Guaranteed Hours: The Law That Changes Everything
The Employment Rights Act 2025 is the most significant overhaul of UK employment law in a generation. With the Government set to mandate guaranteed hours for flexible workers, the ripple effects on businesses, youth employment and the skills pipeline call for a tougher and more transparent conversation.
On 18 December 2025, a piece of legislation quietly became law that will, in practice, reshape how hundreds of thousands of UK businesses plan, hire, and operate. The Employment Rights Act 2025, the centrepiece of the Government’s Make Work Pay agenda, received Royal Assent with relatively modest fanfare. Yet its implications extend far beyond the headline promise of “ending exploitative zero-hours contracts.” For businesses navigating the demands of digital transformation and AI adoption, for young people entering a rapidly evolving labour market, and for the talent ecosystem that Touchscreen Talent exists to serve, this legislation is a watershed moment.
At Touchscreen Talent, we do not deal in abstractions. Our clients are technology and digital transformation businesses including ambitious SMEs to established enterprise teams who depend on flexible, responsive talent strategies to compete. This article examines, honestly and with evidence, what the guaranteed hours provisions will mean in practice: who wins, who loses, and what the legislation fails to address.
What the Law Actually Says
It is worth beginning with precision, because much of the current commentary conflates the legislation’s ambition with its actual mechanism. The Employment Rights Act 2025 does not ban zero-hours contracts outright. What it introduces, from 2027 and subject to further secondary legislation, is a right for qualifying workers to be offered guaranteed hours that reflect the hours they have actually worked during a reference period, expected to be twelve weeks.
A worker becomes a “qualifying worker” once they have worked a consistent pattern through that reference period on a zero-hours or low-hours contract. At that point, their employer is legally obligated to make them an offer of guaranteed hours. Critically, the worker may accept or decline. The flexibility, for those who genuinely want it, is preserved — at least on paper.
Legislative Mechanism
The Act requires employers to make a guaranteed hours offer after every reference period (expected: 12 weeks) where a qualifying worker has worked hours exceeding their contractual minimum. Employers can limit the offer to a defined period if they can demonstrate a genuine temporary need. Workers may accept or reject the offer. Failure to make the required offer exposes employers to Employment Tribunal claims.
Alongside guaranteed hours, the Act mandates reasonable notice of shifts and financial compensation for short-notice cancellations or curtailments. Specific definitions of “reasonable” remain subject to secondary legislation.
Implementation is staged. The first wave of reforms, including statutory sick pay from day one and enhanced parental leave rights, landed in April 2026. The guaranteed hours and zero-hours provisions, along with the reduction in the unfair dismissal qualifying period from two years to six months, are scheduled for 2027. Businesses have time. But the window is narrower than it appears, particularly for those that have not yet audited their flexible workforce arrangements.
The Numbers Behind the Debate
The scale of what this legislation affects is frequently understated. According to the Work Foundation at Lancaster University, drawing on ONS Labour Force Survey data, 1.23 million people in the UK are now on zero-hours contracts as their primary form of employment, the highest figure ever recorded, representing a 91,000 increase in a single year. That growth has accelerated, not slowed, in the two years since Labour’s election victory.
The demographic picture is stark. One in eight workers aged 16 to 24 ( 12.6% ) is on a zero-hours contract, compared with just 2.44% of those aged 25 and over. Young people are 5.1 times more likely to be engaged on this basis than any other age group. The sectoral concentration is equally telling: accommodation and food services carry the highest proportion at 28.8% of their entire workforce, followed by health and social care at 16.8%. These are not peripheral or marginal arrangements, they represent the structural operating model of entire industries.
The geographic dimension matters too, particularly for Touchscreen Talent’s clients across the Midlands and England more broadly. The East Midlands sits at 4.2% above the UK national average of 3.4%. Meaning the local employer base is meaningfully more exposed to these changes than the national headline suggests.
The Case for the Legislation
There is a genuine problem that the Act is attempting to address. A third of all zero-hours contract workers (32.8%), a record high according to the Work Foundation, are entirely dependent on them for full-time income, with many wanting both more hours and greater predictability. This is not voluntary flexibility. It is structural insecurity being borne disproportionately by the youngest, the least financially resilient, and predominantly female workers.
For businesses, there is also a self-interest argument. High turnover is expensive. Research consistently shows that workers with greater income security demonstrate stronger engagement, lower absenteeism, and longer tenure. A three-quarters majority of workers in the industry trials cited in Parliamentary evidence opted to accept guaranteed hours when genuinely offered. The market itself, given the choice, gravitates toward stability.
The Case Against — And the Flaws No One Wants to Name
The practical objections, however, are not trivial, and businesses raising them are not simply resisting worker rights. The twelve-week reference period is the legislation’s Achilles’ heel in any sector with genuine seasonality. UKHospitality made this case compellingly in its Parliamentary submission: a worker who begins employment in late November (peak Christmas trading) will generate a twelve-week average that is fundamentally unrepresentative of the role’s typical demands. The pub sector’s data showed a 15% drop in hours worked in January compared to December, representing approximately 329,000 fewer hours. At the current National Living Wage, guaranteeing those hours into quieter trading periods equates to over £4 million in additional labour costs for the sector in a single month : for hours neither needed nor requested.
For SMEs in digital transformation and technology (Touchscreen Talent’s core market) the parallel risk is different but equally real. Project-based work, sprint cycles, and client-contingent demand mean that flexible resourcing is not an exploitation strategy; it is an operational necessity. A twelve-week reference period during an intensive delivery phase could commit a business to headcount levels that simply do not reflect their structural requirement. The Act contains no general size exemption: SMEs face exactly the same legal duties as large employers, with significantly fewer resources to absorb compliance costs or manage tribunal exposure.
Crucially, from January 2027 the unfair dismissal qualifying period drops to six months, and the compensatory award cap is removed entirely. These reforms, layered on top of guaranteed hours obligations, fundamentally change the risk calculus of every hire. For a growth‑stage technology business built on rapid and flexible hiring, this is not a minor issue. It is a strategic challenge.
The Skills Paradox: When the Law Meets the Gap
The UK is simultaneously facing one of the most persistent skills shortages in its modern history while producing, through its education system, record numbers of technically qualified young people. ManpowerGroup’s 2025 Talent Shortage Survey found that 76% of UK employers still cannot fill roles due to a lack of skilled talent. The Open University’s Business Barometer 2024 put the figure at 62% of organisations struggling to find workers with the right skills. The Government’s own Employer Skills Survey 2024 confirmed that 27% of all vacancies in the UK are hard-to-fill due to skills deficits, and while that is an improvement on 2022’s 36%, it remains structurally embedded. Just think how this will impact future growth?
Yet when employers are asked what those deficits actually look like, a striking and underreported pattern emerges. The skills that are hardest to find are not always the most technical. More than 70% of UK employers report that college and university leavers are inadequately prepared for the demands of the workforce. Not because of coding deficiencies, but because of gaps in communication, resilience, collaboration, and emotional intelligence.
The STEM Paradox
The UK has invested heavily in STEM education for over a decade, and that investment has produced measurable results. Programming is now taught from primary school. Computer science is a core subject. The digital talent pipeline, in raw graduate terms, has never been fuller. Yet approximately 90% of UK employers now consider soft skills to be crucial, and surveys consistently identify emotional intelligence, adaptability, and interpersonal communication as the most acute shortfalls.
This is not a coincidence. It is a structural consequence of the way education has been oriented. Children and young people have been trained for a technically demanding future. They have been examined on algorithms, not on how to handle ambiguity. They have been assessed on code reviews, not always on how to disagree constructively in a team. The IET’s 2023 survey found that 62% of employers believe the skills shortage is having a significant impact on their business and within that, the evidence points consistently to a soft-skills deficit that technical qualifications do not address. The question is, will reduced levels of hiring throughout 2025 and so far in 2026, positively impact this gap and is AI an answer?
Zero-hours and flexible entry-level roles have, whether intentionally or not, served a development function here. They have been the mechanism through which young people in hospitality, retail, and services have developed the human skills that no classroom teaches: managing a difficult customer, working under pressure with a team they barely know, navigating workplace politics, exercising judgement without supervision. These are not incidental benefits. They are foundational to career progression in any sector including, emphatically, digital transformation and AI, where client-facing roles, cross-functional teamwork, and change management are as critical as technical capability.
What Guaranteed Hours May Inadvertently Take Away
The CIPD, arguably the most authoritative voice on UK workforce practice, has raised precisely this concern. In a June 2026 report on youth unemployment, the CIPD noted that proposed minimum guaranteed hours for zero-hours workers may affect the flexible roles that many young people rely on to balance work and study, and encouraged Government to consider these impacts carefully before finalising secondary legislation.
The mechanism is not counterintuitive. If a business knows that offering a flexible role to a student creates a twelve-week clock after which it must provide guaranteed hours; with the associated administrative, legal, and financial obligations. It faces a rational incentive to either not hire at entry level, or to restructure those roles in ways that exclude younger workers entirely. A student who wants ten hours a week during term time and thirty hours during the summer is precisely the person this legislation was not designed to harm. But they may be the person it harms most.
The number of young people not in employment, education, or training has now passed one million in the UK. The CIPD’s warning is timely: the cure must not accelerate the disease.
The Flexible Workforce in Tech: A Sector-Specific Reality
Digital transformation businesses occupy unusual terrain in this debate. They are, in many respects, the least likely to rely on zero-hours contracts in the traditional sense. Their talent strategies more commonly involve permanent roles, fixed-term contracts, and specialist contractors. But the Employment Rights Act’s implications ripple further than zero-hours arrangements alone, and technology businesses are not insulated.
The reduction in the unfair dismissal qualifying period affects every business’s hiring risk profile. The fire-and-rehire provisions constrain the flexibility to renegotiate contract terms as roles evolve. At times, this has been a common occurrence in fast-moving technology environments where job descriptions can be genuinely outdated within months. The guaranteed hours mechanism, while primarily targeted at hourly-paid roles, creates a precedent and administrative apparatus that reflects a broader regulatory tightening of the employment relationship.
For Touchscreen Talent’s clients, the more immediate strategic question is this: if the cost and complexity of direct employment rises, and the flexibility of direct hiring narrows, what happens to your talent strategy? The evidence from previous regulatory tightening such as IR35 reforms, Agency Workers Regulations suggests businesses do not abandon flexible workforce models. They restructure them, sometimes in ways that produce worse outcomes for workers than the arrangements they replaced.
The Seasonal Hiring Problem No One Has Solved
Seasonal employment is not a quirk of the economy. As we approach our summer period it has been a structural feature of how significant parts of the UK’s productive capacity operates. Tourism, agriculture, retail, entertainment, and events all depend on it. The twelve-week reference period, as currently designed, does not accommodate genuine seasonal fluctuation with any elegance.
The Act does provide a limited carve-out: an employer may restrict the guaranteed hours offer to a defined period if it can demonstrate the need for work is genuinely temporary. But the legal standard for what constitutes a satisfactory demonstration remains undefined, subject to secondary legislation, and likely to generate significant Employment Tribunal litigation before any settled interpretation emerges.
For businesses in the Midlands and across England that depend on seasonal talent such as: technology events, summer internship programmes, Christmas retail support, the coming twelve months represent a critical planning horizon. The legislation is not yet fully in force, but its direction of travel is established. Businesses that have not yet mapped their workforce against it are already behind.
The Harder Question: Are We Asking the Right Thing of Legislation?
There is a broader intellectual problem running beneath this debate that rarely surfaces in the trade press or parliamentary submissions. The Employment Rights Act 2025 attempts to address income insecurity and workplace exploitation through the mechanism of contractual obligation. It says, in effect: if a worker has been showing up regularly, they deserve a contract that reflects that reality. This is reasonable and defensible.
But it cannot, by itself, address the skills deficit. It cannot develop emotional intelligence in young people who spent their formative educational years optimising for STEM examinations. It cannot replace the sociological value of entry-level service work as a crucible for human skills development. And it cannot resolve the tension between a labour market that increasingly rewards cognitive and interpersonal capability, and an education system that still largely assesses analytical performance.
The UK’s skills gap costs between £30 to £39 billion annually in lost GDP and productivity, with projections reaching £120 billion by 2030 if unaddressed. Digital skills gaps alone account for £63 billion annually. These are not figures that can be legislated away. They require a long-term, system-level response: in curriculum design, in employer investment (which has fallen 29.5% per employee since 2011), and in how we value and develop the human capabilities that make technically skilled workers genuinely effective in teams.
Legislation that inadvertently narrows the entry points through which young people develop those capabilities (the weekend pub job, the holiday retail shift, the zero-hours event staffing role) may solve one problem while creating another, larger one a decade from now.
What Businesses Should Do: An Evidence-Based Response
Touchscreen Talent’s position is not to oppose reform. The data on zero-hours exploitation is real, the income insecurity is real, and the disproportionate impact on young women and minority workers is real. But good policy requires honest implementation, and honest implementation requires that businesses in our space act with both intelligence and urgency.
Before 2027, the evidence points clearly to four priorities for technology and digital transformation employers:
Audit your flexible workforce now. Map every worker on variable hours against the twelve-week reference period logic. Identify who would qualify, what guaranteed hours would look like for them, and what the cost exposure is. This is not optional, it is foundational.
Rethink your hiring risk model. With the unfair dismissal qualifying period dropping to six months and compensatory awards uncapped, the standard of hiring decision-making and early-employment documentation must rise. Businesses that have relied on the two-year window as a risk buffer need new frameworks.
Invest deliberately in soft skills development. The skills shortages that employers consistently cite; emotional intelligence, communication, leadership under uncertainty, are not going to be solved by the next cohort of STEM graduates. Businesses that build structured development pathways for these capabilities will be recruiting from a larger effective talent pool than their competitors who do not.
Engage specialist recruitment intelligence early. The businesses that navigate this transition best will not be those that react to legislation once it arrives. They will be those that have worked with recruitment partners who understand both the regulatory landscape and the talent market well enough to build workforce strategies that are both compliant and competitive.
The Employment Rights Act 2025 is not, at its heart, bad legislation. The problem it identifies, one-sided flexibility that exploits the most vulnerable workers, is genuine and well-evidenced. But law is a blunt instrument, and the real world is not built to the geometry of twelve-week reference periods. The businesses that will thrive in the post-2027 landscape are those that engage with the complexity honestly: who protect their workers, invest in their development, and build talent architectures that reflect both what the law requires and what the economy actually needs.
At Touchscreen Talent, this is precisely the territory we inhabit. The intersection of regulatory change, digital transformation demand, and skills supply is not an abstract policy space. It is the practical reality our clients navigate every quarter. We exist to help them navigate it well and now have capacity to help you. Contact us for more details.