Research from The Chartered Instistute of Personnel and Development (CIPD) suggests that the use of zero-hours contracts is becoming widespread throughout the UK. The research, widely reported in today’s press, states that the CIPD estimates around 1 million workers to be on zero-hours contracts. But what are zero-hours contracts and what are the implications of using them for your business? When is it appropriate to use them and what rights do employees on zero-hours contracts have? Below we tackle these questions and assess the advantages and disadvantages for you and your staff.
Q. There has been a lot of talk on the news about zero-hours contracts. What is a zero-hours contract?
A. A zero hours contract is a contract of employment where the employee is not guaranteed a minimum or maximum number of hours of work. However, there is an expectation that when the employee is offered work by the employer they will accept the work offered.
Q. When can I use a zero-hours contract?
A. Zero-hours contracts are often used where there are peaks and troughs in a business which makes it difficult to provide employees with weekly contracted hours, for example, in the hospitality and leisure industry or the healthcare sector.
Q. What happens if someone I originally employed on a zero-hours contract starts working a certain number of hours each week in the business?
A. If an employee works regular hours each week over a period of time, then there is an argument to say that these hours could become their contracted hours and that they would no longer be a zero hours employee.
Q. What rights does someone employed under a zero-hours contract have?
A. Someone employed on a zero-hours contract is an employee. This means that after two years’ continuous service (if they were employed on or after 6th April 2012) they would have the right to claim ordinary unfair dismissal at an Employment Tribunal. They are also entitled to the National Minimum Wage, paid holidays and, if they qualify, Statutory Sick Pay.
Q. If an employee on a zero-hours contract isn’t working out, can I just stop offering them work?
A. No. As mentioned above, they are employees and as such, depending on their length of service, they may have employment rights.
Q. How do I calculate holiday pay for an employee engaged on a zero- hours contract?
A. Where an employee doesn’t have any regular hours then their holiday pay is calculated based on their average pay over the previous 12 weeks. If they did not earn anything during one week, then you should add in the pay from the week before the 12th week to bring the total up to 12.
Q. Is a zero-hours contract the same as a casual worker agreement?
A. No, a casual worker is engaged to work for an employer either on a one-off basis for a short period of time, or on an ad-hoc, as required, basis. They usually have no regular pattern of days or hours of work. The employer does not guarantee the casual worker any minimum amount of work within any given period of time.
The casual worker is free to accept or decline the offer of work, which means that no mutuality of obligation exists in the working relationship.
Q. What are the advantages and disadvantages of a zero hours contract for you and your employees?
A. For the employer
This type of contract can allow you to manage your business needs more efficiently and with greater flexibility.
These types of contracts can be appropriate when you have unpredictable levels of work, the work is irregular or the need for work is very short term. When you know that you have work to offer it would be good if you could provide the employee with as much notice as possible.
There is a mutuality of obligation in that the employee is obliged to work upon the demand (subject to certain exception like holidays) and the employee is obliged to come to work subject to a minimum notice requirement.
The downsides for using this type of contract are that the contract will be a contract of employment as opposed to a contract of services and that the employee will accrue continuity of service (whether or not they are actually working) and thus gain over time.
For the employee
The main benefits for the employee of a zero hours contract is that it may suit their personal circumstances and suit individuals who want occasional work.
It also gives the employee continuity of service and allows them to accrue statutory unfair dismissal and redundancy rights as well as accrue annual leave under the Working Time Regulations.
The main disadvantage of this type of contract is that it appears to be very one sided for the employer, as the employee can often be sitting around waiting to be offered work whilst being unpaid and the employee only gets paid for when they work- no regular pay or consistency for them.
If the above affects you and you would like to know more, then please give me a call.