Zero hours contracts often get bad press. With their links to the gig economy, they are often portrayed as unscrupulous employers taking advantage of the most vulnerable workers.
There is no doubt that they can be misused, particularly if they are seen as a way for employers to try to avoid their responsibilities.
However the true picture is – as usual – more complex. Used well and for their proper purpose zero hours contracts can be beneficial for employer and worker, providing flexibility and opportunities on both sides.
In fact, CIPD research in 2022 showed workers on zero hours contracts reported better work-life balance and wellbeing than other workers.
The key is using these types of contract correctly, which needs the employer to honestly assess what they want the individual to do.
What is a zero hours contract and why would I use one?
A zero hours contract is where a worker is engaged to fulfil a role but with no regular or minimum hours. The hours actually worked will depend on the needs of the employer and what the individual agrees to work.
This makes them a great way to meet fluctuating demand. For example, a wedding venue may have a number of bar staff on zero hours contracts – when they know they have a wedding booked in on a specific date they can offer out shifts, and it is up to each individual whether they take the work or not.
There is no guarantee that an event will happen every weekend, and if it doesn’t there will be no work offered. Nor is there any assumption that the individual will take every shift offered to them – the employer has a bank of workers to call on.
As well as helping the business manage their demand and supply, a zero hours contract can be ideal for those looking for additional work, perhaps alongside another job, childcare or their studies, to supplement their income rather than providing a fixed amount of pay each week or month. The individual is able to take on more shifts if they are available and want to earn the extra money, but aren’t obliged to work when other issues take up more of their time e.g. exam season for students.
So why the bad press?
Firstly, the flip side of this level of flexibility is uncertainty – the individual doesn’t have a guaranteed income to rely on, and employers have to rely on enough workers being available to meet their needs. This lack of job security also means zero hours jobs tend to have a high turnover rate.
Secondly, a lot of the issues have arisen because the employment status of zero hours workers is not always straightforward and will depend on both the written contract and the realities of the working relationship.
To put the situation in simple terms, individuals on zero hours contracts could be “employees” or “workers”. Legally, workers have fewer rights than employees. They do retain some statutory employment rights such as national minimum wage, paid annual leave, rest breaks and protection from discrimination, but they are not entitled to other benefits such as redundancy pay, unfair dismissal protection, or statutory notice provision.
This is where the problems have occurred, with some employers claiming the individuals are “workers”, or even self employed, in order to take advantage of reduced rights, but in reality wanting all the benefits of employees.
However just calling someone a worker doesn’t make them so – the tribunal will look at a number of factors. Tribunals are aware of the potential of employers abusing zero hours contracts, and may still grant an individual protection against unfair dismissal if they feel this is the fair and appropriate response.
For example, one of the key factors in determining if someone is an employee is what is termed “mutuality of obligation”. If someone is a worker, then this shouldn’t exist – as described above, the employer doesn’t have to offer any work, and when they do the worker doesn’t have to accept.
In reality, some employers want to have their cake and eat it – not being obliged to offer work, but expecting the individual – or making them feel obliged – to accept work whenever they are asked. The CIPD research mentioned above showed that in practice only just over half of employers gave workers the right to turn down work.
Even without any ill-intentions, it is easy for employers to get caught out if a relationship naturally changes over time: assignments becoming more regular and/or more consistent, and the individual becoming more and more part of the team, can lead to a gradual status change to employee.
Tips for employers
- Don’t be put off using zero hours contracts – they can be a great tool.
- If you do use them, check you are using them correctly – do they reflect reality?
- Keep your zero hours contracts under review to check whether they are still appropriate, or if the relationship has changed.
- Consider the benefits to you as well as the costs of making someone an employee e.g. for them to be invested in the business, to retain your staff and build expertise.
- If you want regular cover but only for a specific period e.g. additional staff to cover the busy Christmas period, it may be better to employ individuals on fixed term contracts.
- If you do believe individuals are workers then be clear from the outset that this is not an employment contract, and on the basis of the agreement:
- that there is no guarantee of work
- they will only be paid when they do work (plus their leave – see below)
- that they can turn down work without it affecting them being offered work in future, and
- that they can work for others when not working for you (exclusivity clauses are unenforceable in zero hours contracts)
- It can often be helpful to explain the reason i.e. to meet fluctuating demands of the business.
- Remember, whether they are workers or employees they still get annual leave – the 5.6 week legal minimum. Following the Supreme Court case Harpur Trust vs Brazel holiday pay should be calculated over a 52 week average of weeks worked, rather than the percentage “roll up” payment approach previously adopted.
In summary, zero hours contracts don’t deserve the wholesale condemnation they often receive and can be a really useful workforce tool, but they can also be a minefield – get in touch if you are interested in using them but not sure if they are the right fit for your situation.