In recent years we have seen a significant rise in ‘zero-hour’ contracts – an effective tool for employers seeking flexibility in their workforce and to cut workplace costs.
Under a ‘zero-hour’ contract, an employer effectively has a pool of people who are ‘on-call’ as and when the workplace demands their services. The employer is not obliged to provide them with work and there are no guaranteed hours and times of work. Employers therefore take their workers on, on an ad hoc basis, as and when they are required by the business and only pay them for the hours they actually work (although employers can schedule work in advance to avoid workers being ‘on-call’). Each offer of work by the employer is treated as an entirely separate agreement so that there is no continuity of employment.
‘Zero-hour’ contracts are particularly suited to seasonal businesses. The retail and hospitality industries are increasingly taking on workers on such contracts. They are also useful in the agricultural sector where there are periodic bursts of intense activity dictated by the nature of the work itself, or the public sector, for example, in the provision of social care or healthcare, where service requirements vary. Businesses in similar industry sectors which require the same flexibility can save considerable costs by hiring workers on this basis.
There are a number of benefits to businesses using such contracts, however it is important to note that whilst a person employed under a ‘zero-hour’ contract is not an employee of the business and does not therefore enjoy the highest level of protection, the worker does have an entitlement to basic employment rights. Under the Working Time Regulations 1998, the worker is entitled to a minimum period of paid annual leave, dependent on the number of hours worked pro-rated on the basis of full-time entitlement of 28 days per year.
Statutory Sick Pay must be made in respect of any period of sickness or injury during an agreed assignment, and pursuant to the National Minimum Wage Regulations, ‘zero-hour’ contract workers (over the age of 21) must be paid the current minimum of £6.19 per hour. The same regulations now also require that employers pay the national minimum wage for the time workers are required to be at the workplace even if there is no ‘work’ to do.
Other rights ‘zero-hour’ contract workers benefit from include protection against discrimination on the grounds of race, sex, disability, religion or belief for example, and whistleblowing protection. Employers seeking to take on ‘zero-hour’ contract workers should not therefore underestimate their important legal obligations. The terms of the relationship with the worker should be set out in a contract which properly reflects the relationship in practice.
‘Zero-hour’ contracts may be a good solution for businesses seeking to reorganise to reduce overhead costs, and to avoid making redundancies. Businesses in this position, which can operate on a flexible basis, can offer employees selected for redundancy, a ‘zero-hour’ contract as alternative employment during the redundancy consultation process.
This option may keep many employees who would otherwise be made redundant in employment, whilst also allowing businesses to largely reduce their workplace costs, operate more flexibly and keep on their key staff. However, it is important for employers to note that any employees in this position who accept a ‘zero-hour’ contract will continue to benefit from their continuity of employment.
For further information contact Jennifer Mansoor, Solicitor, Adams & Remers.
This article is not intended as a full summary of the law, and legal advice should be sought according to circumstances.