Whether you’re hiring seasonal staff, covering fluctuating demand, or managing a flexible workforce, 0 hour contracts remain a popular – and often misunderstood – solution across many UK sectors. While these contracts offer adaptability, they also raise complex questions around employment rights, holiday pay and legal obligations.
What does a zero hour contract really mean in practice? How can HR teams ensure fairness while staying compliant? And how do you manage payroll accurately when hours vary week by week?
Key takeaways
- A 0 hour contract means no guaranteed hours, but workers remain entitled to key statutory rights
- Holiday pay, sick pay and maternity leave rules still apply under specific conditions
- Accurate time tracking and payroll calculations are essential to avoid underpayment
- Employers must offer written terms, avoid exclusivity clauses and treat workers fairly
- Workforce management software like Kelio simplifies scheduling, payroll and compliance
What is a 0 hour contract?
0 hour contracts are often seen as a flexible solution for fluctuating staffing needs, but their legal structure and practical use can be more complex than they appear. For HR teams, the challenge lies in applying the right classification, ensuring entitlements are respected and managing expectations from day one.
Zero hour contract definition
A 0 hour contract is a type of agreement where the employer offers no guaranteed minimum working hours. In essence, the worker is on call. They may be offered work when needed, but are not obliged to accept it, and the employer is not obliged to provide regular shifts.
According to the UK government, individuals on 0 hour contracts are usually classified as workers rather than employees, though this can vary depending on the contract terms and how the working relationship operates in practice.
The key principle? Flexibility. But that flexibility cuts both ways — and must be clearly stated in writing.
Typical roles and sectors using 0 hour contracts
Zero hour contracts are common in sectors with irregular or seasonal demand, including:
- Retail and hospitality
- Social care and NHS support roles
- Warehousing and logistics
- Education support (e.g. invigilators, examiners)
- Event staffing and security
For employers in these industries, 0 hour contracts offer an agile solution for scaling staff up or down quickly. For workers, they can offer freedom to balance multiple jobs, studies, or caregiving.
How 0 hour contracts differ from casual contracts
While the terms “casual” and “0 hour” are sometimes used interchangeably, they’re not identical. A casual contract may include ad-hoc arrangements but often recognises a more informal or occasional working relationship.
By contrast, a 0 hour contract is a specific legal agreement – typically in writing – outlining that no fixed hours are guaranteed, but outlining the statutory rights and expectations that apply.
Critically, someone on a zero hour contract may still qualify for employment rights if the working relationship shows regularity, control, and mutual obligation over time.
UK employment rights under 0 hour contracts
Workers on 0 hour contracts don’t have guaranteed shifts – but that doesn’t mean they’re exempt from legal protections. In fact, many statutory rights apply regardless of the number of hours worked, provided certain eligibility criteria are met.
Holiday entitlement explained
Contrary to common belief, 0 hour workers do accrue paid holiday. Under the Working Time Regulations 1998, they’re entitled to 5.6 weeks of paid annual leave, pro-rated based on hours actually worked.
For example, the standard method is to calculate 12.07% of hours worked as holiday entitlement. If someone works 100 hours over a month, they earn 12.07 hours of paid leave.
Employers must track hours accurately and apply the correct formula, or risk underpayment claims. Tools like Kelio's workforce software automate this calculation and ensure compliance.
Sick pay and statutory sick pay rules
Eligibility for Statutory Sick Pay (SSP) on a 0 hour contract depends on earnings and length of absence. Workers must earn an average of at least £123 per week and be off sick for at least four consecutive days, including non-working days.
Once eligible, they receive £118.75 per week (as of 2025) paid through payroll. Fluctuating hours can complicate this calculation, hence the importance of reliable payroll systems with SSP tracking.
Maternity and paternity rights
Maternity and paternity rights also apply to 0 hour workers, provided they meet continuity and earnings thresholds.
For example, to qualify for Statutory Maternity Pay (SMP), the worker must:
- Have worked continuously for the same employer for at least 26 weeks
- Earn at least £123 per week (gross) in the reference period
If not eligible for SMP, they may still qualify for Maternity Allowance through Jobcentre Plus. The same principles apply for Statutory Paternity Pay (SPP).
Notice periods and termination
Unless stated otherwise in the written contract, a 0 hour worker who has been continuously employed for at least one month is entitled to at least one week’s notice if dismissed.
However, as many 0 hour arrangements blur the line between worker and employee, it's crucial to assess status carefully before terminating, especially if there’s a pattern of regular shifts or implied obligation.
Employer compliance and legal obligations
UK employment law sets clear boundaries around how these contracts must be structured and applied. HR teams must ensure every aspect, from documentation to data handling, is legally watertight.
Employment contracts and written terms
Even in a 0 hour setup, workers must receive a written statement of terms on or before their first working day. This must clearly outline the nature of the contract – including the absence of guaranteed hours – along with pay, holidays, notice periods and any exclusivity clauses.
Note: Exclusivity clauses are banned in 0 hour contracts under UK law. Workers must be free to accept work elsewhere.
Failing to provide written terms can lead to tribunal claims and undermines trust from the outset.
Preventing discrimination and unfair treatment
0 hour workers are protected under the Equality Act 2010. Discrimination based on race, sex, disability, or any protected characteristic is illegal, regardless of contract type or hours worked.
They’re also entitled to the National Minimum Wage, protection from unfair dismissal (after qualifying periods), and equal treatment in working conditions if classified as employees.
This means HR policies must apply equitably across your workforce, including training access, health and safety, and grievance procedures.
Working hours and minimum wage compliance
Fluctuating hours can make it harder to spot underpayment, but employers remain fully responsible for ensuring all 0 hour workers receive at least the applicable National Minimum or Living Wage.
This requires accurate time tracking and clear record keeping. Relying on estimated hours or informal schedules significantly increases the risk of HMRC penalties and reputational damage.
Data protection considerations
Managing a flexible workforce often means handling large volumes of personal data – shifts, availability, health-related absences, bank details – all of which fall under the UK GDPR.
Employers must ensure they have:
- A lawful basis for processing the data
- Clear retention policies for documents
- Secure systems for payroll and time tracking
Digital HR platforms like Kelio can centralise and safeguard this data while ensuring compliance with evolving regulations.
Managing payroll for 0 hour contracts
Payroll can quickly become a minefield when hours vary week by week. To ensure fairness and compliance, HR and payroll teams must apply consistent rules, backed by accurate data and flexible systems.
Calculating holiday pay
For 0 hour workers, holiday pay must reflect average earnings over the past 52 worked weeks (excluding weeks with no pay). This often leads to fluctuating holiday pay values — and makes manual calculations risky.
An alternative, and commonly used approach, is the 12.07% method, which converts total hours worked into accrued paid leave. However, recent case law has limited its blanket use, so employers should ensure their calculation aligns with current guidance from ACAS and gov.uk.
Kelio’s HR software supports compliant holiday-pay calculations by linking time tracking with payroll exports, reducing the risk of miscalculation.
Payroll software considerations
Standard payroll tools often struggle with irregular hours and multiple contracts per worker.
Employers should look for payroll systems that support:
- Integration with scheduling and attendance tools
- Flexible pay runs based on actual hours
- Real-time visibility for HR and finance teams
Using disconnected systems increases the likelihood of underpayment, late payments, and HMRC penalties.
Variable hours and accurate time tracking
Every payslip should reflect actual hours worked, not scheduled hours. This makes accurate time tracking a legal and operational necessity.
Kelio’s time and attendance solution captures worked hours automatically – whether via terminals, mobile apps or online portals – ensuring payroll inputs are precise and verifiable.
Avoiding errors in wage calculations
Payroll errors – even small ones – can trigger costly disputes or legal claims.
For 0 hour workers, common mistakes include:
- Using outdated average earnings for holiday pay
- Misclassifying workers as self-employed
- Applying incorrect pay rates for night shifts or overtime
- Missing rest-break requirements that affect shift length
Automated calculations, real-time reporting, and clear audit trails are essential for reducing these risks.
Advantages and risks of 0 hour contracts for employers
Zero hour contracts offer flexibility for managing fluctuating demand, especially in sectors like hospitality, care, or logistics. They help reduce fixed costs and enable agile staffing.
However, without clear processes, they expose employers to legal risks, from underpaid holiday claims to disputes over employment status.
To avoid this, HR teams must ensure contracts are compliant, rights are respected and shifts are allocated fairly. Tools like Kelio can help by standardising time tracking, scheduling and payroll, reducing errors and supporting transparent practices.
Practical tips for HR teams handling 0 hour contracts
Clarity and consistency are key when managing 0 hour staff.
HR teams should:
- Communicate contract terms and rights clearly from the start
- Train managers to avoid bias in shift allocation and treatment
- Use workforce management software to track hours, ensure legal compliance, and manage scheduling transparently
How Kelio can support 0 hour contract management
Kelio simplifies the management of 0 hour contracts with tools for:
- Tracking hours worked in real time
- Automating holiday and sick pay calculations
- Ensuring compliance with contract terms and wage laws
- Centralising data for accurate reporting and audits
From scheduling to payroll, Kelio helps HR teams manage flexible contracts with precision and transparency.
