Zero-hours contracts have long been a flexible solution for businesses that need to adapt quickly to demand. But with the Employment Rights Act 2025 now in motion, that flexibility is being reshaped.
New rights are being introduced in stages across 2026 and 2027, bringing more security for workers and more responsibility for employers.
If you’re an SME, here’s what you need to know – and what you should be doing now.
What are zero-hours contracts?
A zero-hours contract means:
- You’re not required to guarantee a set number of hours
- The individual doesn’t have to accept the work you offer
They’re commonly used in sectors like hospitality, care, logistics, and seasonal work – where demand can fluctuate.
Zero-hours staff can be classified as either:
- Workers (fewer rights)
- Employees (full employment rights)
The key here: how you classify them matters more than ever, as upcoming changes are narrowing the gap between the two.
What’s changing? (At a glance)
The government is aiming to strike a better balance between flexibility and fairness.
Here are the three biggest changes SMEs need to prepare for:
1. Guaranteed hours (expected 2027)
Workers will have the right to:
- Move to a fixed-term contract with guaranteed hours
- Based on their average hours worked over a 12-week period
What this means:
If someone regularly works consistent hours, you’ll likely need to formalise that.
2. Shift scheduling & cancellations (expected 2027)
New rules will require:
- Reasonable notice for shifts
- Compensation for late cancellations or changes
What this means:
Last-minute rota changes could now come with a cost – so planning ahead becomes essential.
3. Day-one rights (from April 2026)
Workers will gain:
- Statutory Sick Pay from day one
- Expanded access to family-related leave (for employees)
What this means:
More people will qualify for sick pay, increasing short-term absence costs – but potentially improving overall wellbeing and productivity.
Other key changes to be aware of
Notice periods & dismissal
- Unfair dismissal protection is expected to reduce to 6 months’ service
- Processes will need to be faster, fairer, and well-documented
Holiday pay & entitlement
- No major new changes – but compliance is still key
- Zero-hours workers are entitled to 5.6 weeks’ paid holiday
- Calculations must be accurate and consistent
Family & bereavement leave
- Day-one eligibility for family leave (for employees)
- Bereavement leave expected to be introduced (details pending)
Why this matters for SMEs
Most compliance risks don’t come from major issues – they come from:
- Inconsistent rotas
- Outdated contracts
- Poor record-keeping
- Informal processes
And that’s exactly where these changes are focused.
For SMEs without large HR teams, this means more structure, better documentation and clearer processes.
Practical steps to take now
Here’s where to start:
1. Audit your workforce
- Who is on zero-hours contracts?
- Are their hours actually consistent?
2. Review contracts & classifications
- Are individuals correctly labelled as workers or employees?
- Do contracts reflect reality?
3. Improve scheduling processes
- Start giving more notice for shifts
- Track changes and cancellations
4. Strengthen record-keeping
- Hours worked
- Absences
- Communications
- Contracts and policies
5. Train your managers
- Handling absence correctly
- Managing performance early
- Understanding new rights and responsibilities
The bottom line
Zero-hours contracts aren’t going anywhere – but they are evolving.
The direction of travel is clear:
- More predictability for workers
- More accountability for employers
For SMEs, the key is preparation, not panic.
Get your processes right now, and these changes become manageable – not disruptive.
How Breathe can help
With so many moving parts, staying compliant with these changes can feel overwhelming – especially if HR isn’t your full-time function.
That’s where Breathe, our partner platform, can make a real difference.
Breathe gives SMEs a simple, centralised way to manage their people and stay on top of evolving employment law requirements.
Here’s how it supports you with the upcoming zero-hours contract changes:
- Centralised employee records – keep everything in one place
- Absence and sick pay tracking – with day-one Statutory Sick Pay coming into effect
- Rota and time tracking – as scheduling rules tighten
- Document storage & audit trail – if a claim ever arises, your records matter
- Performance & people management – with shorter timeframes around dismissal
In short: Breathe helps you move from reactive to proactive – giving you visibility, structure, and confidence as these changes roll out.
Learn more about Breathe here.
FAQs: Zero-hours contracts & the new employment law changes
Q: Do I need to stop using zero-hours contracts?
A: No – zero-hours contracts are still allowed. However, you’ll need to be more structured in how you use them, especially where working patterns become regular.
Q: What happens if someone works regular hours?
A: If a worker consistently works the same hours over a set period (expected to be 12 weeks), you’ll likely need to offer them a guaranteed-hours contract from 2027.
Q: Can workers refuse guaranteed hours?
A: Yes. Some workers value flexibility and may choose to remain on a zero-hours contract – but you’ll still need to offer the option.
Q: Will last-minute shift changes cost my business?
A: Potentially, yes. If you cancel or change shifts without “reasonable notice,” you may need to pay compensation (expected from 2027).
Q: How does day-one sick pay affect me?
A: From April 2026:
- Employees and workers will be entitled to Statutory Sick Pay from day one
- The lower earnings limit will be removed
This means more people will qualify, so it’s important to plan for increased costs and ensure accurate tracking.
Q: Do zero-hours workers get holiday pay?
A: Yes. They are entitled to 5.6 weeks’ paid holiday per year, calculated based on hours worked.
Q: What’s the biggest risk for SMEs?
A: Not the big changes – but the small gaps, like:
- Inconsistent record-keeping
- Outdated contracts
- Informal processes
These are exactly the areas enforcement bodies will focus on.
Q: What should I prioritise right now?
A: Start with:
- Auditing your workforce
- Reviewing contracts and classifications
- Improving record-keeping
- Training managers
Need support?
If you’re unsure how these changes affect your business, or you’d like help reviewing your contracts, processes, or workforce structure – this is exactly what we support our clients with every day.
Get in contact here and let’s have a chat about how we might be able to support.
