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Government publishes guidance on zero hours contracts

The Department for Business Innovation and Skills (BIS) has published guidance for employers on the use of zero hours contracts.

Available online, the guidance explains what zero hours contracts are, and how they should be used. Importantly, the information also includes details on the ‘appropriate’ and ‘inappropriate’ use of zero hours arrangements.

What is a zero hours contract?

A zero hours contract is one in which an employer will offer ad-hoc work to an individual when available. The term is commonly used to describe a wide variety of casual employment agreements.

Individuals can decide to accept or decline work on each occasion. While a person who persistently refuses work may risk the employer terminating the arrangement, it is not good practice for an employer to try and force the worker to work. Exclusivity clauses, which prevent workers engaged in zero hours contract from working for another employer were banned earlier this year.

Zero hours contracts are often used in industries where work tends to fluctuate unexpectedly or seasonally (e.g. retail, hospitality, etc.). They also have proven popular with start-ups as the employer only has to pay the employee for the hours worked. Currently, around 2.3% of the UK workforce has a zero hour contract with this number expected to increase.

While many individuals on these contracts would prefer guaranteed, regular hours, they can be beneficial to those seeking flexible, occasional, and part-time employment; for example, people who want to work around other commitments such as childcare or study.

Regardless of the hours offered and worked, the employer must pay at least the National Minimum Wage.

What is ‘appropriate’ and ‘inappropriate’ use?

According to the latest government guidance, zero hours contracts should not be used as an alternative to proper business planning or a more permanent arrangement if at all possible. While the guidance concedes that new enterprises, seasonal employers, and certain industries may legitimately require the flexibility that comes with hiring staff on an ad-hoc basis, they cannot be used to free businesses from their legal responsibilities.

Indeed according to the BIS: “Everyone employed on a zero hours contract is entitled to statutory employment rights. There are no exceptions.”

Zero hours ‘workers’

Individuals who undertake occasional work for a business on zero hours contracts are likely to be classed as ‘workers’. This is an important clarification, as while the statutory employment rights of ‘workers’ are protected, they do tend to have fewer rights than those afforded to ‘employees’.

Workers are entitled to a number of employment rights and protections, including:

  • The National Minimum Wage
  • Protection against unlawful deductions from wages
  • Statutory minimum holiday pay
  • Statutory minimum rest breaks
  • To not work more than 48 hours on average per week (they can opt out of this right if they choose)
  • Protection against unlawful discrimination
  • Protection for‘whistleblowing’
  • To not be treated less favourably if they work part-time.

Depending on the nature of their employment they may also be entitled to a range of additional benefits such as statutory sick, maternity, paternity, adoption, and shared parental pay.

However, workers are usually not entitled to:

  • Minimum notice periods
  • Protection against unfair dismissal
  • The right to request flexible working
  • Time off for emergencies
  • Statutory Redundancy Pay

A regular hours employment contract will, therefore, give employees greater statutory employment rights than a zero hours contract.

Employers beware

Zero hour contracts are designed to facilitate casual working arrangements. However, if an individual on such a contract regularly works the same hours, the court will look at the reality of their working pattern in any dispute, regardless of what their contract states.

Employers using zero hours contracts must, therefore, be careful in the implementation of these if they want to limit the extent of their legal obligations. Any employer who regularly offers work, which is accepted, risks inadvertently converting workers to employees in the process.

If you are concerned about the implementation of zero hours contacts in your business, or any employment contract issue, please contact Linder Myers today.

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