5 things you may not know about employing someone on a zero hours contract

7th August 2013

Zero Hours Contracts are storming the press at the moment and have formed the subject of much debate. The Office of National Statistics estimates that there are 200,000 staff on zero hours contracts but this has been considered an underestimate and will no doubt form part of the review into the use of zero hours contracts recently announced by the Government.

Below are 5 important facts for employers to note:

1. What is a Zero Hours Contract?
It is a contract where the Employer does not guarantee to provide workers with work and only pays the workers for the work actually carried out. Some contracts assume that the workers are available for work if and when required, whereas others can be used to describe an arrangement whereby the workers are free to accept or refuse work when offered. This is an important distinction and it is important that Employers clearly identify the arrangement agreed in the contract.

2. Employee or Worker?
A zero hours contract can give rise to both a simple arrangement for paying a causal worker or one of a full employment relationship. It is important that Employers know the difference as someone with an employee status would be entitled to all the standard employment rights, whereas a worker would be entitled to more limited rights. Contracts should be properly drafted to reflect the parties’ true intentions. In a dispute a Tribunal will consider what actually happens in practice which could challenge the employee or worker status.

3. Hours of Work:
Workers are still entitled to basic employment rights. Therefore, should a working day exceed 6 hours then a zero hours worker will be entitled to a minimum of a 20 minute break, and will need to sign an opt out agreement (from the working time regulations) should their hours exceed the 48 hour week limit.

4. Holidays:
Zero hours workers still accrue holiday! Part time workers are entitled to a pro-rated amount of holiday pay, much the same as a full time worker would be entitled to the statutory minimum of 5.6 weeks per year. How to calculate holiday will need to be adjusted depending on the numbers of hours or shift patterns that a worker works. This can involve a complex calculation as the number of hours worked can be uncertain.

5. No Presumption of Continuity:
Rather than issuing a new contract every time work is offered and accepted, these contracts are typically drafted so that the terms apply to each assignment but do not preserve the continuity of employment in-between the gaps of work carried out. However, this is not always the case and the contract needs to be clear on this point.