Zero Hours Contract Reforms 2026: The Consultation is Open

The government has opened a consultation on how the zero hours contract reforms in the Employment Rights Act 2025 will actually work in practice. For employers who rely on zero hours or low-hours staff, casual workers, or agency labour, this consultation is worth paying close attention to, both for what it proposes and for what it reveals about the likely cost of compliance.

The consultation runs for 12 weeks and closes on 25 August 2026 at 23:59.

What's Being Proposed in the Zero Hours Reforms

The reforms centre on two new rights for qualifying workers, described by government as an effort to end "one-sided flexibility" in the labour market.

1. A right to guaranteed hours. Qualifying workers will be entitled to be offered a contract reflecting the hours they've actually worked over a reference period. That reference period isn't fixed yet, but is expected to be set at 12 weeks.

2. A right to reasonable notice of shifts. Workers will be entitled to reasonable notice of a shift and to proportionate payment if a shift is cancelled, moved, or cut short at short notice.

Both rights are proposed to apply to qualifying directly engaged workers and to agency workers, though the detail will differ between the two groups, and further distinctions may be set out in regulations once the consultation closes.

The Cost to Business: Up to £2.9 Billion a Year

This is where the consultation has generated the most attention. A government impact assessment published alongside the consultation puts the direct cost to employers as high as £2.9 billion a year, with a more conservative central estimate of around £1.1 billion.

Broken down, the guaranteed hours right could cost businesses up to £450 million a year, the right to reasonable notice up to £1.2 billion, and compensation for cancelled or curtailed shifts up to £1.3 billion. Business groups have been vocal in response. Industry bodies representing retail and hospitality in particular have warned that the true cost could run higher still, once system and payroll changes are factored in, and that sectors like hospitality, care and the arts are likely to be hit hardest given how heavily they rely on flexible staffing.

There's also concern about the proposed 12-week reference period itself. Employers have warned it could make it harder to offer short-term summer roles or extra seasonal shifts over busy periods like Christmas, without those workers acquiring a right to ongoing guaranteed hours they can't realistically sustain.

Why Sectors Like Social Care Are Watching Closely

The Department of Health and Social Care has actively encouraged the adult social care workforce to respond to the consultation, with the Chief Nurse for Adult Social Care describing the reforms as a way to give care staff "the security, predictability and recognition they need to deliver high quality care." Social care is a sector with heavy reliance on flexible and zero hours arrangements, so the outcome of this consultation could reshape workforce planning significantly, for better or worse, depending on how the final rules are drawn.

What Employers Should Do Now

Respond to the consultation. This is a genuine opportunity to shape the detail, including the length of the reference period and how the rules will apply to agency workers. Employers who rely on flexible staffing should not sit this one out.

Map your zero hours and low-hours workforce now. Understand who would qualify for guaranteed hours under a 12-week reference period, and start modelling what that could mean for staffing costs and rota planning.

Review shift cancellation and notice practices. If your business regularly cancels or curtails shifts at short notice, start thinking about how a compensation requirement would affect your operating model.

Watch the timeline. The consultation closes 25 August 2026, after which the government will develop final policy positions. Draft regulations and an implementation date are expected to follow, but nothing is final yet.

Frequently Asked Questions

When do the zero hours contract reforms take effect? Nothing is final yet. The consultation closes on 25 August 2026, after which the government will develop final policy positions. We will update you when we have the next steps.

What is the reference period for guaranteed hours? The exact reference period will be confirmed following consultation, but the government has indicated it is expected to be 12 weeks. This is the period over which a worker's actual hours would be assessed to determine the guaranteed hours they must be offered.

Do the reforms apply to agency workers? Yes, in principle. The right to guaranteed hours and the right to reasonable notice of shifts are proposed to apply to both directly engaged and agency workers, though the detail is expected to differ between the two groups.

How much will the reforms cost businesses? A government impact assessment estimates the direct cost to employers could reach £2.9 billion a year, with a more conservative central estimate of around £1.1 billion, depending on how the final rules are designed.

IMPACT

This consultation is the detail behind one of the most significant, and most contested, parts of the Employment Rights Act 2025. With potential impact and costs to business running into the billions and a proposed reference period that could reshape how seasonal and casual work operates, it's worth reviewing how it may impact your business now. Employers who rely on flexible staffing should be reviewing their workforce and should seriously consider responding to the consultation before it closes.

To chat through how this may impact your business then get in touch with Oliver Tasker today:

📞 Call: 01522 776270 ✉️ Email: oliver@impactemploymentlaw.co.uk

Impact Employment Law Limited — Advice. Protection. Impact.