Much has been written about zero hour contracts. They’ve been called exploitative and have been associated with some bad working practices. But, in some work contexts, they’re very appropriate. This article shares the pros and cons of these contract types to help you decide whether they are good or bad for your business.
What Is a Zero Hours Contract?
When Do Employers Use Zero Hours Contracts?
Government Rules About Zero Hours Contracts
What Information Should Be Included in a 0 Hour Contract?
Pros and Cons of a Zero-Hours Contract
What Is a Zero Hour Contract?
A zero hour contract is an employment contract type that formalizes working relationships with employees who perform what is often referred to as ‘piece work’ or ‘on-call work.’ By their very nature, these contracts are not designed with full commitment in mind and can be considered ‘casual.’
In a zero hour contract, employers do not guarantee that work will be made available to employees. Similarly, there is no requirement for workers to accept the work when it is made available. This is true even if workers are made to sign a contract stating this when they first sign a contract.
When Are Zero Hour Contracts Used?
Zero hour contracts are a flexible option that is often used in the retail industry or situations where the need for workers fluctuates depending on the time of year, season, or demand. It’s also used when the work is not constant or is ‘as and when,’ according to acas.
People who work in hospitality, in a warehouse, as a delivery driver, or gig-economy workers (like Uber or Just Eat employees) and even care workers, some bank workers, or those doing casual hours (like students who only work during their school or university holidays) are often put on this type of contract. Employers or casual workers are paid depending on how many hours they have worked.
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What Does The UK Government Say About Zero Hour Contracts?
The UK government website, gov.uk, says that these types of workers are entitled to statutory annual leave and must receive the national minimum wage, just like any other employee. According to acas, employers are also still responsible for their employees’ health and safety while they’re working on this type of contract and are required to give them adequate rest breaks and take tax and National Insurance deductions from their pay. Depending on how many hours they have worked, on average, over a period of time, workers on zero hour contracts may also be entitled to statutory sick pay.
Overall, contracts remain flexible from both an employers’ and an employees’ perspective. While employees may agree to be generally available to work when you need them, you don’t have to give them work and they don’t have to work for you when you ask them to.
You also can’t stop them from working elsewhere. And, if you try to put a clause in their contract that prevents them from looking for work or accepting work from someone else (like an exclusivity clause, for example), the law actually says they can ignore it (this is according to gov.uk).
What Should You Include In A Zero Hour Contract?
The CIPD says, “Although there is currently no legal definition for a zero-hours contract, employers need to ensure that written contracts contain provisions setting out the employment status, rights, and obligations of their zero-hours staff”.
According to the HR, Tax, Audit and Accounting firm, Croner-i, a zero hour contract should include a general description of the type of work or services they will undertake: while making it clear that it is, in fact, a zero-hours contract.
Clear information about the flexible nature of the contract must be given. The contract needs to include information about how the contract can be ended by either party. It should include information about when or how planned work might be canceled and explain how holiday and sick pay are calculated.
It should also include information about:
- When employees will be paid.
- What documentation they need to submit in order to demonstrate they have worked the hours.
- Whether their travel or expenses will be reimbursed.
Workers cannot be paid less than minimum wage, and the contract should state the rate of pay.
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Statistics To Consider
According to Safeworkers.co.uk, “Around 2.3% of the UK workforce has a zero-hours contract and this number is rising”. Before COVID-19 hit, an interpretation of figures from the Office of National Statistics (ONS) also demonstrated a 52% rise in over-50s working on zero-hours contracts between 2014 and 2019. However, this isn’t necessarily a bad thing. Figures from the ONS released in December 2019 found 81 per cent of workers born in the UK were satisfied with the number of hours they were working and did not consider themselves to be underemployed.
Pros and Cons of a Zero-Hours Contract
Here is a list of the pros and cons of a zero-hours contract from an employers’ perspective.
|Flexible||Low stability for employees may mean they are less loyal to their employers|
|Good for use in retail industries or for employing people on an ad-hoc basis||Lower commitment: You can’t stop zero-hours workers from looking for work or accepting work from another employer|
|Good for employers who need different staffing levels and different times of year, often on short notice||A zero-hours contract doesn’t mean zero admin: You still need to pay statutory annual leave, minimum wage and take care of their health and safety at work|
|You don’t have to spend money on staff wages if you don’t need them||Employees still need to be paid for being on call and for work-related travel, which may increase overall costs|
|Good for people who want to work part-time or work on flexible hours||Workers who don’t understand the nature of a zero-hours contract can become dissatisfied with the infrequent work, affecting employee morale|
|Good for people (such as older employees) who just want to ‘keep their hand in’ or keep themselves active and engaged with work||Employers’ use of these contracts can be open to accusations of employer bias or favoritism: especially if a supervisor prioritizes certain workers over others|
Are Zero-Hours Contracts Good or Bad?
The use of zero-hours contracts has been exposed to criticism in the past. In 2015 Ed Miliband called zero-hours contracts “exploitative”, stirring up concerns that they do not offer enough financial stability and security. An article in the BBC stated that “employees on zero-hours contracts also do not have the same employment rights as those on traditional contracts, and critics are concerned that the contracts are being used to avoid employers’ responsibilities to employees”.
While there is some validity to this argument – at least, for some employers – the CIPD hit back more recently with a report entitled, MEGATRENDS: Is Work in the UK Really Becoming Less Secure. It provided evidence that most of the UK’s workers at the time felt secure, with most people entering non-permanent work out of choice rather than necessity.
Contracts During (or After) Covid-19
As the economy rebuilds itself, these types of contracts may very well prove to be a necessity for many businesses and many workers who have no other work.
It may also offer additional work for people who now do consider themselves underemployed, offer much-needed piece work for people who are doing whatever work they can to earn a living. This, while simultaneously providing flexibility for employers who need labor to grow or maintain their businesses without the long-term commitment that employing permanent staff requires.
So, good or bad? It depends on your perspective.
What remains indisputable, however, is the fact that employees must be managed appropriately and the documents relating to their employment – whether they are employed on an ad-hoc, temporary or permanent basis – must be created, stored safely, and easy to find whenever you need them.
So if you don’t already have a system that is helping you do that, it might be worth investigating HR document management solutions to help out.
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