Shift cancellation compensation: calculating what you owe

From the relevant commencement date under ERA 2025, workers on zero-hours contracts or arrangements with no guaranteed minimum hours are entitled to compensation when a confirmed shift is cancelled at short notice. The right does not apply where a shift was never confirmed — it applies where a worker was told they were working and then told they were not.

The trigger is short-notice cancellation. ERA 2025 and the associated regulations define the notice period within which cancellation triggers a compensation right. The key threshold is the amount of notice given relative to the start of the shift. Cancellations made with adequate notice — the specific period set by regulation — do not trigger compensation. Cancellations made within the short-notice window do.

How much is the compensation? The regulations set compensation at a flat rate, calculated by reference to the hours of the cancelled shift and the worker's hourly rate. The formula is essentially: hours that would have been worked × hourly rate × the applicable compensation fraction. This is not discretionary — it is a legal minimum that must be paid regardless of the business reason for the cancellation.

There are limited circumstances in which the cancellation compensation does not apply. These include situations where the cancellation was caused by circumstances outside the employer's control — industrial action that prevents operations, a public emergency, a legal prohibition on the work being carried out. A slow night in the restaurant, a drop in customer bookings, or the employer preferring to reduce costs are not qualifying reasons.

For businesses in sectors with high shift variability — hospitality, retail, care, events — the practical implication is clear: once you confirm a shift, it is cheaper to keep the worker in place than to cancel at short notice and pay compensation. This creates an incentive to be more deliberate about confirming shifts and to maintain a flexible pool of workers who are not yet allocated to specific dates until needed.

Documenting shift allocation and cancellation is important. If a dispute arises about whether a shift was confirmed, you need evidence of how shifts are communicated. Text messages, app notifications, and rota management records all constitute evidence. If your current shift allocation process is informal — verbal communication, group chats — moving to a more structured system with confirmation timestamps is worthwhile.

For workers who believe they are owed cancellation compensation but have not been paid it, the claim route is employment tribunal, with a two-year backstop on claims.

Read our guide on zero hours contracts under ERA 2025 for the broader rights framework, and ERA 2025 and agency workers for how cancellation compensation applies to agency-placed staff.

Mellow's shift management module logs confirmation timestamps and calculates cancellation compensation automatically where short notice applies. [Start a free trial →](https://mellowhr.com/register)