19 January 2014
Guide to zero hours contracts for employers
Zero hours contracts have been in the news but what are they, and what are the pros and cons for employers?
There is no specific legal definition of a 'zero hours contract', but it is generally used to mean an arrangement under which the employer does not guarantee to provide work, and only pays the worker for hours actually worked. The worker usually does not have to accept any work offered to him or her, but must carry out the work personally if they do.
Zero hours contracts can therefore be used to create a pool of workers who are 'on call' – for example, for unexpected surges in work, to cover for specialist staff (who may be on leave or ill), or on-call work such as care work – instead of having to take on fixed contract employees or agency workers.
Most zero hours contracts will give staff 'worker' status – for example, they are entitled to rest breaks, annual holiday, sick pay and, importantly, to be paid the national minimum wage – but not 'employee' status, which carries further rights such as the entitlement to claim for unfair dismissal, to maternity pay and leave, to ask for flexible working, to statutory minimum notice periods, and to redundancy payments.
However, if the contract provides that the worker must be available for work whenever they are offered it, or can be disciplined (or subjected to some other sanction) if they refuse work, this can mean that they are employees, with full employee rights.
It's also important that practice matches what's in the contract. In a recent legal case an employee's hours were only those specified by his line manager each week but in fact he had worked a 48 hour week for two years. When his hours were reduced he claimed constructive unfair dismissal. His employer argued that there was no legal obligation to provide him with work, so he was on a zero hours contract – was a worker, not an employee – and could not claim for unfair dismissal.
The Employment Appeal Tribunal (EAT) said that the true agreement, worked out from the evidence as a whole, was that the employee was contractually entitled to work for 48 hours per week. The EAT remitted the case back to the Employment Tribunal to decide whether the failure to provide 48 hours of work amounted to an unfair constructive dismissal.
Zero hours contract workers have the same right to a 20-minute break in every six hours worked, and 11 hours' uninterrupted rest in every 24 hour period/24 uninterrupted hours in every seven-day period, as other workers.
Also, like other workers, they are not allowed to work more than 48 hours per week unless they have contracted out of that requirement.
Zero hours contract workers have the same right to 28 days' annual leave (including bank holidays), although this is pro rata the average number of days they work per week.
They must also be paid statutory sick pay from the fourth day of their sickness absence, if they have been ill for at least four days and their average weekly earnings over the last eight weeks are less than the lower earnings limit (£109 per week in 2012/13) in the last eight weeks.
National Minimum Wage
The national minimum wage (£6.31 in 2012/13) must be paid to zero hours contract workers who are on your work premises, even if they are only there waiting to be allocated work. Whatever work is allocated, they must be paid the same hourly rate as other workers doing that work, which must be at least the minimum wage.
Zero hours workers are protected by discrimination laws too. Employers whose zero hours workers are generally of a particular age, sex or race (or any other protected characteristic) should ensure that any additional, contractual rights enjoyed by permanent workers are also given to zero hours contract workers, or risk discrimination claims.
The government plans to review the use of zero hour contracts, although it has indicated that it is unlikely to ban them as they can be useful to both employers and employees. In the meantime, employers should monitor their arrangements with zero hours contract workers – not just what is in the paperwork, but what is actually happening on the ground - to ensure that they do not create an expectation among their zero hours contract workers that they will be offered a specific number of hours work each week.