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AQA 7138 · Paper 2 · Spec 3.2.1 and 3.2.2

Zero-hours contracts and flexible employment explained

Businesses do not need the same number of staff every hour of every week. Here is how zero-hours, freelance, part-time and temporary work help them match staff to demand, and what it costs them.

By Jay Fanimo · 7 min read · Updated 31 October 2026 · For Year 12 students on AQA A-Level Business 7138

Short answer: a zero-hours contract means the employer does not have to offer any set hours, and the worker is paid only for the hours worked. It is one form of flexible employment, along with part-time, temporary and freelance work. Flexible employment helps a business match its staff to demand, but it can cost loyalty, training and service quality.

What the 7138 specification asks

Topic 3.2.1 covers how businesses manage people. It lists the forms of employment you need to know: part-time, full-time, temporary, permanent, zero-hours and freelance. It also asks about the meaning and significance of flexible employment [1].

The new course names zero-hours and freelance work. Neither term appears in the old 7132 specification. Topic 3.2.2, on operations, lists the same flexible forms as ways to match supply to demand [1]. So expect this topic in people and operations questions on Paper 2. We explain all the changes in AQA A-Level Business is changing.

Forms of employment compared

FormWhat it meansMain benefit to the businessMain drawback
Full-timeThe standard full working week for that businessStaff build skill and loyaltyHigh fixed labour cost
Part-timeFewer hours than a full-time weekCovers busy periods, such as lunchtimesMore staff to train and manage
PermanentNo end date on the contractStability and lower recruitment costsHard to cut staff if demand falls
TemporaryA fixed period, such as a Christmas peakExtra staff only when neededLess experience and less commitment
Zero-hoursNo guaranteed hours; paid for hours workedLabour cost moves closely with demandInsecure income, so staff may leave
FreelanceA self-employed person hired for a task or projectSpecialist skills without a long-term contractLess control; may cost more per hour

Zero-hours workers still get statutory annual leave and the National Minimum Wage, the legal minimum hourly pay. They can also ignore any clause that bans working for another employer [2]. Freelancers are self-employed, usually pay their own tax and National Insurance, and may not get worker rights such as the minimum wage [3].

Flexible employment: meaning and significance

Flexible employment means using contracts that let the number of staff, or their hours, change with demand. A café is busy at lunchtime and on Saturdays. If every worker is full-time and permanent, it pays staff to stand idle on a quiet Tuesday. So it may keep a small permanent core and add part-time or zero-hours staff for the peaks. Because labour rises and falls with demand, the labour cost of each sale falls.

The significance goes beyond cost. Workers on uncertain hours may feel insecure. In Maslow's terms, their safety needs are not met, so motivation can fall. Higher labour turnover then pushes recruitment and training costs back up.

HR planning: matching the workforce to the plan

HR (human resources) planning means working out how many staff, with which skills, the business will need. Then it closes the gap with five tools:

Flexible contracts reduce the need for redundancy, because a firm can cut hours instead. But this shifts the risk onto workers.

The UK picture in 2026

Government analysis of survey data from ONS (the Office for National Statistics) found around 1.2 million people on zero-hours contracts in October to December 2025. That was around 3.6% of all people in employment [4]. These workers are more likely to be aged 16 to 24, female or in full-time education. And 26% would like more hours, compared with 8% of other workers [4].

ONS updates its official series, EMP17, every quarter. The latest edition came out on 18 August 2026; the next is due on 17 November 2026 [5]. ONS advises caution with short-term changes in this survey [6].

The Employment Rights Act 2025

The Employment Rights Act 2025 became law on 18 December 2025. Section 1 creates a right to guaranteed hours [7]. Under the plans, employers must do three things [8].

  1. offer qualifying workers guaranteed hours that reflect the hours they usually work
  2. give reasonable notice of shifts
  3. pay workers when a shift is cancelled, moved or cut short at short notice

Workers can turn down guaranteed hours and stay on a zero-hours contract if they wish [8]. As of 31 October 2026, these measures are not in force. A consultation on the details closed on 25 August 2026 [9]. The July 2025 roadmap planned them for 2027 [10], but the government now says dates will be updated after the consultation [11]. So check the latest position before your exam.

UK example: Amazon and the festive peak

In October 2025, Amazon said it was hiring for more than 15,000 seasonal positions across its UK fulfilment, sortation and delivery sites [12]. This is temporary employment used to match labour supply to a predictable peak.

From 27 September 2026, Amazon's UK minimum starting pay rose to £15.10 an hour, for full-time, part-time, temporary and seasonal roles alike [13]. So temporary staff are not cheaper per hour. The saving comes from paying for labour when demand is there.

HR data you can calculate

Two HR calculations carry over from the old course. They show whether a flexible workforce is working.

Illustrative calculation: labour turnover and employee costs

Invented data for practice. A restaurant chain has an average of 160 staff over the year. 40 staff leave.

Labour turnover = leavers ÷ average number of staff × 100. So 40 ÷ 160 × 100 = 25%.

The chain's total employee costs are £1.2 million and its revenue is £4.8 million. Employee costs as a % of revenue = employee costs ÷ revenue × 100. So £1.2m ÷ £4.8m × 100 = 25%.

If more zero-hours staff cut employee costs to 22% of revenue, but turnover rose to 40%, the saving may be lost to recruitment and training.

Zero-hours contractA contract with no guaranteed hours, where the worker is paid only for the hours worked.
FreelanceSelf-employed work for a client, usually for a set task or project.
Temporary employmentA job that lasts for a fixed period or until a task is done.
Flexible employmentUsing contracts that let staff numbers or hours change with demand.
RedeploymentMoving staff to a different job or site instead of making them redundant.
Labour turnoverThe percentage of staff who leave a business over a period.
Exam practice: Assess (9 marks)

Practice question, in our own words: A UK hotel chain employs 40% of its staff on zero-hours contracts. Assess whether it should move most of these staff onto guaranteed-hours contracts.

Analysis: Guaranteed hours give staff a secure income, so their safety needs are met. Because they feel secure, they are more likely to stay. Lower labour turnover cuts recruitment and training costs, so service quality can rise.

Counter-argument: However, hotel demand is seasonal. Guaranteed hours raise fixed labour costs in quiet months, so employee costs as a % of revenue may rise. Some staff, such as students, may prefer zero hours.

Judgement: Moving the regular, long-serving staff makes sense, especially as the Employment Rights Act is set to require guaranteed-hours offers. Keep a smaller flexible pool for peaks. It depends on how predictable demand is and how high turnover is now.

Notice the structure: linked steps joined by "so" and "because", one theory, a real law, and a judgement that names what it depends on.

Practise the new 7138 people topics

Our free Business starter pack covers people, marketing, finance and operations with real UK businesses and practice questions.

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For quizzes on forms of employment and the rest of Paper 2, see the CC Business platform, Year 12 track. Most tutors teach the subject. We teach the criterion.

Sources

  1. AQA (2025). AS and A-level Business 7137/7138 specification, version 1.0, October 2025.
  2. GOV.UK. Contract types and employer responsibilities: zero hour contracts, updated 10 September 2026.
  3. GOV.UK. Contract types and employer responsibilities: freelancers, consultants and contractors.
  4. GOV.UK (2026). Employment Rights Act 2025 factsheet: reforms of zero hours and similar contracts (analysis of ONS Labour Force Survey, October to December 2025).
  5. Office for National Statistics (2026). EMP17: people in employment on zero hours contracts, released 18 August 2026.
  6. Office for National Statistics (2026). Employment in the UK: August 2026, 18 August 2026.
  7. Employment Rights Act 2025, c. 36, Royal Assent 18 December 2025 (legislation.gov.uk).
  8. Department for Business and Trade (2026). End of exploitative zero hours contracts to give people security and predictability at work, 2 June 2026.
  9. Department for Business and Trade (2026). Make Work Pay: ending one-sided flexibility, reforms of zero hours and similar contracts (consultation, 2 June to 25 August 2026).
  10. Department for Business and Trade (2025). Implementing the Employment Rights Bill: our roadmap for delivering change, July 2025.
  11. Department for Business and Trade (2026). Analysis to support the consultation on reforms to zero hours contracts: covering note, 12 August 2026.
  12. Amazon UK (2025). Amazon UK seasonal Christmas jobs: how to apply, pay and benefits, 20 October 2025.
  13. Amazon UK (2026). Amazon announces above-inflation pay rise for UK operations employees, 16 September 2026.