How do zero hours contracts work?

Employers and managers may have heard a lot about zero hours contracts. After all, their use by employers has been debated by MPs and splattered across the front page of newspapers.

Love them or loathe them, they do occupy a place in the British workforce. The Labour Force Survey, which covers October to December 2016, shows that over 900,000 people are employed on a zero hours contract. This represents 2.8% of people in employment.

But do you know what they are and how they actually work in practice?

In this article, we will give you an overview of zero hours contracts. For more in-depth information take advantage of the exclusive bonus below.

[infobox] Exclusive Bonus:Get the free Employer’s Definitive Guide to Zero Hours Contracts which gives you expert tips and warnings about everything you really need to know when engaging someone on these types of contracts.Download Now[/infobox]

What are zero hours contracts?

A zero hours contract is a contract between an employer and an individual whereby the worker has no guaranteed hours and is only paid for the work they carry out.

But what does this actually mean?

Employers are under no obligation to give individuals work.

If, for example your shop is very quiet, you are under no pressure to provide individuals on a zero hours contract with work. This prevents you from having employees getting paid for doing anything.

The individual on the zero hours contract does not have to accept the work offered to them.

One of the most attractive elements of zero hours contracts for workers is the fact that it allows people to work, but still fulfil their other commitments. For people who study, are semi-retired or have care responsibilities, it is an opportunity for them to take on work when they can and turn an assignment down if other prior commitments take priority.

For employers, it provides a pool of workers who are on ‘standby’.

Engaging people on zero hours contracts provides a pool of people who can step in to work when necessary. This helps organisations respond quickly and effectively to any fluctuation of business demands.

If you have an employee who is on maternity leave, you may decide to engage someone on a zero hours contract to cover the absent employee when required.

If you are starting new business, hiring some people on a zero hours basis may be suitable as business demands may be unpredictable and it may take time to build up a client base.

You may also need additional people on board in the run up to a busy period. For example in retail, there will be an increase in demand in the run up to Christmas, which will require all hands on deck.

Zero hours may also be useful when you have limited or variable finding, are dealing with an unforeseen event or are covering a particular event.

Zero hours contracts should not be relied upon to run the core activities of the business.

In its guidance, the government is clear that they should not be used as an “alternative to proper business planning and should not be used as a permanent arrangement if it is not justifiable”. If there is a better alternative, for example hiring someone on a fixed-term basis, this should be used.

Exclusivity clauses are banned.

The law prohibits the use of provisions in a Contract of Employment which restricts someone on a zero hours contract from undertaking work with another employer or bans them from taking work with another employer without the employer’s consent. If these provisions are in the contract, they will not be enforceable.

The law also provide redress.

  • For those who are “employees”, they cannot be dismissed if the main reason for the dismissal is that they have violated a term in their contract that prevents them from working for someone else. If they bring a claim of unfair dismissal to an Employment Tribunal, they do not have to have worked for two years with their employer as is typically the norm for this type of claim.
  • For those who are “workers”, they cannot be subjected to any detriment for not complying with the exclusivity provision in their contract.

This means that if you decide to put someone at a disadvantage or dismiss someone because they turn down an assignment because it conflicts with their other commitments, you could face legal action.

[infobox]Exclusive Bonus:Get the free Employer’s Definitive Guide to Zero Hours Contracts. It is free and covers a wide range of topics, including what the law says about these contracts, what rights individuals have, how to calculate annual leave and holiday pay entitlement and our top tips.Download Now[/infobox]

Our Employment Law Advisers can also give you bespoke advice for your particular situation.

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