Zero hours contracts: using them appropriately and effectively
As part of its Plan to Make Work Pay, the government has pledged to “ban exploitative zero hours contracts” and “end one-sided flexibility”.
Employers have become more aware of the precarious nature of zero-hour contracts and the negative perception they can attract, but if used appropriately, they can be highly beneficial for employers in offering flexibility in how they manage their workforce.
Why use zero hours contracts?
Zero-hour contracts can allow businesses to respond to fluctuations in demand for staffing levels, to ensure that staff are only engaged when required, allowing a greater control in labour costs. Employers can have access to workers without committing to fixed hours, which means they can adapt to changing circumstances. This means they can be useful for organisations where there may be seasonal or unpredictable workloads, such as hospitality, event planning or retail. Yet, research by the TUC found that almost half of zero hours contract workers have been with their employer for over 2 years, and only a minority of these workers were in roles which are truly as a stop-gap temporary resource.
Zero hours contract can also offer flexibility for individuals. According to research by the CIPD, the highest proportion of workers on zero hours contracts are 18-24 year-olds, and their research found that one-fifth of students have a zero hours contract, which enables them to balance studying alongside ad hoc work.
How can employers use zero hour contracts well?
- Provide clarity in terms of engagement
Ensure that it is clear to zero hour workers that there is no guarantee of hours, and that they have the right to refuse work. They should also be clear on how they will be paid, which must comply with National Minimum Wage requirements. Zero hour workers are also entitled to holiday pay, and for time spent on work-related training. These terms should be outlined in writing.
Casual workers would require different terms of engagement so employers would not be able to use their standard employment contract.
- Shift allocation and communication
Allow sufficient notice for workers when planning possible shifts. Be transparent with zero hour workers on how shifts are offered and consider if there are any processes required to ensure fairness in how they are allocated. This can help build positive working relationships.
- Monitor and review working patterns
It is good practice to monitor the usage of zero hours workers. This will help establish if zero hours contracts are still the most appropriate resource for the role. This may also help identify if a regular pattern of work is emerging, which could lead to any claims around employment status. This will also allow you to adapt any contracts or working practices in response.
- Record-keeping
Keeping accurate records of hours worked, pay and entitlements will help ensure you comply with legal obligations. It can also be a good idea to keep records of how shifts have been allocated, including offers and refusal. This reinforces that workers can choose to accept or refuse work.
- Fair treatment
You should ensure that zero hour workers are treated fairly and are not discriminated against. They should receive appropriate training for tasks they are expected to perform and be made aware of any health and safety requirements for their role.
Greater regulation is coming on the use of zero hours contracts, with measures being introduced by the Employment Rights Act to include a requirement for employers to offer guaranteed hours contracts based on their average hours worked during a reference period. Workers will also gain rights to reasonable notice of shifts and compensation for late changes. These rights extend to agency workers. These changes are timetabled for 2027 with the detailed operation of these rights being set out in future regulations. Using the time now to review existing practices and use of zero hours contracts will ensure employers are in the best position to comply with these changes.
