As reports of insecure working hours and employees enduring precarious working situations continue to increase, the negative focus on zero hours contracts shows little sign of shifting. The Guardian reports that the number of people in the UK employed on zero hours contracts increased by as much as 100,000 in 2017, and figures from the Office for National Statistics show that 32 percent of people on zero hours contracts state that they would like more hours – this compares to just 9 percent of people in other types of employment.
However, it should be noted that there are now many employee/employer relationship agreements that differ from the traditional nine to five. Many argue that new working contract types, such as zero hours, have positively contributed to the decline in unemployment rates, which have returned to pre-recession levels.
However, others claim that their very existence means employees are trapped in part-time, temporary employment through a lack of potential full-time, permanent jobs.
What are zero hours contracts?
It should be noted that the term ‘zero hours contract’ is not a recognised legal term. In the absence of an official legal definition, a rough understanding of the term would be as follows:
- The employer is not obliged to provide any minimum working hours
- The worker is not obliged to accept all working hours offered
The employee’s contract will state exactly what level of pay the individual will receive if they do work, and what will happen when they turn down any work that has been offered by the employer.
When and why were they introduced?
Zero hours contracts have been used for years under a number of different guises, but have gained prevalence over the last twenty years. Under the National Minimum Wage Act 1998, UK workers operating under a zero hours contract on stand-by time, on-call time, and downtime must be paid the national minimum wage for hours worked. However, prior to the introduction of the Working Time Regulations 1998, and the National Minimum Wage Regulations in 1999, zero hours contracts were sometimes used to ‘clock-off’ staff during quiet periods, whilst retaining them on site so they could be returned to paid work should the need arise.
Traditionally, they were used to employ seasonal, agricultural, and hospitality workers, to whom permanent hours might not be available.
Zero hours contracts – key points:
Understanding these type of employment contracts can be confusing, but there are some key facts to remember that should help to make the area a little clearer:
- Zero hours contracts normally mean that there is no obligation for employers to offer work, or for the workers involved to accept it.
- Most zero hours contracts will provide staff with ‘worker’ employment status
- Workers on this type of contract have the same employment rights as regular workers
- Protection is provided to zero hours workers from any company exclusivity clause
Do they affect employment status?
In most cases, zero hours contracts mean that an employer ‘recruits’ a worker. However, the way in which the relationship with that worker develops may enhance the employment status to that of an ‘employee.’
Clarity of employment status is one of the more challenging aspects of managing zero hours contracts. The three main types are employee, worker and self-employed. Individuals engaged on zero hours contracts may be either employees or workers in terms of their legal rights. Identifying which one depends on what the employee’s contract says, and how the relationship with their employer works. In most cases, those on zero hours contracts will be ‘workers,’ as there will be no mutual obligations on either side.
You should be clear about which category zero hours workers belong to, and consider the rights and conditions that they may be entitled to accordingly.
When can they be used?
Zero hours contracts can be used to essentially provide a flexible workforce to meet a temporary or changing need for staff. According to research from the CIPD, the most common reason employers use zero hours contracts is to provide them with the flexibility to manage fluctuations in business demand. However, the same research also found that an equal number of employers stated that they used the contracts to provide flexibility to individuals.
Examples of when to consider using zero hours contracts include:
- For unexpected or last-minute events (e.g. a restaurant needing extra staff for an event)
- For temporary staff shortages (e.g. an office requires a temporary specialist worker to cover an absence)
- For on-call or bank work (e.g. a firm has a period of heightened work, requiring extra resource temporarily)
Are there any alternatives?
You should carefully consider whether offering zero hours contracts is the right choice for your business, depending on the nature of the work and your specific circumstances. You could also consider:
- Offering overtime to permanent staff to ensure that existing knowhow is available to cope with business demand fluctuation
- Recruiting a part-time employee, or alternatively someone on a fixed term contract if regular hours are likely to be required
- Offering annualised hours contracts if peaks in demand can be anticipated across a working year
- Using agency staff as a quicker way to employ any staff needed temporarily or at short notice