What is a 0 hour contract? Rights, pay, redundancy and settlement options explained

Key Takeaways

1. A 0 hour contract means no guaranteed hours of work, with your legal rights depending on whether you are treated as a worker or employee.
2. Zero-hour workers are entitled to the national minimum wage, paid annual leave, rest breaks and protection from discrimination, just like other staff.
3. You can refuse a shift on a zero hours contract and are usually free to work for other employers due to recent exclusivity bans.
4. If your hours are cut or cancelled, you may not get pay, but you could still be owed holiday pay and certain redundancy or notice rights, depending on continuity of employment.
5. Redundancy and unfair dismissal protections for zero-hours contracts can be complex; our solicitors offer specialist advice to help you challenge unfair treatment or negotiate a settlement agreement.
6. If offered a settlement agreement on a zero hours contract, our SRA regulated solicitors can provide required independent legal advice, usually at no cost to you, as the employer pays our fees.
7. Our solicitors have extensive experience negotiating improved settlements, like increased ex gratia payments, tax-free allowances and agreed references for zero-hour workers.
8. Settlement Agreement Lawyers are rated Excellent with over 1,400 five-star reviews on Trustpilot, Google and other platforms, delivering same-day remote appointments UK-wide.

What is a 0 hour contract? Your rights, redundancy and settlement agreement options

A 0 hour contract is a type of casual employment agreement in the UK where you are not guaranteed any set number of hours each week. Your employer can offer shifts as needed, and you have the right to refuse them. If you’re on a zero hours contract and have received a settlement agreement, independent legal advice is a legal requirement before you can sign; this advice is what makes the agreement binding, and your employer almost always covers our fees, so it is usually free to you.

It’s vital to understand exactly where you stand before signing, as you may be giving up the right to bring claims for unpaid wages, holiday entitlement, unfair treatment, redundancy pay or discrimination. Our solicitors regularly advise zero-hour workers, covering not just the legal basics but also whether your offer is fair, how tax will be handled, and whether any terms can be improved.

In this guide, you’ll learn what a 0 hour contract means for your employment status, your rights to pay and holiday, what to do if your shifts stop, and how to handle redundancy and settlement agreements as a zero-hour worker. If you need help, you can call our solicitors now on 0800 054 1144 or book your settlement agreement advice online.

What is a 0 hour contract and how does it work in the UK?

A 0 hour contract is an agreement between a worker and an employer where the employer is not obliged to provide any minimum amount of work, and the worker is not obliged to accept any work offered. These contracts are most commonly found in hospitality, care, retail, and casual labour. For those searching what is a 0 hour contract, it means flexibility: the employer offers work only as needed, and the worker can usually refuse shifts. The lack of guaranteed hours means income can fluctuate significantly from week to week.

0 hour contracts are legally recognised under UK law. There is no statutory definition, but guidance can be found via the ACAS explanation of zero-hour contracts. The key feature is mutual flexibility: no guarantee of work, but also no restriction on declining it. Employers should provide a written statement of terms on the first day of work, outlining pay, notice, holiday, and any other core terms. If the contractual arrangement persists for at least one month, even with gaps, legal entitlements and protections can begin to accrue.

What rights do zero-hour workers have? (Pay, holiday, sick leave and protection from unfair treatment)

Rights on a 0 hour contract depend on your legal status: most individuals are classified as ‘workers’ rather than ‘employees’. Workers are entitled to the National Minimum Wage, paid annual leave (minimum 5.6 weeks pro rata), protection from unlawful deduction of wages, and rest breaks. Employers must pay workers only for time actually worked, but holiday pay must reflect your average earnings over the previous 52 weeks (taking into account weeks with no work).

Zero-hour workers are also protected from discrimination on the grounds of age, disability, race, religion or belief, sex, sexual orientation, pregnancy or maternity, marriage and civil partnership, or gender reassignment under the Equality Act 2010. They have the right not to be subjected to a detriment or dismissed for protected disclosures (whistleblowing), and are entitled to written terms and an itemised payslip.

Do zero-hour contracts guarantee minimum hours or income?

Zero-hour contracts do not guarantee any minimum hours or income—you are paid only for the work you actually perform. Employers have no obligation to offer work in any week or month. Your pay will reflect the actual hours worked, and if you have a run of weeks with no shifts, you receive no income for that period.

Some employers try to give the same casual staff regular hours each week, but unless the contract or a collective agreement promises a minimum, this is a matter of goodwill and roster planning only—not legal obligation. If your work pattern becomes predictable over time, you may be able to argue you are, in substance, an “employee” and entitled to greater rights.

Can you refuse work on a zero-hour contract?

Zero-hour workers generally have the right to turn down shifts offered by an employer, without penalty. This flexibility is a defining trait of what is a 0 hour contract. However, there should be no detriment for refusing work—such as being removed from the rota simply because you didn’t pick up a shift. If you are punished for repeatedly refusing work, you may have claims for unfair treatment or potentially for unfair dismissal if you qualify as an employee.

It’s good practice to communicate clearly if you’re unable to take up a shift. Repeated or last-minute refusals may eventually influence whether work continues to be offered, but it does not trigger disciplinary rights automatically.

Are zero-hour workers protected from discrimination and unfair dismissal?

Zero-hour workers are protected from discrimination under the Equality Act 2010. All workers, regardless of hours, can bring claims for unlawful discrimination, harassment, or victimisation. For unfair dismissal rights, only “employees” (who usually have two years’ continuous employment) are protected under s.94 of the Employment Rights Act 1996; most zero-hour staff are technically workers, not employees, but patterns of regular work may shift your status.

Whistleblowing, exercising statutory rights, or refusing to break the law can also give rise to automatic unfair dismissal protection, regardless of length of service or status.

Are you a worker or employee? (Employment status and why it matters)

The distinction between “worker” and “employee” is central to your rights on a zero-hour contract. A “worker” receives basic legal entitlements—holiday pay, minimum wage, pay for work done, and protection from discrimination. An “employee” (the narrower category), however, enjoys additional protections such as statutory notice, redundancy rights, family leave, and full unfair dismissal protection.

The written contract is a starting point, but courts and tribunals look beyond the paperwork to how the relationship actually works in practice. If you have regular hours, clear expectations, discipline, and mutual obligations, you might have employee status despite your “zero-hour” label.

How does your employment status affect your legal rights?

Being classified as a worker or employee determines what statutory and contractual rights you can claim. Only those defined as “employees” have protection from unfair dismissal, redundancy pay, and statutory notice under the Employment Rights Act 1996. Many zero-hour workers will be “workers”—they still get minimum wage and holiday rights, but lack deeper protections.

Employment status also impacts settlement agreements. Only employees can agree to compromise their right to bring unfair dismissal or redundancy claims through a settlement agreement; workers may settle other claims (e.g., wages, discrimination), but unfair dismissal claims only if employee status is established.

How to check if you qualify for employment protections

To assess your status, examine:

1. How much control does your employer have over your work?
2. Do you work regular, scheduled hours?
3. Are you required to personally perform work?
4. Can you refuse work without penalty?
5. Does your contract describe you as an “employee”?

If you’re unsure, our solicitors can advise you—especially where settlement or redundancy pay is involved. There are free tools available through ACAS to help you self-assess, but legal advice gives you certainty.

Zero-hour contracts and exclusivity clauses: Can you work for other employers?

By law, zero-hour contracts cannot prevent you from working for other employers. An “exclusivity clause” tries to restrict your right to earn income elsewhere, but the law now voids such clauses for zero-hour staff in England and Wales.

The Small Business, Enterprise and Employment Act 2015 amended the Employment Rights Act to make these restrictions unenforceable for zero-hours workers. You cannot legally be penalised for taking shifts with another employer or agency.

What is the exclusivity ban for zero-hour contracts?

Since 26 May 2015, any clause in a zero-hour contract that seeks to stop workers taking other jobs is invalid (s.27A of the Employment Rights Act 1996). Workers also have protection against being subjected to a detriment—such as reductions in hours or negative treatment—because they worked elsewhere.

If you suspect your contract includes such a restriction, it is not legally binding and you cannot lawfully be disciplined for breaching it.

What if your contract limits your work elsewhere?

Should your contract contain wording that expressly or indirectly restricts you from seeking or accepting work with others, this is now unlawful if you are on a zero-hour contract. Employers must not include such clauses, nor can they take disciplinary or financial action against you for working elsewhere.

If you are penalised for breaching an exclusivity clause—e.g., losing shifts, reduced hours, or threats—seek advice promptly. You may be able to bring a claim for detriment or automatic unfair dismissal (if an employee), or even seek a settlement agreement to exit on better terms.

What happens if your hours are cut, cancelled or you stop getting shifts?

For zero-hour workers, a sudden loss or reduction of shifts is common. There is no legal entitlement to guaranteed hours—so, strictly, being “removed from the rota” may not be a breach of contract unless your regular pattern makes you an employee. However, if the employer has given you regular work for a sustained period and then stops without fair reason, it could constitute an unfair dismissal if you have employee status and sufficient service.

You are entitled to payment for work actually done, including any holiday pay accrued but not taken. If your hours are cut or cancelled last minute, employers do not have to provide compensation unless your contract says so. Unfair treatment, especially after raising complaints, can trigger legal remedies.

Are you entitled to notice pay or redundancy pay?

Most zero-hour workers—unless they have achieved “employee” status and two years’ continuous service—do not qualify for statutory notice pay or redundancy pay. If you have worked regular hours for a long period and meet the continuity and status requirements, you may be entitled to these payments under the Employment Rights Act 1996, using your average pay to calculate the sum.

For redundancy, you must have at least two years’ continuous employment and be classed as an employee. Notice pay is usually based on your average weekly earnings over the previous 12 weeks.

Continuity of employment and qualifying periods

Continuous employment is essential for redundancy and most dismissal rights. Weeks where no work is performed can break continuity, unless you are on authorised leave or a temporary layoff period less than one week. If you have regular shifts, keep detailed records. If you meet the qualifying period (often two years), you may have “employee” protections even with a zero-hour label.

Your timeline for claiming is usually three months from the last day of employment, so act fast if you suspect your continuity or notice rights are at risk.

What is a settlement agreement and how does it apply to zero-hour contracts?

A settlement agreement is a legally binding contract where you waive specific employment rights and claims in return for a financial package or other benefits. For zero-hour workers, these can arise where relations have broken down, after a complaint, or where the employer wants to formalise an exit without risk of future claims. The agreement can cover unpaid wages, holiday entitlement, discrimination claims, or, if eligible, redundancy and notice pay.

Settlement agreements are not confined to employees—workers can also settle claims, but only “employees” can compromise unfair dismissal and redundancy claims. The law requires that you receive independent legal advice (ILA) from a solicitor before the agreement is valid.

When might you be offered a settlement agreement on a zero-hours contract?

Employers may offer settlement agreements to zero-hour workers when ending the arrangement, following a grievance or disciplinary matter, or to resolve disputes about pay, discrimination, or working time. These are often used to avoid formal litigation or to “clean break” a deteriorating working relationship. The agreement will set out any severance payment, tax position, references, and confidentiality wording.

If you have been removed from schedules, are raising a complaint, or face redundancy/restructuring, a settlement agreement may be a route to a financial settlement and a positive reference.

Key legal requirement: Why independent legal advice is mandatory (s.203 ERA 1996)

Section 203 of the Employment Rights Act 1996 mandates that for any settlement agreement to be effective, the individual must receive independent legal advice from a solicitor or certified adviser. The adviser—such as our solicitors—must provide a certificate stating the advice was given and that they are covered by relevant insurance.

Without this advice, any agreement is invalid, and the worker retains all their employment rights and claims. The employer normally pays the legal fees directly—so advice is free to the worker or employee.

Is your settlement agreement offer fair? (Financial package, ex gratia, redundancy, unfair dismissal and more)

The fairness of a settlement agreement is not automatic—employers may initially offer the statutory minimum (e.g., wages owed, holiday pay), but in many cases, you can negotiate for more, especially if there are risks for the employer (potential discrimination, whistleblowing, or unfair dismissal claims).

Check the settlement covers:

• All wages due up to leaving date
• Accrued but unused holiday pay
• Any statutory redundancy/notice pay (if eligible)
• Ex gratia/severance sums
• Compensation for waiver of claims (e.g., discrimination, detriment)
• Payment for restrictive covenants (if you are restricted from future work)

The financial sum should reflect the strength of your claims, potential legal costs for your employer, and your likelihood of winning a tribunal.

Which payments are you entitled to?

Payment entitlements in zero-hour settlement agreements may include:

• Wages up to the leaving date
• Holiday pay (averaged over 52 weeks)
• Statutory notice pay (if “employee”)
• Redundancy pay (if eligible)
• Ex gratia payments (compensation, subject to tax rules)
• Payment in lieu of notice (PILON)
• Any sums for waiving specific claims

Employers often bundle these into one figure; ensure a breakdown is given. If restrictive covenants or confidentiality apply, a further sum may be appropriate.

How to negotiate your settlement as a zero-hour worker

Negotiating a settlement agreement on a zero-hour contract involves:

1. Calculating owed wages, accrued holiday, and potential statutory entitlements
2. Assessing whether you qualify as “employee” for redundancy/notice pay
3. Identifying if you have valuable claims (e.g., discrimination, whistleblowing, unfair treatment)
4. Deciding what outcome you want—financial settlement, reference, waiver of restrictive clauses
5. Asking our solicitors to draft counterproposals, propose higher ex gratia sums or clarify tax positions
6. Reviewing all terms before agreeing or signing

Employers often respond positively to reasonable, well-supported counteroffers—especially if risks of claims exist.

Are settlement payments tax free? (Tax on ex gratia, PILON, redundancy pay and holiday pay)

Tax treatment on settlement agreements depends on the nature of each payment. Under current HMRC guidance, the first £30,000 of genuine compensation for loss of employment (ex gratia and redundancy) can usually be paid tax-free. Other elements—wages, holiday, and payment in lieu of notice (PILON)—are subject to income tax and National Insurance as normal earnings.

Statutory redundancy pay is tax-free up to £30,000. Contractual redundancy pay may be partly taxable if it exceeds this.

What is the £30,000 tax exemption?

The £30,000 tax exemption applies to payments made for loss of employment—such as ex gratia and statutory redundancy pay. Only the amount above £30,000 is taxable. This exemption is defined in Section 403 of the Income Tax (Earnings and Pensions) Act 2003.

The exemption does not cover ordinary wages, contractual notice, or holiday pay, which remain taxable as part of your pay packet. For employer-funded settlement agreements, a clear breakdown ensures you don’t pay more tax than necessary.

Do you pay tax on notice or holiday entitlement?

Yes. Any payment in lieu of notice (PILON) or holiday pay is always subject to income tax and National Insurance deductions. This is because HMRC treats these as “earnings” rather than compensation. Only genuine compensation for loss of office (redundancy/ex gratia) benefits from the tax exemption noted above.

Always check whether your employer will deduct tax at source—otherwise you may need to account for tax yourself, especially if paid gross.

Key clauses, risks and common pitfalls in zero-hours contract settlement agreements

Settlement agreements for zero-hour contracts often contain clauses that can restrict your actions after leaving. It’s essential to understand their effect before you sign—especially if you move between employers or sectors.

Risks include agreeing to post-termination restrictions, confidentiality terms that stop you discussing your experience, or broad tax indemnities. If the agreement includes any clause that might limit your future earnings or ability to contest the tax position, make sure these are negotiated or clarified.

Restrictive covenants and your right to future work

Some agreements attempt to limit your ability to work for competitors, clients, or set up a similar business (so-called “restrictive covenants”). For a zero-hour worker, long or unclear restrictions can unlawfully limit your future income. Clauses should only be as wide and as long as necessary to protect legitimate business interests.

Challenge any broad “non-compete” language, and where possible, limit duration and geographic scope. If your primary income is through flexible arrangements, this is especially important.

Confidentiality, references and non-disclosure terms

Employers routinely include confidentiality clauses in settlement agreements, obliging you not to discuss the circumstances of your exit or the terms agreed. These can be reasonable to protect business information, but should not bar you from reporting unlawful acts, or restrict your ability to speak to legal or regulatory authorities.

Reference clauses can also be included—make sure any reference promised is accurate, or ask for specified wording within the contract for peace of mind.

Tax indemnities and repayments: what to watch for

Settlement agreements typically require you to indemnify the employer against future tax demands by HMRC—this means if HMRC later decides more tax was due, the employer can recover it from you. This is usually fair if the payment was described accurately, but if the breakdown is unclear or sums are labelled wrongly, you could face a surprise tax bill.

Ensure you understand what each payment is for, that payments are correctly categorised, and that your agreement does not put unfair liabilities on you for errors caused by the employer.

Step-by-step: How to sign your settlement agreement as a zero-hour worker (remote, same-day advice)

Zero-hour workers can complete settlement agreements fully remotely, usually within a single day. Here’s how the process works:

1. Employer sends the draft settlement agreement
2. You forward it to our solicitors for review
3. Our solicitors schedule a same-day remote session (video/phone)
4. We discuss all terms, answer your questions, and advise if it’s fair or if we can negotiate better terms
5. Once you’re happy, you sign the agreement (usually by email or secure portal)
6. Our solicitor provides the mandatory ILA certificate to the employer to make the agreement binding
7. You receive your finalised settlement and payment

Everything can be completed without attending a face-to-face meeting; speed and flexibility are vital for zero-hour workers.

The process from offer to binding signature

The “offer” stage usually starts with a conversation or letter from your employer, followed by a formal settlement agreement draft. Our solicitors conduct an initial review, advise remotely, and arrange for electronic signing. Only after our ILA certificate is issued is your waiver of claims enforceable.

Your employer should not pressure you to sign immediately; ACAS recommends a minimum 10-day consideration unless both sides agree otherwise.

What documents you’ll need

When seeking advice, prepare:

• The draft settlement agreement document
• Your contract, payslips, and rotas/shifts worked (for pay/holiday checks)
• Correspondence relating to the dispute or breakdown
• ID (passport or driving licence—needed for the ILA certificate)

Having these to hand speeds up the process and helps our solicitors check your entitlements and spot any underpayments.

Why Choose Settlement Agreement Lawyers?

For workers on zero-hour contracts, the nuances of employment status, pay calculations, and settlement rights are complex. Our solicitors specialise in reviewing and negotiating settlement agreements—ensuring zero-hour workers and employees get everything owed, and that all your rights (including future earnings and tax) are fully protected.

We provide a same-day, fully remote service—no need to attend an office, and no delay in receiving advice or your ILA certificate. We cap our fees at the employer’s contribution; in nearly every case, our service is completely free to you. Our track record includes success for zero-hour, casual, agency, and gig economy staff exiting roles in virtually every UK sector.

Frequently Asked Questions About What Is a 0 Hour Contract

Do zero-hour contract workers get holiday pay?

Yes, zero-hour contract workers are entitled to paid holiday—at least 5.6 weeks a year, calculated on average weekly hours. If you don’t take all your holiday, you should be paid for untaken accrued leave when your contract ends.

Can I be made redundant on a zero-hours contract?

You can be made redundant if you have “employee” status and at least two years’ continuous employment. Otherwise, most zero-hour workers don’t qualify for redundancy pay, but may still be offered a settlement or compensation.

What happens if I refuse shifts or my employer stops offering me work?

You can refuse shifts without penalty, but if your employer stops offering you work entirely, it could—if you’re an employee—be treated as a dismissal or redundancy. Keep a record and get advice on your status.

Am I protected against unfair dismissal on a zero-hours contract?

You are protected against unfair dismissal if you qualify as an employee and have at least two years’ continuous service. Workers do not usually have unfair dismissal rights, but can still claim discrimination or detriment.

How do I calculate holiday pay on a zero-hours contract?

Holiday pay is usually based on your average earnings over the last 52 paid weeks, including irregular hours. Calculate total pay for that period, divide by 52 to get your weekly average, and multiply by statutory holiday entitlement.

Can I work for a different employer on a zero-hour contract?

Yes, you have the right to work for other employers on a zero-hour contract. Exclusivity clauses restricting this are not enforceable under UK law.

Do I need legal advice for a settlement agreement on a zero-hours contract?

Yes, independent legal advice is mandatory by law (s.203 ERA 1996) for any valid settlement agreement. Our solicitors provide this service, and your employer covers the cost.

What are my options if I think my employer is treating me unfairly on a zero-hours contract?

If you feel unfairly treated—such as being penalised for refusing shifts or facing discrimination—you can raise a grievance, request a settlement, or bring a legal claim. Our solicitors can advise on your options and negotiate on your behalf.

Get Expert Legal Advice for Your Zero-Hour Contract or Settlement

Understanding what is a 0 hour contract is essential for anyone working flexibly in the UK, especially when it comes to rights, pay, and what happens if your shifts stop or you receive a settlement offer. Our article explains your legal entitlements, how your employment status affects rights like holiday, redundancy and unfair dismissal, and what to expect if a settlement agreement is proposed—including how these are taxed and the steps to sign safely.

Our solicitors specialise in zero-hour contract issues and settlement agreements. We offer free, same-day, fully remote advice—your employer pays our fee, not you. You will always deal with SRA-regulated employment law solicitors, who ensure every aspect of your agreement is clear, enforceable and in your best interests.