Zero hours contracts have been branded as controversial and prone to abuse with a number of employers receiving considerable flak for their use.

In fact, these types of contracts can be lawful and beneficial to both employers and employees.

What is a zero hours contract?

A zero hours contract is a contract between an employer and an individual whereby the worker has no guaranteed hours and is only paid for the work they actually carry out.

This means employers do not need to give them work and the worker does not have to accept the work offered to them.

Law and policy

The government’s guidance states that zero hours contracts “should not be used as a permanent arrangement if it is not justifiable”. As an example, they state that they are not suitable if the person is working regular hours over a sustained period. It is more than likely that in this scenario it is more appropriate to offer them a different type of contract, for example a part-time contract or fixed-term contract. Even if this was not formally documented, it is likely that this could have become the position through custom and practice so be careful if offering regular hours of work.

The government has banned the use of exclusivity clauses in zero-hours contracts; therefore employers cannot restrict a zero-hours employee from undertaking work with another employer.

Pros

For employers, the biggest advantage of using zero-hours workers is the flexibility it provides.

Having a pool of people available allows an organisation to respond quickly and effectively to any fluctuation of business demands (e.g. to deal with an unforeseen event, cover a particular event, cope with absences or in the build up to a busy period). This can be very beneficial for a business’s productivity and efficiency.

If you have no work, there is no pressure to provide staff with work. Rather than have people hanging around doing nothing, you can just have them when needed and pay them for the work they perform.

Additionally, hiring people on zero hours contracts can be cheaper than paying the agency fees and commission for an agency worker, so it can help keep costs down.

Cons

The flexibility of these types of contracts can backfire on employers. As individuals are under no obligation to accept work, it can be difficult to get someone on short notice to step in as they juggle their studies, other jobs, personal or care commitments.

It is easy to get the employment status of these individuals wrong and not provide them with the rights they are legally entitled to, which can lead to expensive claims.

What are their rights and your obligations?

An individual’s rights depend on their employment status.

It can be notoriously difficult to work out whether someone is an employee or a worker. An Employment Tribunal will not just look at the label used in the person’s contract, but will consider the nature of the working relationship and how that has progressed.  Therefore, if you are looking to terminate a zero hour contract, you should ensure that you get advice first.

As a worker, they are entitled to certain employment law rights including:

• To be paid the national minimum wage
• 28 days (including bank holidays) of annual leave (pro rated according to how they work)
• Not to be discriminated against on basis of age, disability, race, etc
• Not suffer any unlawful deductions from wages
• Rest breaks

As an employee, they are entitled to a wider array of rights, including redundancy pay, maternity leave and unfair dismissal.

Tips

The government’s guidance offers the following tips for employers:

• Clearly advertise the role as being zero-hours.
• Contracts should clearly state their employment status and rights.

• Individuals should understand how it operates – how work will be offered and how they are under no obligation to accept the work.
• Describe the process for termination.

• Try and give as much notice as possible of available work – this gives them time to arrange their schedules and ensure personal or care commitments are taken care of.
• Avoid cancelling at the last minute – this allows workers to pick up another assignment.

It is also important to evaluate what is happening in reality to ensure that there is no pattern in their working hours which may have become contractual or that workers are not actually employees.

If you require assistance on any of the matters touched on above, give your Employment Law Adviser a call for specific advice and support.