Zero Hour Contracts: An Employer's Guide

As demands by unions intensify for a ban on zero-hours contracts, you may well be scrambling to check how extensively they are used in your organisation. From time to time, employers may use zero-hours contracts to cover situations where work fluctuates.

Many businesses find them to be a suitable working arrangement as it gives them a flexible schedule. It also means they don't have to be fully committed, so they can have more than one job if they wish.

However, with zero-hours under further scrutiny, it's vitally important you check you are using them fairly. If you're in doubt, call one of our experienced employment law advisors for 24/7 zero-hours contract advice, on 0800 124 4996.

This comprehensive guide will explain what zero-hours contracts are, why you might use one, and employment rights for individuals with a zero-hours contract.

What are zero-hour contracts?

A zero-hours contract is a working arrangement in which there is no minimum set contracted hours or guaranteed work.

The contract will state what working hours and pay the zero hours workers will receive and what could happen if the work is turned down. At the very least the pay must be national minimum wage.

As this type of employment contract is casual, it means:

• Individuals are on call to work when you need them.
• You don't have to give them work. (They don't require minimum working hours)
• They don't have to do the work when asked.

As zero-hour contracts have no legal definition within the law, employers must ensure they set out the employment status, rights and obligations of their staff. You are also still responsible for the health & safety of an individual on a zero-hour contract.

Why are zero-hours contracts used?

Employers may use a 0 hour contract to adapt to staffing requirements and to manage fluctuations in work demand. However, they may also use these types of contracts to provide a flexible work schedule for individuals.

Types of work that might use a zero-hours contract could be:

• Casual hours.
• Delivery services.
• Care work.
• Hospitality work.
• Warehouse work.

Some types of work are driven by external factors that are out of the employer's control. These factors can be things such as work/life balance or wellbeing issues.

These factors can affect a range of sectors, including:

• Leisure.
• Catering.
• Hospitality.

In these sectors, the workload is irregular and there's not a constant need for staff.

Other reasons for using a zero-hour contract may include reducing costs and avoiding agency worker costs.

What are the employment rights of zero-hour contract workers?

As mentioned, under UK law, individuals on a zero-hour contract are entitled to paid annual leave and must be paid the National Minimum Wage for hours they worked.

This is regardless of how many hours have been offered to the individual.

It ensures they are treated in the same way as permanent employees, with the same benefits, pay and statutory employment rights.

Depending on the employment status, an individual can be classed as an employee and have more employment rights. Employees have protection from being unfairly dismissed or experiencing detriment.

Detriment means treatment that leaves an employee worse off. For example:

• You reduce an employee's work hours.
• An employee experiences bullying or harassment.

You turn down an employee's training requests without a valid reason.

Can an employer add an exclusivity clause to a contract?

An exclusivity clause grants exclusive distribution or licences. But it can also be an obligation for a worker to work exclusively for an employer.

If you have provided a zero-hour contract to a worker, you must not:

• Stop someone from working multiple jobs by adding exclusivity clauses in their contract.
• Treat them unfairly if they do work for another employer.
• Dismiss them for working for another employer if they're classed as an employee.

If zero-hour workers aren't receiving regular hours, they may look elsewhere for employment.

What pay are zero-hour contract employees entitled to?

For employees working under zero-hours contracts, they are entitled to:

• Statutory sick pay
• Statutory redundancy pay
• Statutory maternity pay
• Statutory paternity pay
• Holiday pay

The following entitlements only apply to employees if they meet the eligibility criteria.

Do you have to offer rest breaks?

Under zero-hours contracts, employees and workers have the same rights to breaks including:

• Rest breaks at work
• Rest between shifts
• Weekly rest periods

 

Employment status for a zero-hours contract

Employment status is an employee's legal status at work. It affects what rights they have and what they're entitled to. There are three main types of status:

1. Employee
2. Worker
3. Self-employed

The correct status for zero-hours contracts will depend on contract terms, working arrangements and any statutory tests needed to determine employment status.

 

Advantages of zero-hour contracts for employers

The main advantage of using a zero-hours contract is flexibility.

To meet fluctuations in work demand, you need to respond quickly and offering zero-hour contracts can fulfil this need. They can allow you to:

• Deal with unforeseen events at short notice, such as an increase in demand
• Cover a specific event, such as a promotional event
• Cope with absent employees, such as maternity leave
• Deal with a busy work period, such as Christmas time

Employers can reduce costs and save money where necessary. Hiring individuals on zero-hours contracts can also be cheaper than paying agency fees.

 

Disadvantages of zero-hour contracts for employers

However, there can be a downside to hiring zero-hours workers. Although employees have to accept work, workers have no obligation to accept. So, it can be difficult to get someone to undertake an assignment.

This could lead to a decrease in the quality of work and productivity in the workplace. Employer responsibilities are to ensure everyone is consistently meeting company standards and deadlines.

It can also be difficult to determine what the employment relationship, status, holiday pay and annual leave accrual of the individual is under this type of contract.

What's the difference between zero-hours workers and casual workers?

Zero-hours contracts and casual workers can often be confused. Both types of contracts are similar, but they have key differences.

Zero-hours contract workers have an agreement with an employer that indirectly ties the employee. As an employer, you have no obligation to offer any work, but the employee has an obligation to accept the work offered.

However, a casual contract is a variable agreement. It's similar to a zero-hour contract, as the employer isn't obliged to offer any work. With such contracts, the employee is not obliged to accept the work when offered. The agreement can also be ended by either party at any time.

Are there notice periods on zero-hours contracts?

No, zero-hour workers have no statutory rights to notice periods. This means you can terminate an individual's contract without notice, and they can leave without any warning.

If an individual is on a worker's status, they won't be eligible for flexible working or get protection against unfair dismissal or a minimum notice period.

But if an individual gets an employee status, they won't be able to refuse the hours you offer them. As employees, they're eligible for the statutory notice period.

Can giving notice periods help employers?

Giving your employees a zero-hours contract can give you time to look for replacement employees if they decide to leave. But your staff can refuse to pick up any shifts during this time which can cause problems.

If you don't continue to offer your staff work, you could face discrimination claims from them.

What if there are breaks in a worker's employment history?

Depending on what agreements have been outlined, a zero-hour contract might mean the contract only exists if work has been provided.

If this occurs, a break in employment is considered when no work has been provided for a full calendar week. A full week constitutes a break in continuous service. For example, this can include where an employee is reinstated after an unfair dismissal claim.

But if the employment is continuous, then the individual has rights that can accumulate over time.

If you're hiring someone with a gap in employment and haven't worked for a prolonged period of time, take the time to find out why. This could be problematic for your business as this individual may be less committed to your business than other candidates.

What are the employer's responsibilities for zero-hours contracts?

As an employer, you are responsible for:

• A zero-hours worker's health & safety in the workplace
• Pay wages through PAYE: including tax and National Insurance deductions

Get advice from Croner

Handling zero-hours contracts can be difficult especially if you don't fully understand an individual's rights.

Given that zero-hours contracts may well face further scrutiny with a change in government or further calls from unions, it's clear that this issue isn't going away.

A zero-hours contract can be very flexible for your workforce, especially in times of high work demand. Weigh up the pros and cons before you decide. On the other hand, it can lead to complications such as a potential decrease in productivity.

Croner can help you manage zero-hour contracts in the workplace with ease. We provide expert advice in employment law and contracts with our 24/7 HR advice line. Give us a call on 01455 858 132 today.