What is a Zero Hours Contract?

What is a Zero-Hour Employment Contract and how do I write one?

Key points to consider:

• There is usually no obligation for employers to offer work to staff on zero hours contracts.
• The majority of zero hours contracts give the employee a ‘worker’ employment status.
• Although it isn’t very well documented employees on zero hours contracts have exactly the same employment rights as ordinary workers, however they may have breaks in their contract, which affect rights that accumulate over time.
• Workers on zero hours contracts are still entitled to the National Minimum Wage, National Living Wage and annual leave in the same way that regular workers are.

Zero Hour Contracts of Employment – What you need to know:

Zero hours employment contracts have risen in popularity over recent years. According to the Office of National Statistics the number of zero hour contracts in use has doubled since 2005.

This is hardly surprising given the fragility of the economy over recent years. Zero-hours contracts are especially prevalent in the service and retail sectors.

On the face of it a zero hour contract of employment appears to be a very attractive basis on which to employ someone, giving the employer complete freedom over when to offer work and how much to the employee.

However, engaging workers on a zero hours employment contract can be fraught with problems, both legal and practical. This question and answer guide should help you to ensure that if you do use zero hour contracts you are doing so in a way which is suited to your business needs.

How does a Zero-Hour Contract work?

A Zero hours contract is a contract of employment which does not guarantee the worker a minimum number of hours work each week. Therefore, if no work is available then no hours of work have to be given to the worker and no wages paid.

Some zero hour employment contracts will place an obligation on the worker to accept work if and when it is offered to them but others will not. This is important when deciding what employment status the worker has.

In most other respects a zero hour contract will work in the same way as any other contract of employment. The worker will be entitled to at least the legal minimum amount of paid annual leave and also statutory sick pay, maternity pay etc. if they meet the minimum earning requirements.

What employment status do zero hour workers have?

This is a tricky question and will depend partly on the contract and partly on how the relationship works in practice. Many businesses will want them to be classified as ‘workers’ so that they cannot claim unfair dismissal or redundancy payments.

However, unless the contract is clear that the worker does not have to accept work and the actual reality of the relationship reflects the contract accurately then there is a strong chance the worker will be found to have the rights of an employee. This is a situation employers will want to avoid, especially if they see zero hour workers as a long time solution.

Conversely, some employers will want zero hour workers to be employees in order that the obligation to accept work exists. However, this obligation is one side of a mutual duty so if the employer has no duty to provide work it cannot compel the employee to accept work. Therefore the employer may lose that element of control they desire.

Are there suitable alternatives to Zero Hour Contracts?

There are numerous ways in which a business can seek to engage a flexible supply of labour. Which one is best will depend on the particular staffing needs to be satisfied and the manner in which the business operates. Possible solutions include:

1. A contractual right to lay off employees, or place them on short time working.
2. Short hour contracts where only a small number of hours each week are guaranteed can be as low as four hours.
3. Agency workers.
4. Subcontracting work to a bona fide Subcontractor.

What should I do if I decide Zero Hour Contracts are the best option for me?

You should ensure you have a carefully drafted contract in place which sets out how the employment relationship will work and the rights and obligations of each party. This contract should accurately reflect the manner in which you wish to manage the employment relationship.

You should carry out a detailed analysis of what your staffing needs are likely to be to ensure that you have a sufficient number of zero hour workers on your books to meet expected demand.

You should carry out regular reviews of the employment relationship and your staffing needs to ensure that the arrangements you have in place continue to meet your business needs.

For further advice on zero hour contracts and other forms of engaging short hour and temporary workers please call 0114 241 7092 to speak to one of our employment law and HR experts.