The pros and cons of zero-hour contracts

Zero-hours contracts have been a hot topic in employment law in recent years with much debate as to whether they offer businesses and workers mutual flexibility to work when required or are a form of exploitation with very little workplace protection.

What are zero-hours contracts?

Zero-hours contracts (ZHCs) are contracts between businesses and casual staff where individuals are engaged on an ad hoc basis with no guarantee of work. Under ZHCs, staff only work when they are needed by the business (often at short notice) and are paid for the hours they work.

Usually, there is no obligation on the business to provide work or on staff to accept it. Some ZHCs do require staff to accept work, which can effect whether they are classed as a worker or employee for employment status purposes.

Worker rights and zero-hours contracts

An individual engaged on a ZHC will either be a worker, employee or self-employed contractor for employment status purposes.

Usually, an individual working under a ZHC will be a worker and most businesses operate on that basis. Workers are entitled to far fewer employment rights than employees.

All workers and employees engaged on ZHCs are entitled to the National Minimum Wage, paid holiday leave, a 48-hour limit on their average working week, rest breaks, and protection from discrimination. 

Employees also have enhanced statutory rights and protections including the right not to be unfairly dismissed and the right to receive a statutory redundancy payment.

ZHCs must not include exclusivity clauses as such clauses are legally unenforceable if there is no guarantee of work or where their average net pay falls below the lower earnings limit which is set each year. This is on the basis that individuals working under ZHCs with no guarantee of work or in receipt of little pay should not be prevented from working elsewhere.

Why use zero-hours contracts?

The key advantage of ZHCs is flexibility for both the business and the individual.

ZHCs provide businesses with flexibility over their workforce, for example in order to manage fluctuating demand for services and shortfalls in staffing. They also allow businesses to offer work to individuals (as and when required) who are experienced and already “know the ropes” meaning the business doesn’t need to go through a recruitment process or train a new starter each time it needs casual staff.

The flexible nature of ZHCs can be attractive to some individuals who don’t want to commit themselves to regular contractual hours such as students or those with child care responsibilities. 

What are the concerns when using zero-hours contracts?

The key concern is that ZHCs don’t offer financial stability and security to individuals, particularly given most individuals engaged under ZHCs are workers who don’t have the same employment rights as those employed under contracts of employment. Critics view the use of ZHCs as a way for employers to avoid their responsibilities to these individuals.

There is also a concern that businesses are using ZHCs as a management tool to offer more hours to preferred employees.

These issues are one of the reasons that the Workers (Predictable Terms and Conditions) Act 2023 was recently passed. From September 2024 this will give those working on ZHCs a right to request a predictable work pattern. The employer will still be able to refuse the request but it will need to consider it and identify which of the statutory reasons applies in order to refuse it.