. You cannot penalise someone for declining a shift, and doing so could expose you to a claim.

If you find yourself pressuring workers to accept shifts "or else," you've likely drifted away from a genuine zero-hour relationship, and that's a red flag worth addressing before it becomes a dispute.

Do You Get Holiday Pay on a Zero-Hour Contract?

Yes, and this trips up a surprising number of business owners. Zero-hour workers are entitled to the same statutory holiday pay as any other worker: 5.6 weeks of paid annual leave per year, under the Working Time Regulations 1998. The contract type doesn't change that entitlement. What changes is simply how that holiday pay is calculated, since there's no fixed weekly hours figure to anchor it to.

Here's what that means in practice:

• The entitlement is the same; zero-hour workers cannot be excluded from holiday pay, even if they work irregularly or infrequently.
• The calculation is different; rather than a flat weekly rate, pay is based on average earnings over a reference period, or on rolled-up holiday pay for irregular-hours workers.
• Failure to pay carries real risk; underpaying or withholding holiday pay can result in an Employment Tribunal claim, even for short-term or casual workers.

Rolled-up holiday pay (irregular-hours and part-year workers only) is now permitted for irregular-hours and part-year workers.

You have two lawful ways to calculate it:

• 52-week average (the standard method). Pay holiday using average weekly earnings over the last 52 weeks in which the worker was actually paid. Exclude unpaid weeks and go back further if needed, up to 104 weeks. Include regular overtime and commission if it forms part of normal pay.
• Rolled-up holiday pay (irregular-hours and part-year workers only). Since the 2024 holiday pay reforms, you can add 12.07% to each payment for hours worked instead of paying holiday when leave is taken. It must appear as a separate line on the payslip, not folded into the hourly rate. For leave years starting on or after 1 April 2024, irregular-hours and part-year workers accrue holiday at 12.07% of hours worked in each pay period. Workers with regular hours still use the standard 5.6-week entitlement, and rolled-up pay isn't an option for them. Whichever method you use, record it in the worker's contract and keep payslips itemised. Unclear or inconsistent holiday pay is one of the most common triggers for back-pay claims.

Stop guessing your employees holiday pay entitlement, start calculating in minutes.

Can You Sack Someone on a Zero-Hour Contract?

This depends entirely on what the worker actually is, in practice, not just what the contract says.

• If they're a genuine zero-hour worker, you can simply stop offering them shifts. There's no formal "dismissal" process required.
• If "status drift" has occurred and they're functioning as an employee (regular hours, ongoing expectation of work), standard unfair dismissal protections may apply once they've built up two years' service.
• Regardless of status, you cannot stop offering work as a punishment for someone exercising a statutory right, such as declining a shift or requesting holiday pay. That's automatically unfair and can land you in an employment tribunal fast.

My advice to every client: if you've been rostering someone consistently for months, review whether their contract still reflects reality. It's far cheaper to fix the paperwork now than defend a tribunal claim later.

What Is the Notice Period for a Zero-Hour Contract?

There's no single statutory notice period baked into a genuine zero-hour arrangement, because there's no guaranteed ongoing work to give notice on. That said, two separate issues need addressing in your contract:

1. Ending the overall arrangement: Many businesses ask for around a week's notice as good practice, though it's not a legal requirement for a true zero-hour worker.
2. Cancelling or changing confirmed shifts: Currently, there's no standalone statutory rule here either, so what's "reasonable" depends on your written agreement.

Reasonable Notice and Payment for Short-Notice Are Changing in 2027

The Employment Rights Act 2025, expected to come into force in 2027, gives eligible zero-hour workers two new rights:

• Reasonable notice of shifts. You must give reasonable notice of a shift, and of any change to it. The Act doesn't set a fixed number of days. The government will set a presumed "reasonable" notice period in regulations, which a tribunal can use as its starting point.
• Payment for short-notice changes. If you cancel, move or shorten a shift at short notice, you must pay the worker. The Act caps "short notice" at a maximum of seven days. The exact period and the payment amount will be confirmed in regulations. No payment is due where the worker asks for the change, doesn't turn up, or swaps a shift voluntarily.

These rights apply to zero-hour workers and workers on low guaranteed hours below a set hours threshold. The government has consulted on the detail and hasn't confirmed the final figures yet, so check gov.uk before you update your rostering processes.

If your business relies heavily on zero-hour staffing, start reviewing your rostering processes now rather than waiting for the rules to land in 2027.

The Bottom Line

Zero-hour contracts remain a legitimate, useful tool for UK businesses managing unpredictable demand. But "zero hours" has never meant "zero obligations." You still owe your workers the National Minimum Wage, accurate holiday pay, and fair treatment, and with the Employment Rights Act on the horizon, the compliance bar is only getting higher.

Getting this wrong isn't just a paperwork problem. Misclassified status, miscalculated holiday pay, or inconsistent rostering can all trigger tribunal claims, back-pay demands, and unwanted attention from HMRC.

That's where Debitam comes in. We help over 26,000 business owners, self-employed professionals, and contractors across the UK, excellently rated with 4.9 ratings on Trustpilot 8 years in a row, coming out on top of the other online accountants out of +6,200 reviews.

Get your contracts, payroll, and compliance right the first time, so you can focus on running your business instead of worrying about employment tribunals. Get in touch with Debitam's team today for straightforward, expert support.

Frequently Asked Questions about Zero-Hour Contracts

What is a zero-hour contract in simple terms?

A zero-hour contract is a UK employment agreement where the employer offers no guaranteed hours of work, and the worker can accept or decline any shift offered.

What is a zero-hour contract example?

A catering business, for example, might contact a pool of workers every week to check their availability for upcoming events, weddings, corporate dinners, or private functions. Each worker can choose to accept the shifts that fit their schedule or decline without penalty. Pay is calculated solely on the hours actually worked, with no guaranteed minimum each week. This gives the employer flexibility during busy and quiet periods, while workers maintain control over when they take on work.

Is a zero-hour contract the same as self-employment?

No. Most people on zero-hour contracts are classed as "workers" or "employees" for tax and rights purposes, not self-employed. Employment status depends on the real working relationship, not the contract label.

Can an employer stop a zero-hour worker from working elsewhere?

No. Under UK law, exclusivity clauses in zero-hour contracts are legally unenforceable. This means that even if your contract contains such a clause, your employer cannot prevent you from working for other employers. This protection was introduced under the Small Business, Enterprise and Employment Act 2015, giving zero-hour workers the freedom to take on additional work and diversify their income, something particularly valuable when hours are unpredictable.

What's changing for zero-hour contracts in the UK?

The Employment Rights Act 2025, expected to come into force by 2027, is set to bring significant changes to how zero-hour contracts are managed in the UK. Here's what's changing and what it means for your business:

• Guaranteed hours: Employers will be required to offer guaranteed hours to workers who have an established, regular working pattern, meaning casual arrangements could become more contractually binding over time.
• Reasonable notice of shifts: Eligible workers must be given reasonable notice of their shifts and of any changes to them. The government will set a presumed reasonable notice period in regulations.
• Payment for short-notice changes: Employers must pay workers when a shift is cancelled, moved or shortened at short notice. The Act caps "short notice" at seven days, and the exact period and payment rate will be set in regulations.
• Right to request a stable contract: Workers will also gain the right to request a more predictable and stable contract after a qualifying period, giving long-term zero-hour staff more security.

These reforms reflect the government's broader push to strengthen workers' rights while giving businesses time to adapt their workforce planning strategies ahead of the deadline.