Zero Hour Contracts: An Employer's Guide

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28 Dec 2018

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Zero hour contracts (ZHC) are often a point of contention. The appeal of this type of contract is its flexible nature, but that’s also where the majority of issues arise.

A recent study saw that approximately half of workers want more regular work and better job security.

In light of such issues, it’s vital you get your contract right, and minimise the risk of issues occurring in the future. Let’s start by establishing what a zero hour contract is at its fundamental level.

What's a zero hour contract?

There’s no guarantee of work with this type of employment contract, meaning working hours fluctuate.

However, there are two main types of contract. These are:

  • Employee contract.
  • Worker contract.

If an employee is on a ZHC then you must provide work and they must accept.

If a worker is on a ZHC, then you don’t have to provide work and they don’t have to accept.

Zero hour contract rights

Employment contracts entitle workers and employers to certain rights.

Some of the rights employees can expect include entitlement to statutory annual leave and the national minimum wage. Workers also have the right to look for and accept work from another employer while they work for you.

Zero hour employees have greater employment rights, including redundancy pay, maternity leave, and protection against unfair dismissal.

As for employers’ rights, you may offer as many hours as you need covering, within the working time directive in the UK. Whether you have to pay the employee or worker for work done is down to the individual’s contract—it isn’t a legal right.

The Working Time Directive states that workers can’t work more than 48 hours a week on average. Workers can choose to opt out of the 48-hour week, but that doesn’t mean you are legally obliged to provide more hours.

Some workers may ask the question: ‘How many hours is full time in the UK?’ believing that a certain amount of working hours negates the zero hour contract, and entitles them to employee status.

However, it isn’t the amount of hours that the individual works, but a number of different factors, including control, person service, and mutuality of obligation.

This doesn’t mean working hours have no impact on the contract. If you make a worker work regular hours over an extended period of time, then the worker may have a case for changing their contract to have a minimum number of hours in it.

Zero hour contracts and benefits

With ZHCs, holiday pay and entitlement can be a point of tension. All workers get 5.6 weeks of paid holiday entitlement per year.

Workers accrue holiday days the same as employees, but it’s easier to base this on hours, rather than days worked as zero hour workers have no guaranteed hours, meaning the amount of time they work will vary.

The best way to calculate holiday pay entitlement is to determine the worker’s average pay over the preceding 12 weeks of employment. If there is a week within that date range where the worker didn’t work, then use the previous week’s pay instead.

You do this to provide a total of 12 weeks of work carried out, rather than attempt to navigate significant gaps in your working.

There is no legal obligation for you to provide any other employee benefits to workers, but you may do so if you want to motivate employees or encourage recruitment.

You must provide employee benefits to employees on zero hour contracts if employees on full-time or part-time contracts receive them.

If you want to offer any other benefits, make sure you detail the specifics of the benefit provided in the employee’s contract so there is no grey area and less chance of an issue arising.

Zero hours contract template

See below for a basic summary of the points to include in your ZHC:

  • Status of agreement: If the individual is a worker, confirm that you’re under no obligation to provide work. (or you are if they are an employee)
  • Offering work (Company Discretion): Detail the specifics of how & when you’ll offer work and how the worker should accept.
  • Type of work: Detail the type of work you’ll offer.
  • Arrangements for work: Detail how you’ll communicate work requirements with the worker.
  • Pay: Detail arrangements for paying the employee, as well as an hourly rate.
  • Hour of work: Reiterate that you’ll give hours at your discretion, as well as any break entitlements.
  • Place of work: Detail location of head office, other locations (if the role requires work on multiple locations) etc.
  • Holiday entitlement: Explain how you’ll calculate the worker’s entitlement and holiday pay.
  • Sickness: Set out your sickness procedure and any sick pay rules.
  • Rules and procedures: Detail your company rules & procedures and inform the individual of their responsibility to follow them.
  • Data Protection: For individuals carrying out work involving sensitive data, explain the GDPR, and how it impacts them. Also, explain your company’s commitment to protecting the data of workers.
  • Governing law: A statement confirming that English law governs the contract.

You may also include:

  • Details on terminating the contract.
  • Use of company property.
  • A separate confidential information clause.
  • Working time opt out.

Expert Support

For support writing a zero hour contract, or any issue arising from one, speak to a Croner expert on 01455 858 132.

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