Zero-Hours Contracts – Good, Bad, or Room for Improvement?
We take a closer look at a recent CIPD report on zero-hours contracts, which considers how zero-hours contracts are used, alongside their benefits and drawbacks for both employees and workers.
The CIPD, the professional body for HR and people development, published their report on 11 August 2022 and it is titled ‘Zero-hours contracts: Evolution and current status‘.
What Actually Are Zero-Hours Contracts?
Unlike a traditional contract of employment, a zero-hours contract offers no guarantee of work. This is an agreement between two parties where one may be asked to perform work for another. There is no set number of hours, and the individual will only be paid for the work they actually do, which they aren’t obliged to accept.
There isn’t currently a legal definition of a zero-hours contract, so it’s essential to make these arrangements clear in the contract, and reference the intended employment status, namely whether the individual is a worker or employee.
Zero-hours contracts have had a bit of a bad press, with some commentators suggesting that they are abused by employers. However, more recently they have been seen in a more favourable light – particularly since in 2015, a clause which prevented individuals from working elsewhere was banned. The CIPD report offers a valuable review of the current position and makes some suggestions as to best practice.
What Suggestions Have Been Made?
We think the below suggestions are all very sensible and reflect practices that we would want to see in a business that values its workforce and commits to kind and respectful working practices. Therefore, we recommend you give some thought to whether there are areas where you could improve.
- Employers should only use zero-hours contracts where the flexibility inherent in these types of arrangement suits both the organisation and the individual.
- Employers should consider whether zero-hours working is appropriate for their business and whether there are alternative means of providing flexibility for the organisation, for example, through the use of annualised hours or other flexible working options. Zero-hours working lends itself to situations where the workload is irregular, there is not a constant need for staff, or staff needs are driven by external factors outside the employer’s control.
- All zero-hours contract workers should receive a written copy of their terms and conditions (both workers and employees became entitled to this as a day one right on 6 April 2020). Employers should also set out in atypical workers’ contracts the notice required by either organisations or individuals if they’re unable to meet their contracted commitments.
- Employers should set out in the contract the employment status of those engaged on zero-hours contracts and conduct regular reviews (at least once a year) of how these contracts are operating in practice. Reviews should include conversations with line managers and staff on zero-hours contracts. If the reality of the employment relationship no longer matches the contract of employment, one or the other should be adjusted to bring them into line.
- Employers need to provide training and guidance for line managers to ensure they are managing zero-hours workers in line with their employment status. Training must ensure that line managers are aware that zero-hours workers have a legal right to work for other employers when there is no work available from their primary employer.
- Comparing different contract types, standard permanent employees fare better in both skills development and career development than those on temporary or zero-hour contracts. To address this, employers and line managers need to ensure that atypical workers are eligible for their organisation’s training and development activities. Performance management processes should also be setup to give atypical workers regular feedback.
- Employers should provide zero-hours workers with reasonable compensation if pre-arranged work is cancelled with little or no notice. We believe a reasonable minimum would be to reimburse any travel expenses incurred and provide at least an hour’s pay as compensation. Some employers appear to go further than this, for example by paying employees in full for shifts cancelled at short notice. This seems a reasonable position if organisations also prevent or penalise employees from cancelling pre-arranged work at short notice.
- Employers should ensure there are comparable rates of pay for people doing the same job regardless of differences in their employment status. This could be written into employment policies and terms and conditions with practice reviewed periodically.
