Member Article

Demystifying Zero Hours Contracts

Today, Ed Miliband has announced that, if Labour win the election, any worker on a zero hours contract for over 12 weeks would be automatically entitled to become an employee with all the rights this entails. Much confusion still surrounds what zero hours contracts are, however.

What is a zero hours contract?

A 2013 CIPD report shows that there is a great deal of confusion amongst employers, with almost two-thirds classifying zero-hours staff as employees only just less than a fifth describing them as workers. 7% of employers have not classified their status and a similar proportion (7%) don’t know.

“A zero hours contract is essentially a casual work relationship”, says Debbie Mactaggart, Senior Employment Solicitor at Taylor Bracewell in Sheffield and Doncaster. “People on zero hours arrangements usually fall within the worker category, which means they have more limited legal protection than employees. The main protection that employees get, however, is the right not to be unfairly dismissed and, in order for that to kick in, the employee needs to have been with their employer for a minimum of two years.”

Are zero hours contracts bad for employees?

Employers have occasionally taken advantage of the confusion surrounding zero hours contracts in order to get around legislation and save money.

The care industry is one where zero hours contracts are prevalent and can often lead to workers being at a disadvantage. According to the 2013 CIPD report, care/social workers represent nearly 20% of job roles for which employers use zero hours contracts.

“I have seen care workers employed on so-called zero hours contracts that clearly aren’t; it’s just a way for their employers to avoid paying them for all the hours they work. Because the businesses in this industry are not paid enough per call to enable them to remunerate staff appropriately, they try to get around the national minimum wage by using zero hours contracts, not paying for travelling etc”, says Debbie Mactaggart.

Sara Ellison, Head of HR & Employment at Taylor Bracewell, agrees that the issue is around how zero hours contracts are used. “The problem and the bad press zero hours contracts get is due to some employers issuing zero hours contracts, then treating those engaged on them as employees but without the additional benefits and protection employees have. Recent issues have involved employers trying to include exclusivity clauses in zero hour contracts, which completely goes against what they are designed to do.”

She adds “Zero hours contracts can be of huge benefit to those employers who have seasonal work, e.g. catering, events, allowing them to rely on workers they have used before for the short period of time they are needed.”

When zero hours contracts are administered correctly, employees can benefit, too. According to the 2013 CIPD report, almost half of all employers who use zero hours contracts do so in order to provide flexibility for the employees concerned and about the same percentage of employees on such contracts are satisfied with the arrangement.

How prevalent are zero hours contracts and who do they affect? According to the Office of National Statistics (ONS):

• The number of people who have a zero hours contract for their ‘main job’ has risen from 1.9% of all people in employment in October to December 2013 to 2.3% of all people in employment for the same period in 2014.
• Not everyone understands or recognises the term ‘zero hours contract’, however, so it is not possible to say how much of this increase is due to greater recognition rather than new contracts.
• The average zero hours contract worker works 25 hours per week.
• Zero hours contracts are more common amongst women, those in full-time education and those working part-time. They are also more widespread among those aged under 25 or over 65.

Zero hours contracts can be a legal minefield for employers and, whilst they are not necessarily as detrimental to employees as they may appear to be, they need to be managed carefully to ensure they are used for the right reasons and are fair to all concerned.

This was posted in Bdaily's Members' News section by Taylor Bracewell LLP .