• employee_law
  • August 07, 2019

Zero Hours Contracts - A Business Benefit Or A Risk?

By Lawbite Team

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Zero Hours contracts are a contract type that has been the subject of much press interest and controversy in recent times. These contracts have been on the rise and growing in popularity amongst employers, particularly since the global financial crash of a decade ago. Love them or loathe them, they do occupy a place in the British workforce.  In this article, we will give you an overview of zero hours contracts. For more in-depth information take of our free 15-minute legal consultation.  

What are the key aspects of a Zero Hours contract (‘ZHC’)?

A ZHC is a special type of contract where the person working is considered a ‘worker’ as opposed to an ‘employee’. The reason for this is that there is no ‘mutuality of obligation’ in that an employer is not obligated to offer the worker any work, and the worker is not obligated to accept the work as and when it is offered.   With ‘worker’ status the individual enjoys some of the same rights as ‘employee’ status, including the rights to annual leave and to be paid the National Minimum Wage. Other rights accrue over time, for example, initially Zero Hours workers must accrue their annual leave before taking it, but then after one year’s continuous service, this is no longer a requirement.   Onekey aspect of a ZHC in the The Exclusivity Terms in Zero Hours Regulations 2015 which makes it unlawful for an employer to insist upon an exclusivity clause in a ZHC preventing the worker from working for multiple employers. 

What are the pros and cons of this contract type? 

The pros

  • From the point of view of the employer are that ZHC contracts provide an opportunity to provide a contingent, flexible workforce which has the elasticity to cater for fluctuating demands in a cost-effective way, when considered against alternatives such as agency staffing costs.  ZHC can also help with short-term staff absence, such as illness or holidays.
  • For the employee, ZHCs can provide an opportunity to earn an income in a more flexible way, with the option to have multiple employers and work the shifts that they wish to work.

The cons 

  • From the point of view of the employer is that it may be more difficult for them to foster a cohesive workforce sharing the same aims and goals via the use of ZHCs, particularly when the hours may be sporadic and many workers may have second or third jobs.
  • From the point of view of the employee is that an ZHC provides little to no security or certainty of income.  This may make it very difficult to manage monthly bills and day-to-day expenses or to obtain personal credit such as a mortgage.

Important factors to bear in mind 

An employer must ensure that the written contract mirrors what actually happens in practice.  For example, since the contract allows for workers to have multiple jobs, if a worker is disciplined or treated unfavourably as a result of turning down work in favour of a shift elsewhere, this type of treatment may be deemed by a Tribunal to be indicative of the individual having ‘employee’ rather than ‘worker’ status, thus giving them the full range of employee protections, including statutory notice and all the maternity / paternity rights etc.  Another aspect for an employer to be aware of is the full extent of The Exclusivity Terms in Zero Hours Regulations 2015.  It is vital that employers comply with these Regulations. It is unlawful for a worker to be subjected to a detriment by reason of them working for another employer, and if a worker under a ZHC is dismissed by reason of working for another employer in breach of a contractual clause preventing them from doing so, then this will be regarded as an automatically Unfair Dismissal.   

What instances are ZHC most suitable?

They are most suited to employers looking for an agile, flexible workforce and for workers who are content to work without guaranteed hours and income. 

Summary

Zero Hours Contracts do have their place in the modern labour market. They can provide an important happy medium, somewhere between employment and self-employment.  In certain sectors, particularly those with very fluctuating or seasonal demand levels, they help provide a much-needed contingent workforce. However, they have to be managed and reviewed carefully, and the relevant legislation should be followed to the letter.  

How can we help?

Our expert lawyers can provide you with all the business legal advice. We can also give guidance on the right documents to use for any situation.  

How much does it cost?

At LawBite our expert lawyers can check whether your contract: 
  • contains everything you need
  • is clear and unambiguous
  • contains clauses that are unfair or dangerous for your business
  • conforms with current law and regulation
Prices start at £149+VAT for contracts up to 20 pages.     Ashley Gurr LawBrief   The author of this article is LawBrief Ashley Gurr. Ashley Gurr is an experienced Solicitor who has represented SME clients for many years in the fields of Employment Law, Commercial Property and General Commercial.

Journey further

Permanent Employment Contracts: What you need to know Fixed-term employment contracts: Best of both worlds? Directors Service Agreements Thinking of hiring? Here are the different types of contracts you should consider

In closing

Nothing in this article constitutes legal advice on which you should rely. The article is provided for general information purposes only. Professional legal advice should always be sought before taking any action relating to or relying on the content of this article. Our Platform Terms of Use apply to this article.

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