Business Law & Compliance

What you need to know about Zero Hour contracts, from a lawyer

5 min read

17 October 2014

Zero hours contracts have traditionally become a useful tool for many businesses, particularly, but not exclusively, those with a high turnover of temporary workers and a consistent need for last minute arrangements, such as restaurants, retail outlets and hotels.

Traditionally, businesses regularly using zero hours contract workers were able to benefit from the system not only because of the flexibility of this workforce but also because they were able to lock workers into having to accept work when it was offered to them, leaving the individual unable to accept other work elsewhere in the meantime. 

However, in July, and since confirmed by David Cameron at the Conservative party conference, Business Secretary Vince Cable announced that exclusivity deals were to be banned. Does this leave businesses with a worry about whether these arrangements will still be as useful in the future?

Whilst in theory the ban on exclusivity appears to benefit the worker at the expense of the business, the change may not be all bad. One would assume that any company regularly utilising zero hours contracts workers would have a good bank of contacts on whom to call if needed, so if one can’t do the work, there will be another available who can. 

Furthermore, businesses will be now less worried about employment status. With a locked in arrangement, a worker naturally becomes a more regular face at one establishment, leading to a more likely case for deemed employment status, should the relationship become contentious. With more flexibility for the worker to choose where to work and when to say no, arguably the less mutuality of obligation there will be to one company and therefore the less likely the worker is an employee.

This may save businesses prohibitive possible future legal fees defending unfair dismissal and other employment status related claims and free them from administratively time-consuming tasks such as calculating part time and shift-workers’ holiday and sickness entitlements. 

Finally, with all the controversy surrounding the locking in of workers to one company under these contracts, arguably both the workers and the businesses should be happier with the new, looser arrangements. The more businesses use these contracts, with more flexibility on both sides, the more they maximise opportunities for individuals and businesses to find those they work best with. As all good business owners (and employment lawyers) know, happy staff and a fluid working environment will go a long way to making your business a success. 

However, as with all employment law, the area is far from fool-proof and naturally there are bound to be challenges from workers claiming employment status and other problems with these new arrangements. The best way businesses can protect themselves is by making sure they have clear and well-defined terms of engagement at the outset. So many businesses have been burnt, not only by not agreeing terms with their staff in the first place, but by not taking the time to do this properly. 

With circumstances regarding zero hours, it is crucial for businesses to get terms absolutely correct. If your staff are coming and going, working elsewhere at the same time as working for you, you have no idea how many hours they are doing and whether they are therefore potentially in breach of the Working Time Regulations. If neither of you knows what to expect from each other and the less clear payment and benefits terms are, the greater the risk of employment related claims or those for financial compensation. And so it goes on. Clear engagement terms could deal with all of these possible problems, and more.   

In reality, it looks increasingly like the situation is developing and merging into the one that currently and popularly exists between businesses and freelancers, a market which has its own issues of course. But wherever it is heading and whatever you call it, spending a bit of time getting your terms right now will save your business a lot of time later.

Philippa Wood is a consultant solicitor at Keystone Law

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