Guaranteed hours: What the consultation means for employers

On 2 June, the Government launched a consultation paper on its proposals in respect of its guaranteed hours reforms under the Employment Rights Act. In summary, these reforms are designed to prevent the exploitation of low-hour and zero-hours workers and would require employers to offer such workers a permanent contract with guaranteed hours representing their average hours worked over a specific reference period.

Whilst the Employment Rights Act is now in place, a lot of the detail of these reforms was left open-ended and to be determined by Regulations, with the implementation date still unclear. It is the detail of the reforms upon which the Government is now consulting.

Areas covered by the consultation are

Hours threshold

The right to be offered guaranteed hours will only apply to those workers who currently have guaranteed hours below a certain threshold. Options in the consultation paper range from 8 hours to 48 hours, with the Government’s suggested range being 8–20 hours. Where this threshold lands will be critical in determining the practical impact of these reforms.

A threshold of 8 hours might mean that employers choose to offer many (or all) of their workers contracts guaranteeing at least 8 hours' work, thereby avoiding the administrative steps required by the legislation (calculating average hours, offering fresh contracts at the end of each reference period). On the other hand, if the threshold lands at 20 hours, employers are unlikely to offer such a high level of guaranteed hours to their zero-hours or casual populations, and will likely have to follow the averaging process for a large number of workers.

Reference periods

The reference period over which average hours will be determined is also not yet finalised. To qualify for a guaranteed hours offer, a worker will need to meet conditions as to regularity of work (e.g. working three 48 hour weeks in a 12 week reference period is unlikely to qualify even though it averages out as 12 hours per week). The consultation asks whether the regularity threshold should be 6, 8, 10 or 12 weeks worked in a 12-week reference period.

Another proposal within the consultation is a requirement for the worker to have worked both a minimum number of weeks during the reference period, and to have exceeded their contractual hours by a certain threshold in order to qualify (e.g. an eight-hour-a-week worker who happens to work on average 10 hours per week might not meet the threshold to trigger a guaranteed hours contract). The Government is seeking views on this proposal and whether a threshold of 48, 72 or 96 excess hours would be an appropriate trigger (assuming a 12-week reference period).

Seasonal work and temporary need

This has been one of the most heavily discussed areas of this legislation. The concern of those in seasonal industries is that the reforms will mean that at the end of their peak periods, they will have to offer workers guaranteed hours reflecting the business of those peak periods, even though there is no or little work to do once the peak finishes. The legislation does provide an exception where a contract is for a limited period due to “temporary need” and the consultation seeks views on what might legitimately be a “temporary need”.

Exclusions

There is a question about whether any particular type of workers should be excluded from rights under these reforms.

Reasonable notice of shifts – hours threshold

The ERA provides workers with the right to reasonable notice of shift and shift cancellations and changes. But there is not yet an hours threshold setting out which workers such rights should apply to: suggested options range from 8 to 48 hours, meaning that we don’t yet know whether most workers will be included in this reform (if the threshold is 48 hours) or if most will be excluded (if the threshold is 8 hours) or somewhere in between.

Payment for short notice of shift cancellations and payments

Topics for debate are:

• What will count as short notice (with options ranging from 1 day to 7 days)

• How much should a worker be paid for a shift that is cancelled on short notice (with options ranging from 30% to 80% of the shift pay)

There is also a proposal, on which feedback is sought, for the Fair Work Agency to enforce short notice payments, and to be able to levy a penalty of up to 50% on top of any amount not paid to workers (subject to a minimum of £100 and maximum of £5,000 per worker).

The extent and range of matters being consulted upon mean that it is still very difficult for employers to plan for these reforms. It is possible that the thresholds will end up being set at a level where relatively few workers are impacted and where most seasonal employers can argue that they are exempt.

On the other hand, high thresholds and limited exceptions may mean significant changes to business models are needed for a large number of employers who currently use zero hours or low hours workers. The original timeline for implementation of these reforms was 2027 and there has been no suggestion that this will change.