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.
How to reduce the risk of using zero-hours contractsWhilst 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.
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?
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