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What Are The Fundamentals Of Zero-Hour Contracts?

Mark Higgins

Mark Higgins, Employment Law Partner

Employment partner Mark Higgins recently commented on HR Aspects’ article about zero-hour contracts. There has been continued press coverage of the ongoing debate over zero-hour contracts, and it is a media trend that shows little sign of slowing down.

A government consultation process is currently underway, and everybody from Vince Cable, through to the Institute of Directors and the man in the street is having their say about the seemingly controversial contracts.

However, what do zero-hour contracts really mean, and what do employers need to know about them? We are hearing and reading a lot about these contracts, and it can be difficult, especially for employers, not to get lost in the discussions.

The danger here, of course, is that employers dont get a chance to develop a real understanding of what zero-hour contracts mean, and what effect mis-managing these deals could have for a poorly informed business. Essentially, these contracts only entitle staff to be paid for work carried out when called upon by the employer to work. There is no guarantee of pay for a set number of hours as with traditional contracts.

Indeed, the usual obligations on the employee to turn up for work and on the employer to pay the employee for a specific number of hours per week are much looser  to the extent that it is questionable whether the worker is an employee in the strict sense of the term. This is important for both parties as traditional employees have significantly more statutory rights than other types of worker.

The rise of zero-hour contracts has been met with dismay by those representing employees who regard them as exploiting some of Britain’s most vulnerable and lowest paid workers. However, the contracts have found limited support among some workers principally because of the flexibility they offer. For employers operating on tight margins and whose demand for labour varies significantly from week to week, zero-hour contracts offer an attractive method of keeping a tight control of the wages bill.

However, the flip side is that they have less control over the availability of workers to meet short-term increases in the need for labour. Additionally, employers need to be wary of the status of zero-hour workers when it comes to holiday pay. Contrary to widely held belief, zero-hour staff are entitled to paid annual leave. This can leave employers with tricky calculations to make regarding how much holiday pay is due, and misunderstanding this process can, of course, prove costly if legal action results from any dispute.

Employers should also be wary of the possibility of allegations of unlawful discrimination should the emerging statistics show that zero-hour contracts are generally offered to workers of a particular sex, race, nationality or to those working part-time. A company may well find itself liable under anti-discrimination laws if its use of the contract cannot be objectively justified. The row over zero-hour contracts will continue, I’m sure. The best way for a firm involved in zero-hour contracting to truly understand their potential legal exposure is to speak to experts and get their advice on what is a constantly evolving debate.