Zero-Hours Contracts from January 2027: Guaranteed Hours, Reasonable Notice and Cancellation Pay

The Employment Rights Act 2025 introduces three new statutory rights for zero-hours and low-hours workers, expected to commence in January 2027 alongside the wider 2027 reforms.

The package is designed to address what the Government has called "one-sided flexibility", where workers carry the risk of fluctuating demand without the income stability of guaranteed hours. The detail is being finalised in secondary regulations following consultations during 2026.

Employers who rely on zero-hours, low-hours or short-notice rota patterns should be planning their response now, particularly in retail, hospitality, care, security, leisure and warehousing.

The Three New Rights

From the commencement date, qualifying workers gain three statutory rights that bite on how rotas are built and how shifts are managed:

1. A right to be offered guaranteed hours reflecting the hours actually worked over a defined reference period.
2. A right to reasonable notice of shifts, including changes to or cancellations of shifts that have already been offered.
3. A right to compensation for shifts that are cancelled, moved or curtailed at short notice, set as a proportion of the pay the worker would have received.

The rights apply to workers as well as employees, which is the deliberately wide scope. Agency workers fall within the regime through a parallel set of duties on hirers and agencies, with the precise allocation of obligations being defined in regulations.

Source: DBT Factsheet: Zero-Hours Contracts. The final commencement date and the detailed thresholds are being set by secondary regulations, so verify the final position before relying on any specific date or threshold below.

Right One: Guaranteed Hours After the Reference Period

The headline entitlement is the right to be offered a contract that guarantees the hours the worker has actually been working. The mechanic is built around a reference period.

The reference period is currently expected to be 12 weeks, although this is being confirmed in regulations. At the end of each reference period, the employer must calculate the worker's average hours and offer a contract that guarantees those hours going forward.

The offer must reflect the days, times and pattern of work that have become the worker's regular pattern, not just a raw weekly hours figure. A worker who has consistently been doing 24 hours over four shifts should be offered a guaranteed-hours contract that reflects that shape.

The worker can accept or decline the offer. Where the worker declines, they remain on their existing arrangement and a new reference period starts. The worker does not lose any other rights by declining.

The duty to offer recurs at the end of each reference period if the worker is still doing qualifying hours. An employer cannot satisfy the duty by offering once and then leaving the worker on a different pattern indefinitely.

Who Is a "Low-Hours Worker"?

The new rights are not limited to workers on a literal zero-hours contract. They extend to workers on a contract that guarantees only a low number of hours, where the actual hours worked exceed the contractual minimum by a defined margin.

The threshold for what counts as "low hours" is being set in regulations. The Government has indicated it will be calibrated to capture genuine low-hours arrangements rather than full-time contracts with occasional overtime.

Employers should not assume a contract is outside the regime simply because it is not a zero-hours contract. A contract guaranteeing eight or twelve hours, where the worker routinely does thirty, will fall within scope.

Agency workers are caught through a parallel set of provisions. The rights against the end-user hirer and the agency are split in regulations, and the practical consequence is that hirers will need to track agency hours in much the same way they track their own workers' hours.

Right Two: Reasonable Notice of Shifts

The second right is a duty to give reasonable notice of shifts and of any changes to or cancellation of shifts. "Reasonable" is not defined in the Act and will be the subject of tribunal interpretation, with regulations expected to set out factors that tribunals must take into account.

The factors are likely to include:

• How far in advance the shift was originally offered
• The nature of the work and the sector
• The reason for the change or cancellation
• Whether the change is initiated by the employer or by external circumstances
• Custom and practice in the workplace

The duty applies to the original offer of a shift and to any subsequent change. A shift that is offered with two days' notice and then cancelled an hour before start time is two breaches of the same duty, not one.

Right Three: Compensation for Cancelled, Moved or Curtailed Shifts

Where a shift is cancelled, moved or curtailed at short notice, the worker is entitled to a payment set as a proportion of the pay they would have received. The exact percentage and the notice thresholds are being set in regulations.

The payment is on top of any pay due for hours actually worked. It applies to:

• Cancelled shifts, where the worker is told not to attend
• Moved shifts, where the start or end time is changed at short notice
• Curtailed shifts, where the worker is sent home early

Curtailment is the most operationally significant for sectors like hospitality and retail, where it has been common to send staff home in slow trading periods. From January 2027, that decision carries a direct cost.

The compensation is enforceable as an unauthorised deduction from wages claim in the employment tribunal under Part II of the Employment Rights Act 1996.

How This Interacts with the Wider 2027 Reforms

The zero-hours provisions do not arrive in isolation. The same January 2027 commencement window brings the reduction in the unfair dismissal qualifying period from two years to six months, and the new restricted variations regime under the fire-and-rehire rules.

Two interaction points are worth flagging:

• Specified shift pattern changes are a restricted variation. Once a worker is on a guaranteed-hours contract, changing the agreed pattern by dismissal-and-rehire becomes automatically unfair, except in narrow financial-distress circumstances. That makes the original shape of the guaranteed-hours offer the operationally important decision.
• Six-month unfair dismissal protection. Workers who become employees on guaranteed-hours contracts acquire ordinary unfair dismissal protection at six months, not two years. Performance and probationary processes need to keep pace.

Sector Implications

Retail

Variable customer demand and seasonal trading have driven low-hours and zero-hours arrangements across retail. From January 2027, the cost of an under-hours contract is the recurring duty to offer guaranteed hours plus the cost of cancelling or curtailing shifts in slow periods.

Retailers should expect to move to a smaller pool of guaranteed-hours contracts supplemented by a clearly defined flexible reserve, rather than a large pool of low-hours contracts.

Hospitality

Hospitality is exposed on three sides: heavy reliance on zero-hours contracts, last-minute rota changes driven by booking volumes, and the practice of sending staff home early on quiet nights. All three are addressed by the new rights.

Operators should review how rotas are built, how far in advance they are confirmed, and what the documented process is when shifts are cancelled or curtailed.

Care

The care sector relies heavily on zero-hours and bank arrangements to cover variable demand and unplanned absence. The guaranteed-hours offer will reshape how care providers structure their workforces, particularly in domiciliary care.

Providers should map current hours patterns against the likely 12-week reference period and model what a guaranteed-hours offer would look like for each carer.

Agency, Security and Warehousing

Agency workers are caught by the regime through the hirer-agency duty split. Hirers cannot assume the obligation rests entirely with the agency. Security, warehousing and logistics operators using temporary labour should expect to be tracking agency hours and feeding into guaranteed-hours offers in some form.

Documentation Employers Will Need

The regime is operationally heavy because it is calculation-driven. Employers should expect to need:

• A shift-tracking system capable of identifying each worker's actual hours over the reference period
• A guaranteed-hours offer template that captures the days, times and pattern, not just a weekly figure
• A documented record of acceptances and declines, with the next reference period clock starting from the decline
• A rota change log recording when each shift was first offered, when any change was notified, and the reason
• A cancellation pay calculation baked into payroll
• A worker-facing policy explaining how the regime is implemented in your business, including how reasonable notice is defined and how cancellation pay is calculated

The worker-facing policy should sit alongside the existing holidays and pay policy and the employee handbook.

Tribunal Risk

The new rights are enforceable in the employment tribunal. Workers can bring claims for:

• Failure to offer guaranteed hours where the duty has been triggered
• Failure to give reasonable notice of a shift or shift change
• Non-payment of cancellation, move or curtailment compensation

The Fair Work Agency, which launched in April 2026, has a wider role in policing low-paid and atypical work. Although individual zero-hours claims will run through the tribunal, the Agency will be tracking sector-level patterns and is expected to use its enforcement powers where systemic non-compliance is identified. See our Fair Work Agency employer guide for the wider enforcement context.

Compensation in tribunal claims will reflect the missed payment plus, in the case of unauthorised deductions, any further loss flowing from the non-payment. Repeated breaches against the same worker, or systemic breaches across a workforce, will compound the exposure.

What Employers Should Do Now

1. Map your workforce against the regime. Identify every worker on a zero-hours or low-hours contract, every agency worker hired through your business, and every casual or bank arrangement. The mapping is the foundation for everything else.
2. Run a 12-week look-back. For each worker in scope, calculate the hours actually worked over the most recent 12 weeks. The shape of those hours, not just the total, is what a guaranteed-hours offer will need to reflect.
3. Decide your target operating model. Most employers will need to choose between offering guaranteed hours that match current usage, restructuring rotas to reduce qualifying hours, or accepting the recurring offer-and-decline cycle. Each has cost, flexibility and tribunal-risk consequences.
4. Build a shift-change log. Reasonable notice and cancellation pay both depend on a clear record of when each shift was offered and when any change was notified. Without the log, the employer carries the evidential burden in any dispute.
5. Update contracts and the handbook. Existing zero-hours and low-hours contracts will need new terms covering reference period, guaranteed-hours offers, shift notice and cancellation pay. The employee handbook needs a corresponding rota and shift-management policy.
6. Train rota managers. The day-to-day decisions sit with line managers and rota planners. They need to know what counts as reasonable notice in your business, when cancellation pay is triggered, and what the documentation expectations are.
7. Plan the agency-worker interface. If you use agency labour, agree with each agency how the duty split will work in practice. This may include data-sharing arrangements, rota visibility and which party makes the guaranteed-hours offer.
8. Watch the regulations. The detail of reference period length, low-hours threshold, reasonable notice factors and cancellation pay percentages is being set in secondary regulations. Confirm the final position before finalising contracts and policies.

Until January 2027

The current law continues to apply until commencement. Existing zero-hours rights, including the prohibition on exclusivity clauses under the Employment Rights Act 1996, section 27A, remain in force.

The ACAS guidance on zero-hours contracts is the current baseline for good practice and remains relevant in the run-up to commencement.

Employers should not wait for the regulations to land before starting the workforce mapping. The data work, the contract redrafting and the manager training are all front-loaded, and the operational changes need to bed in before the right to the first guaranteed-hours offer crystallises.

How Policy Pros Can Help

Policy Pros writes the HR policies and procedures that need updating before January 2027, including rota and shift management policies, casual and bank worker policies, agency worker management procedures, and the manager guidance documents that translate the new rules into day-to-day decisions.

We can also review existing zero-hours and low-hours contracts and produce updated versions that reflect the guaranteed-hours offer mechanic, the reasonable notice duty and the cancellation pay obligation. Our policy review service can audit your current documentation against the new framework on a fixed-price basis.

For broader Employment Rights Act 2025 readiness, see our ERA 2025 timeline summary, our 6 April 2026 employer checklist, and our January 2027 fire and rehire guide covering the related restricted variations regime.