Zero hours contract – is it the right contract for you?

Posted 24/04/2014

Under zero hours contracts, employers are under no obligation to provide work and the worker is paid for the work they carry out.

This arrangement is popular for employers who have a fluctuating need for staff. Some workers enjoy the flexibility, whereas others crave more certainty about how much they will be earning each month. However, some of the UK’s largest employers are regular users of the zero hours contract as they deal with peaks and troughs in demand.

Surprisingly, up to 20 years ago, employees working zero hours could very rarely build up sufficient continuous employment to qualify for protection against unfair dismissal for example.

Opinion on this type of contract is divided. The Government issued a consultation due to concerns that those hired under these contracts were getting a bad deal. The deadline for submissions to the consultation has passed and we now await the Government’s commentary on the feedback provided.

For an employer seeking to get a quick fix for increased demand over the summer period, a zero hours contract can be ideal, especially if it is almost impossible to calculate how many staff will be needed, and when. However, the employment status of the new summer recruits could be called into question.

It can be very difficult to establish whether the individual hired is an “employee”.  If they do not fit the employment law definition of “employee” they are often likely to be a “worker”.  A worker has far fewer employment rights than an employee. For that reason, employers will often stipulate in a zero hours contract that it is not an employment contract. However, it is the reality of the working relationship which will dictate what is written in the contract when deciding the employment status.

The practicalities of working out the entitlements of an individual under a zero hours contract can also be difficult. For example, how will holiday entitlement accrue when the individual works on an ‘as and when’ basis? Likewise, serious consideration needs to be given as to the terms of the contract. If there is a marked difference in terms when compared to a full-time employee, is there a risk that this is discriminatory if, for example, it is only a certain age category that is offered a zero hours contract instead of, say, a fixed term contract.

If you need assistance in understanding whether the use of a zero hours contract is right for you or your business, please contact our Employment team.