Labour Government Proposes Reforms for Zero-Hours Contracts

The Labour Government is considering reforms that may soon require companies to offer regular contracts to workers on zero-hours agreements after just three months. This proposal was discussed in a private meeting between Deputy Prime Minister Angela Rayner, Business Secretary Jonathan Reynolds, and representatives from business and labor unions.

Under the proposed legislation, employers would be obliged to transition zero-hours staff to contracts that guarantee a set number of hours after 12 weeks of employment. This initiative is part of Labour’s broader effort to eliminate what it deems “exploitative” employment practices, with the employment rights bill set to be unveiled next month.

The three-month threshold takes inspiration from McDonald’s, which introduced a similar option in 2017, allowing staff to switch to contracts with guaranteed hours. While most employees opted to maintain flexible arrangements, the initiative has been cited as a model for balancing employee protections with business needs.

However, sources involved in the discussions report that opinions are divided. Some business leaders have advocated for a longer qualifying period, while union representatives are pushing for a shorter timeframe. A Whitehall insider explained that the three-month proposal aims to elicit clearer responses from businesses, with additional details to be developed later.

Labour’s plans also include provisions to address “one-sided flexibility” in the workplace, such as requiring employers to compensate staff for late-notice shift cancellations, ensuring workers are not financially disadvantaged when shifts are abruptly canceled. Although Labour initially considered a complete ban on zero-hours contracts, resistance from businesses—particularly in the hospitality and leisure sectors—has led to a shift in focus, emphasizing the value of flexibility for both workers and employers.

The ongoing debate over zero-hours contracts forms part of Labour’s commitment to implement the most significant overhaul of workers’ rights in decades. Nonetheless, business leaders have voiced concerns about the potential costs associated with these reforms. The Confederation of British Industry (CBI) indicated that only 26% of businesses feel confident in their ability to absorb the financial impact without negatively affecting growth, investment, or job creation.

Tensions have also surfaced within the government regarding how to manage probation periods under the new system. Rayner advocates for full employment rights from day one following a brief probation, while Reynolds reportedly supports a longer probation period, potentially lasting up to nine months.

As the Government prepares to unveil its flagship employment rights bill, it faces the challenge of balancing business concerns with its commitment to enhancing worker protections.