Insights into the new Employment Rights Bill: #4: Hospitality & leisure focus

15 November 2024 7 min read

By Rachel Chapman

At a glance

The hospitality and leisure industry, which relies heavily on casual and seasonal workers, will be significantly affected by the government’s changes aimed at protecting zero and low hours workers.
The Employment Rights Bill (ERB) will require employers to offer guaranteed hours contracts to qualifying workers (including zero hours workers) based on their working patterns over a specified reference period, which is yet to be defined.
Employers must proactively monitor hours worked and offer contracts that reflect the hours worked during the reference period. The duty to offer these contracts lies with the employer, not the employee.
Employers will need to provide reasonable notice for shifts and any changes or cancellations. Compensation will be required for shifts canceled at short notice, with specific regulations to be established.
The new rights will also extend to agency workers, ensuring they receive similar protections and that both agencies and end hirers are responsible for compliance.

Hotels, restaurants, bars, pubs, sports, gaming, and leisure attractions, all heavily rely on casual and seasonal workers to ensure the business is appropriately resourced to respond to fluctuating demand throughout the year. As such, hospitality and leisure is the sector which is most likely to be impacted by the government’s upcoming changes to the law on protection for zero and low hours workers.

Labour’s Plan to Make Work Pay, published in May, stated that the government would “end ‘one sided’ flexibility and ensure all jobs provide a baseline level of security and predictability, banning exploitative zero hours contracts and ensuring everyone has the right to have a contract that reflects the number of hours they regularly work, based on a twelve-week reference period“.

The provisions of the ERB, which aim to make good on this commitment, are both complex and incomplete. The provisions make up 11 pages of the ERB, but much of the detail will be contained in regulations which have not yet been published.

We have taken a close look at the ERB and set out here our views on how these changes to the law will impact the hospitality and leisure sector.

The right to a guaranteed hours contract

The new provisions will oblige employers to offer contracts with guaranteed hours to ‘qualifying workers’ whose working pattern over a yet to be specified reference period reaches a yet to be specified threshold. ‘Qualifying workers’ include zero hours workers and workers whose guaranteed hours fall below a level to be set by the regulations.

A qualifying worker will qualify for an offer of guaranteed hours if, over the course of the reference period, they work hours in excess of the minimum number of hours under their contract and do so with a level of regularity that will be set out in regulations.

Where the obligation is triggered, the employer must make an offer to the worker of either a new contract or a variation to their existing contract, which must ‘reflect’ the hours worked in the reference period. The offer should not be on less favourable terms than the existing contract.

It is important to note that the duty is on the employer to offer the guaranteed hours, not on the employee to request.

Assuming the worker accepts the offer, then the reference period begins again, and employers will then have to continuously review hours worked by low hours workers. If the worker is still a qualifying worker, there will be another potential obligation to offer a contract to reflect hours worked in excess of the new guaranteed minimum. This continues until the worker no longer qualifies because their guaranteed hours are no longer low (with ‘low’ yet to be defined).

There is some limited flexibility in the ERB to make the offer of guaranteed hours on a limited time / fixed term basis, where it is reasonable to do so.

What still needs to be spelt out in regulations?

The hours which will qualify as low hours.
The length of the reference period – the government has referred to 12 weeks, but this is not specified in the ERB.
How regularly the excess hours need to be worked in the reference period.
What the requirement for the contract to ‘reflect’ the hours worked means in practice.
Any formal requirements for making the contract offer.
How long the worker has to respond to the offer.

So, there is still a lot of detail to come, but what we do know is that for hospitality and leisure employers who regularly utilise zero hours and low hours workers, there will need to be more pro-active monitoring of hours than ever before and systems in place to facilitate the additional administrative burden.

Rights in relation to shifts

The ERB also contains provisions relating to notice of shifts and compensation for moved, curtailed or cancelled shifts.

Employers will be required to give workers reasonable notice of a shift that the employer requests or requires the worker to work. Notice means notice of how many hours are to be worked and from what time on which day.

Employers will also be required to give reasonable notice of cancellation of or change to a shift. The ERB does not set out what is regarded as reasonable notice but notice of cancellation is presumed not to be reasonable if it is given less than a specified amount of time before the shift would have started, which will be as a minimum the length of the cancelled shift. So, cancellation of a 12-hour shift will require at least 12 hours’ notice.

Notice of a change to when a shift is to start is not reasonable notice if it is given less than a specified amount of time before the earlier of (1) when the shift would have started (if the shift had not been changed), and (2) when the shift is due to start (having been changed).

Notice of a change to when a shift is to end is not reasonable notice if it is given less than a specified amount of time before the shift is due to start or on or after the start of the shift.

Employers will be required to make a payment of a specified amount to a worker each time that the employer cancels, moves or curtails at short notice a qualifying shift that the employer has informed the worker they are required to work, that the employer has requested the worker to work and the worker has agreed to work, or that the worker has suggested working and the employer has agreed to the worker working.

The specified amount will be set out in regulations, but may not be more than the remuneration to which the worker would have been entitled had they worked the planned shift.

Again, there is more detail to come, but what is clear is that hospitality and leisure employers will need to plan shifts more carefully than ever and where reasonable notice of changes cannot be given, this is going to be at a cost to the business. The extent of that cost is currently unclear, but compensation will be subject to a cap of a number of weeks’ pay and workers will have to mitigate any loss. Therefore, compensation to workers is unlikely to be significant enough to put the sector off using zero and low hours workers to resource seasonal demand.

Agency workers

The intention is to extend the rights set out above to agency workers. Agency workers need to be covered to prevent employers using them to circumvent the new rights. The government is seeking views on how the new rights should apply to agency workers, agencies, umbrella companies and end hirers and, in particular whether agency workers should be offered guaranteed hours by the employment agency (option one) or the end hirer (option two).

Under option two the end hirer would become the employer for the duration of the guaranteed hours contract. Under the Conduct of Employment Agencies and Employment Businesses Regulations 2003 (Conduct Regulations) the end hirer would then generally be required to pay a temp-to-perm fee or to pay for an extended period of hire. The consultation paper asks whether this should apply to the offer of guaranteed hours.

The government proposes that both the agency and the end hirer should be responsible for providing reasonable notice of shifts and that a tribunal should be able to find that either the agency or the hirer or both should be liable to compensate the worker to the extent they are responsible for the unreasonable notice.

The government proposes that agencies should be responsible for cancellation payments but seeks views on whether the government should legislate to ensure that the agency can recoup the cost from the hirer.

There will be a separate consultation on implementation of the new rights more generally.

Impact on hospitality and leisure sector employers

The right to a guaranteed hours contract gives rise to two major issues for hospitality and leisure sector employers. The first is the administration involved in monitoring hours, making offers and checking worker responses. The second is the challenge of managing seasonal fluctuations and surges in demand. Problems will arise when staff need to work longer hours in the run-up to Christmas, but with a significant drop off in January / February, or over the summer months, with the drop off in the Autumn. Employers could find that they are required to make offers of contracts for much higher guaranteed hours than they have demand for.

Costs to businesses will also not doubt increase alongside the reduction in flexibility, when workers have the right to be compensated when reasonable notice of a shift or changes to shifts cannot be given. This will have a huge adverse impact on the sector, given the need to be reactive at short notice to ensure that peak times and key events are adequately resourced.

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