What’s so wrong with zero hours contracts?

Zero hour contracts must have attracted more adverse publicity than any other way of organising work this century. 

So, what’s the problem?  And should you stay well away from them as a good employer?

A zero hours contract means that the employer does not guarantee a set number of working hours for the employee.  Depending on the needs of the business, the worker could be asked to work full time hours some weeks and zero hours other weeks.  

This means people's income can fluctuate significantly and without a regular amount of pay they won’t be able to take out tenancies, loans, credit cards or a mortgage.  High stress level have been reported because of uncertainty about how much work there will be from one day to the next.

On the other hand, the flexibility of a zero hours contract can work well for people looking for casual part-time employment, such as students, home carers and the semi-retired.  A recent CIPD survey found that workers on zero hours contracts were as happy as permanent full-time employees: 65 % of the sample on zero hours contracts said they were either very satisfied or satisfied with their jobs, compared with 63 % for all employees.

The arrangement can help businesses cope with fluctuating demand, enable new businesses uncertain about workloads to get onto their feet, and also provide cover for unexpected sickness absence. They’re widely used by retailers, restaurants, leisure companies and hotels. The care industry is estimated to employ 160,000 workers on zero hours contracts and the NHS has increasingly adopted them.

The problem is that a few "workhouse not workplace" style large employers have exploited the vulnerability of their people on zero hours contracts, with bad practices such as giving unreasonably short notice whether or not they're required at work, and, if the individual isn’t able to come in when “asked”, firing them without notice or punishing them via the disciplinary procedure. 

Some had even forbidden their zero hours contractors from working for anyone else, so that they were more likely to be available for work at short notice: that is now completely illegal.  Zero hours contracts can’t contain exclusivity clauses prohibiting staff from seeking or accepting work from another employer and people working them can seek additional employment and have other jobs.

Even the most notorious – but by no means only – exploiter of zero hours contracts, Britain’s largest sportswear retailer Sports Direct, has now decided to offer its shop staff the option of a minimum contract of 12 hours’ work per week, in line with other retailers such as Next.

Regardless of the debate surrounding their use, zero hours contracts are here to stay as a flexible alternative to full and part time employment, one that can be useful to both employer and employee in some circumstances.

If you opt to go ahead and hire staff on zero hours contracts, you must ensure that you provide the necessary legal rights. All zero hours workers are entitled to at least the National Minimum Wage and paid annual leave, rest breaks and protection from discrimination.  Calculating holiday entitlement has to be done in arrears for each individual based on the number of hours worked, taking additional admin time.  Guidelines on employment rights for zero hours workers from ACAS here.

To help staff plan ahead, it’s best practice to give as much notice as possible regarding possible working hours, ensuring the zero hours contractor understands that they can either accept or refuse the work.

If your business needs more certainty and less to-ing and fro-ing to organise enough workers, consider the alternatives such as:

• Offer overtime to current permanent staff
• If regular hours need to be worked, recruit a part time employee
• Offer annualised hours and fixed term contracts to cope with seasonal demand
• Bring in temp agency workers as a quicker and easier way to fill gaps.

Zero hours contracts are rarely appropriate to run the core business.  Most businesses are providing a regular service or product and have a broadly predictable timetable or output, and so permanent or fixed hour contracts are likely to be a better fit.  And there's always the traditional British compromise of flexible hours contracts with a certain number of fixed hours plus the option to work additional time if required. 
  

If you currently operate zero hours contracts, or have considered them and would like assistance and guidance on how to use them properly, please get in touch with us at The Human Resource.