HR & Management

How to reduce the risk of zero-hours contracts

4 min read

30 August 2013

The use of zero-hour contracts has been abused by some employers and workers (generally those in low paid jobs) have been exploited. Pressure from the media, trade unions to ban their use appears to be growing. But are they all bad?

What exactly is a zero hours contract?

There is no legal definition of a zero-hours contract. In simple terms, the worker is retained under a contract where there is no guarantee of work each week. Crucially, if there is no work, then there is no pay and therefore no guaranteed income. 

How bad is the problem? 

Despite the recent furore over their use in the press, businesses have actually been employing people on the contracts for decades. So, why are they so popular now?
The lengthy recession meant that employers could not afford to keep permanent staff and now they are understandably concerned about committing to full or even part-time contracts. Casual workers provide employers with greater flexibility and additional capacity to deal with changes in demand. The economy provides some explanation, but only part of it.

In 2012, the CBI reported a correlation between the increased uptake of these contracts and the introduction of the Agency Worker Regulations 2010, which gave agency workers additional rights and made them a less attractive proposition.

Are the days of the zero-hours contract numbered? 

Whilst there are advantages and disadvantages to zero-hours contracts, it looks like changes may be afoot. Earlier this year, Secretary of State for Business, Innovation and Skills Vince Cable, concerned that employers have been abusing such contracts, announced a review of their use. It now appears that the Government is considering legislating so that zero-hours workers cannot be restricted to working for only one employer. It has, however, ruled out a complete ban. This suggests that zero-hours contracts are here to stay, but it is likely that guidance on their proper use will be provided. 

How to reduce the risk of using zero-hours contracts 

Whilst the use of zero-hours contracts is lawful and is a good source of additional manpower, there are a number of potential pitfalls associated with their use.
Companies looking to reduce their risk of using the contracts, should consider the following options. 

To avoid employment rights:

  • Use a carefully drafted contract, which reflects accurately the relationship between the company and the worker;
  • Beware of getting into a pattern of regularly offering casual workers work;
  • Do not require the worker to accept each and every assignment (i.e. ensure there is no mutuality of obligation which could give rise to an employment relationship); and
  • Allow the worker to work elsewhere between assignments.

Ensure that appropriate pre-employment checks are undertaken for all staff:

  • Consider whether there is any risk of claims if casual staff are not offered the same benefits as full-time staff;

  • How will you manage holidays? Casual workers have the right to 28 days paid holiday per annum pro-rata. This can be rolled up and paid at the end of an assignment, using the formula of 12.07 per cent of hours worked;

  • Make sure you are paying all workers the national minimum wage; and

  • Review the use of zero-hours contracts regularly – if regular hours are given to a worker, should their contract be updated so that regular hours are offered each week, with overtime to cover any increase in demand? Or would a fixed term contract take you through the busy period?  

With care, the zero-hours contract can still be used as a relatively risk-free, cheap and flexible means of employing staff.

Eleanor Rogers is a solicitor at employment law firm Doyle Clayton.

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