Zero hour contracts are a hot topic, especially with the upcoming election. They are divisive and generally frowned upon, but is there is a place for them in the employment sphere?
What are they?
A zero hour contract is a contract which does not guarantee an employee any minimum hours per work. This means that an employee’s working pattern can be unpredictable, with no guaranteed income as the employer will only pay for the hours that are worked. It is estimated that 2-3% of the working population are on zero hour contracts. The figures fluctuate throughout the year, with peaks over the summer and Christmas periods to cover seasonal work.
The key benefit for an employer offering zero hour contracts is that they can secure staff and flexibly plan their staffing levels dependent on the work coming in. This is ideal for small businesses or growing businesses who have low cash flow and cannot commit to paying an employee regular hours but risks being understaffed. Staffing levels can vary at different times of the year and a zero hour contract can be a quick and easy solution for seasonal work when demand is less predictable and staff may be required at short notice.
The benefit for an employee is that they may prefer to work flexibly and part time to fit around other commitments. A zero hour contract cannot prevent an employee working elsewhere, so can be an ideal solution for a second job.
A zero hour contract also does not preclude an employee from receiving holiday payments and in some cases they can still receive Statutory Sick Pay, Statutory Maternity Pay and other employee benefits.
It is estimated that around a third of employees on zero hours contracts would like more hours. Often, an employee is reassured that they will receive a set number of hours but, as there are no minimum hours within the contract, the hours actually given may not meet the employees expectations and the employer cannot be compelled to give additional hours. Also, whilst the idea of working flexibly appeals to some, it can cause problems for employees who require a set pattern of work. An employee may feel unable to turn down work, if they fear that a refusal to work will result in them receiving even less hours in the coming weeks.
Zero hour contracts can make employment status difficult to determine. Often someone on a zero hour contract will be a worker, which affords them limited employment rights. However, the contract of employment can give employee status, even though there are no guaranteed hours. The significance of this is that an employee is entitled to statutory sick pay, redundancy, protection from unfair dismiss and statutory maternity pay and other family rights. A worker is not entitled to these benefits.
It is not only the contract of employment which will determine whether there is a true zero hour arrangement. The reality of the situation will also be considered. This means that if someone regularly works the same number of hours each week and has done for a significant period but is on a zero hour contract, there may be an argument to suggest that they have fixed contractual hours and could in fact be an employee as opposed to a worker. They would be able to argue that they are entitled to a minimum number of hours per week.
Do your contracts of employment stand up to the challenge?
With the upcoming election, the future is uncertain for zero hour contracts with arguments that they allow the exploitation of workers and undermine workers’ rights.
Due to the negative press zero hour contracts have received, many companies are now looking to reduce their numbers of zero hour contracts and offer existing employees with regular hours the opportunity to move on to fixed hour contracts.
As employment law experts, we can draft comprehensive contracts of employment to suit your business and assist in the transition from zero hour to fixed hour contracts. We can also provide specialist advice in relation to employment status and what the best options are for your company when recruiting new members of staff.
We will be running a specialist session on employment status alongside BHP Accountants on 27th September 2017. We will be sending out details on how to book in due course.
If you would like your contracts of employment reviewing, new contracts drafting or just need some advice on employee status, please contact us on 0114 303 2300 or email email@example.com