Zero hours contracts: best practice

Zero hours contracts have been in the news recently, with figures suggesting that they are used to employ between 250,000 and one million workers.

Zero hours contracts are contracts for casual work, under which the employer does not guarantee to provide the worker with any work and pays the worker only for work actually done. Workers are usually contacted at the start of each week or at the end of the previous week and told how many hours they will be expected to work that week. Employees usually agree to be available for work when they are required.

These contracts have traditionally been popular in sectors where demand fluctuates – such as in the leisure sector, for example – and it is difficult to plan staffing levels. However, in recent years they have been used more widely.

Student workers and the semi-retired may find zero hours contracts beneficial as they have more flexibility and can fit work around other activities, such as studying or travel. Others find it difficult to manage their finances if they do not know how much they will be earning and it can be difficult for them to take out a mortgage or loan. In addition, it is hard to claim benefits or tax credits with a lack of clarity around earnings. It may also impact on childcare arrangements. Some contracts are also ‘exclusive’, meaning that employees cannot work for any other employer.

Individuals on zero hours contracts:

  • do not receive paid holidays
  • do not receive sick leave or a statutory minimum period of notice
  • cannot claim unfair dismissal or a redundancy payment
  • have no right to paid family leave.

The recent growth in the use of zero hours contracts suggests that employers find them effective. A recent Chartered Institute of Personnel and Development survey found that one fifth of employers employed at least one person on a zero hours contract. Although one in seven workers reported that their employer often fails to provide them with sufficient hours to have a basic standard of living, the average number of hours worked under a zero hours contract was 19.5 per week.

However, with pressure mounting for a change in the law, there are a number of alternative arrangements that an employer could consider if it wanted to achieve flexibility without using zero hours contracts. These include:

  • part-time contracts
  • short fixed-term contracts
  • agency workers.