The Employment Rights Act 2025 received Royal Assent on 18 December 2025. What are the implications of the row back on day one unfair dismissal rights to zero-hours contracts?

Published: 16 January 2026
Author: Simon Fennell

The Employment Rights Bill was a significant part of the Government’s manifesto with the well-publicised pledge to ban exploitative zero-hours contracts.  With the Bill now passed as the Employment Rights Act 2025, this article examines the future of the zero hours contract on employees and agency workers.

Background

A typical zero-hour contract will see an individual contracted to an organisation on terms that deal with pay and basic benefits, but which provide no entitlement to regular hours and no obligation on the individual to accept hours/shifts that might be offered.  They were designed to provide maximum flexibility and would typically be triggered at times when employed staff were unable to satisfy the demand for labour within the relevant business.

While some businesses would engage with these workers on a regular basis and provide them with frequent hours, others would be far more sporadic in nature, with the worker unable to rely on the contracts to form part of a steady stream of income.  With no mutuality of obligation in place, there was nothing to stop the business from terminating the arrangement without notice or leaving it to wither on the vine.

The flexibility that these contracts provide is ideal for some and problematic for others and with the balance of power considered to be weighted in favour of the business, the contracts were a target for legislative overhaul.

Were they banned?

No.  Neither the Bill nor the Act has any measure to prevent any business from continuing to operate zero-hour contracts.  However, there are measures in place which will make it more likely that the arrangement will result in the worker moving into an employment situation.

In summary, at the end of the given reference period (yet to be determined), an employer will be obliged to offer a qualifying worker a contract which “reflects” the hours worked during that reference period.  Consultation will determine exactly what all of this means but we can work on an assumption that a zero-hour worker who completes an average of 10 hours per week during the reference period must (unless one of the limited exemptions apply) be offered a guaranteed hours contract (GHC) of 10 hours a week.  On our assessment, the engagement will then be an employment contract and would start the day after the worker accepted the offer.

The worker does not have to accept the offer, and if they choose not to, the zero-hour contract arrangement would continue with the hours reviewed at the end of each subsequent reference period.

What are the consequences?

If we assume that the GHC is an employment contract, then once the GHC is accepted the individual will benefit from all the rights of an employee.  Until a few days before Royal Assent was given, the Bill gave all employees protection from unfair dismissal from day one of employment.  The obvious benefit to a worker who had accepted a GHC under the Bill was that they would be protected from unfair dismissal from the moment the new contract started.  However, the day one right to unfair dismissal protection was removed at the last minute and was replaced by the need to complete six months’ service before those rights are attained.  This is still much reduced from the two-year period that has been in place for many years.

The removal of day one employment rights reduces the protection for workers who accept a GHC.  While the Act does contain some protection for automatic unfair dismissal (with no qualifying period), it is unclear whether this will provide adequate protection.

What is the automatic unfair dismissal protection?

The Act provides for a new Section 104BA to be included into the Employment Rights Act 1996 and through a further amendment to Section 108 of the 1996 Act, no qualifying period is necessary.   In summary, an employee will be treated as (automatically) unfairly dismissed if the reason (or, if more than one, the principal reason) for the dismissal is that the employee accepted or proposed to accept or rejected or proposed to reject an offer of a GHC.

This sounds fine in theory and should prevent the scenario where an employer offers a contract one day and terminates the same contract for no obvious reason the following week.  However, what if there is a wider reason for wanting to terminate the contract?

In our view, in the first six months, an employer will only have to show that the principal reason for the dismissal is unconnected to the fact that the individual only became an employee through the offer of a GHC to avoid an automatically unfair dismissal.  For example, an employer who can (genuinely) show that the individual failed to deliver satisfactory performance during a probationary period should be able to dismiss without the employee having the right to claim automatic unfair dismissal.  Alternatively, and potentially more likely, if the workload which had generated sufficient work to justify the offer of a GHC significantly reduced, the employer would have justification to dismiss by reason of redundancy.  The issue for employers therefore will be one of evidence for dismissal.

How soon might we be able to dismiss?

It will be a question of fact and evidence but in the right circumstances it could be a matter of days/weeks following acceptance of a GHC.  Although an employee may argue that, had they not accepted the contract, the redundancy or performance procedures would not have been initiated and attempt to connect this to automatic unfair dismissal, the 'but for' test does not apply in this context.

If the employer can show that the demand for staff has genuinely reduced since the offer of the GHC was made, it would seem likely that the employer would be able to break the causal link between the offer and the dismissal.  While remembering not to discriminate on the grounds of any protected characteristic, the employer is arguably free to apply a blunt selection process (such as last in first out) to determine who is to be dismissed and if the process were to take place inside the first six months of employment, the employee would have no rights to suggest that the selection was unfair.

Summary

While there are likely to be many who will gain permanent employment from this legislation, employers can take some comfort from the last-minute changes.  One thing we do know is that zero-hour contracts will live to fight another day.