In recent years we have seen many organisations adopt what are commonly known as zero-hours contracts to provide increased flexibility to their workforce. But do you really know what they are and what the implications are for you as an employer?
An agreement whereby one party is asked to perform work for another party but there are no agreed set number of hours. The contract will specify basic terms such as rate of pay as well as the conditions under which assignments will be offered and, if appropriate, turned down.
So what are the key issues that you need to understand?
· When is a zero-hours contract suitable? – When you wish to engage an individual on an ad hoc, as required, basis, and where, due to fluctuating demands you are unable to guarantee work. Not when you have a need for full-time work but want to retain control over their working times, as indicated in the next point.
· Employment status – It is important to establish the employment status of those on zero-hour contracts, are they employees or workers? This is imperative as this status will determine an individual’s legal rights. Remember that this isn’t just about what the contract states but also the reality of the situation. For example if an individual performs work personally but is able to refuse work without any adverse consequences then they may be a worker, a common scenario would be an agency or a bank worker. On the flip side, if an employer is under obligation to provide work, the individual to accept that work and carry it out themself then it is likely the individual is an employee.
· Regular reviews – the nature of the working relationship may evolve over time so it is important to keep an eye on these arrangements. This is to ensure that the employment status of individuals has not changed significantly.
· Contracts – all contracts should specify basic terms, including pay, holiday and pay entitlements, notice and other relevant terms.
There can be some difficult issues that arise when using zero-hour contracts. For example staff on zero hours contracts are entitled to statutory holiday pay. This is more complicated for staff who work irregular hours and there is a temptation for employers to roll up holiday pay into the staff member’s hourly rate. It has been suggested by European law that this type of ‘rolled up’ holiday pay is unlawful as it discourages staff to take holiday. The government advises employers to renegotiate any contract that still includes ‘rolled-up’ holiday pay.
Some zero-hours contracts prevent the individual from working for other organisations, even during periods where no work is guaranteed. The government has announced plans to ban these types of clauses and aims to develop a code of practice on the fair use of zero hours contracts by the end of the year.
A code of practice will be welcomed, until then it is important for employers to establish the reasons for operating contracts of this type and to be aware of their responsibilities to their staff.
For more guidance around zero-hours contracts and employment status you can call the Real People helpline on 0207 710 0626 or email us your query at email@example.com.