A zero hour contract is an arrangement where the employer does not guarantee any work and the individual works only when work is offered and accepted. The legal definition is in section 27A of the Employment Rights Act 1996. Zero hours does not mean zero rights. The individual is still entitled to the National Minimum Wage (£12.71 an hour at 21 and over from April 2026), paid holiday that builds up at 12.07% of hours worked, a written statement from day one, and, if they are an employee, Statutory Sick Pay from the first day of sickness. Exclusivity clauses cannot be enforced against them. The Employment Rights Act 2025 will add a right to be offered guaranteed hours and payment for cancelled shifts, but those measures are not yet in force and are expected in 2027.
What counts as a zero hour contract
Section 27A(1) defines a zero hours contract as a contract of employment or other worker's contract under which the individual agrees to work only if the employer makes work available, and "there is no certainty that any such work or services will be made available". Government guidance describes these as casual agreements where the employer does not guarantee work and the individual can decline it.
The label does not settle employment status. Someone on a zero hours contract may be a worker or an employee, depending on how the relationship works in practice. The difference matters for rights such as unfair dismissal and redundancy pay, which only employees have. A genuinely self-employed contractor is not on a zero hours contract at all.
Rights a zero hours worker has now
- Minimum wage. The National Living Wage is £12.71 an hour for those aged 21 and over from 1 April 2026, £10.85 for ages 18 to 20, and £8 for under-18s and for apprentices who are under 19 or in the first year of their apprenticeship;
- Holiday. For leave years starting on or after 1 April 2024, irregular hours workers accrue holiday on the last day of each pay period at 12.07% of the hours worked in that period, up to 28 days a year;
- Rolled-up holiday pay. For irregular hours workers, the employer may instead pay holiday pay as a 12.07% uplift on pay for work done, paid at the same time as that pay;
- Written statement. A written statement of particulars must be given no later than the first day of work;
- Statutory Sick Pay. Since 6 April 2026 there is no waiting period and no lower earnings limit. The weekly rate is the lower of £123.25 and 80% of normal weekly earnings;
- No exclusivity. A clause that bans the individual from working for someone else, or requires the employer's consent first, is unenforceable.
The exclusivity ban also covers contracts that are not zero hours but pay net average weekly wages at or below the lower earnings limit, which is £129 a week for 2026/27. This extension comes from the Exclusivity Terms for Zero Hours Workers (Unenforceability and Redress) Regulations 2022.
Holiday pay and sick pay: worked example
Priya, aged 24, works 30 hours one week at £12.71 an hour, which is £381.30. On the accrual method she builds up 30 × 12.07% = 3.62 hours of paid holiday for that week. Regulation 15B rounds a fraction of an hour of 30 minutes or more up to a full hour, so if her pay period is weekly this is recorded as 4 hours. If her employer uses rolled-up holiday pay instead, it adds 12.07% × £381.30 = £46.02 to that week's pay and shows it as a separate item. Rolled-up pay is simpler to run for staff whose hours swing widely. The worker must still be able to take the time off, unpaid at that point because the holiday pay has already been paid.
If Priya's normal weekly earnings average £200, 80% is £160. That is above £123.25, so her weekly SSP is £123.25. If her earnings average £100, her SSP is £80 a week. Before April 2026, someone earning below the lower earnings limit got no SSP at all. Now every employee qualifies, which has a real cost for businesses that rely on low-hours staff.
What the Employment Rights Act 2025 will change
Sections 1 to 3 of the Employment Rights Act 2025 insert three new rights into the 1996 Act:
- Guaranteed hours. After each reference period, the employer must offer a qualifying zero hours or low hours worker a contract that reflects the hours they regularly worked during that period;
- Reasonable notice of shifts. Workers must be given reasonable notice of shifts, and of any changes to them;
- Payment for cancelled, moved or curtailed shifts. If a shift is cancelled, moved or cut short at short notice, the worker is entitled to a payment.
Key details, including the length of the reference period, the "low hours" threshold and the notice periods, will be set by regulations. The government's timeline lists the guaranteed hours and short-notice payment rights for 2027, with "timings will be updated after consultation". Its zero hours guidance for employers confirms that "the law regarding the new zero hours measures is not yet in force". Section 8, in force since 6 January 2026, widens the power to make exclusivity terms in zero hours arrangements unenforceable, but it changes nothing on its own until regulations are made under it.
Payroll and practical points for employers
A zero hours worker is paid through PAYE in the normal way, and tax and National Insurance are worked out on each payday's earnings. Weeks with no work produce no pay, but the person stays on the payroll. Do not issue a P45 just because there is a gap in shifts. The other practical points are:
- Record hours accurately. Hours worked drive minimum wage checks, holiday accrual and, from 2027, the guaranteed hours test;
- Check minimum wage on all working time. Time on call at the workplace, training and travel between assignments can count;
- Know when the contract is the wrong tool. Government guidance says zero hours contracts may not suit work that is regular and predictable. If someone works the same three mornings every week for a year, a part-time or fixed-term contract is more appropriate;
- Prepare for 2027. Reviewing rotas now shows which staff are likely to qualify for a guaranteed hours offer, and what that would cost.
For employees, the qualifying period for unfair dismissal falls from two years to six months where the effective date of termination is on or after 1 January 2027. The commencement regulations for this change (SI 2026/559) have already been made. It will bring many casual staff who are employees within scope.
Sources: section 27A of the Employment Rights Act 1996, regulation 15B and regulation 16A of the Working Time Regulations 1998, section 1 of the Employment Rights Act 2025, zero hours contracts: guidance for employers and the Employment Rights Act timeline update. See also our guides to holiday pay, statutory sick pay and the National Minimum Wage 2026.
Acumon runs payroll for businesses with casual and variable-hours staff through outsourced payroll, including holiday accrual and SSP. Our employment tax team can review contracts and status ahead of the 2027 changes.