The pros and cons of zero hours contracts
Are they right for your business?
Zero hour contracts are usually for ‘piece work’ or ‘on call work’ which means that the individuals employed under a zero hour contract are on call to work purely when you need them, you don’t have to give them regular work but in the same token they don’t have to accept the work when asked. Employers are still responsible for all aspects of health and safety during employment.
Zero hour contract is not a legal term and therefore does not have a specific meaning in law but is an agreement between two parties. Whereby one may be asked to perform work for the other but there is no set minimum number of hours.
The contract will define the rate of pay for the work and details of the circumstances in which the work will be offered and possibly turned down.
Usually individuals are employed under a zero hour contract as either a ‘worker’ or an ‘employee’ rather than on a self employed basis.
A ‘worker’ is similar to someone who is self employed but the employer maintains control, meaning the employer decides, what, how and when the work is done. A worker has the same general employment rights as an employee apart from:-
- No right to unfair dismissal
- No right to receive a written statement of terms and conditions
- No itemised payslip
- No statutory minimum notice
- No statutory redundancy pay
- No statutory maternity, paternity, adoption leave or pay
- No unpaid time off to care for dependants
- No right to request flexible working
- No time off for ante natal care or trade union activities
- No protection under the transfer of undertakings legislation
Employer Pro’s | Employer Con’s | Employee Pro’s | Employee Con’s |
|
Employee Status | Stable workforce | More expensive to dismiss employee’s | Stability | Notice period |
| Longer lasting employee relationships | Employee’s have full range of benefits | Have employment benefits | No flexibility | |
| Control over when employee works | Investment in career development & training | A permanent staff member with workplace and equipment | - | |
| Can offer long term employee benefits | May have to provide equipment | - | - | |
Employer Pro’s | Employer Con’s | Employee Pro’s | Employee Con’s |
|
Worker Status | Workers receive lower pay and benefits | Less stable workforce | More flexibility | No employee benefits |
| Employer invests less time and resource | High rates of staff turnover | Shorter notice period | No regular work guaranteed |
|
| Can engage workers quickly | Higher absence/sickness | - | Lack of security | |
| Can dismiss quickly | Admin burden | - | - |
What are the business benefits of a Zero hour contract?
There are cost savings, workforce management and less employment contractual rights to having individuals on a zero hour contract.
Are they fair to staff?
In some respects it could be argued that these agreements are fairer to staff due to their flexibility which suits many individuals in a variety of working environments. Although it can be harder for someone on a zero hour contract when applying for credit or a mortgage as there are no income guarantees.
Employee or Worker?
If an employer wants a zero hours individual to provide a personal service, be fully integrated into its business, control the way in which work is done and to provide prolonged employment, than an employee rather than a worker is best suited.
If however a worker is best suited then it is best to state on the zero hours contract that it is not an employment contract.
When should an Employer use a zero hour’s contract?
When an individual is required on an ad hoc basis or the employer cannot guarantee regular work.
When would the contract be required?
A zero hour’s contract will be required once employee or worker status has been decided.
It is an agreement between the two parties whereby one works for the other with no set minimum number of hours, but states rates of pay for work undertaken.
From the taxman’s point of view?
There is no current intention for the government to ban zero hour contracts but they have stated there has been evidence of abuse, so it is important that you seek professional help to ensure you have the right contracts in place.
