Zero Hours Employment Contracts – What are they?

Zero Hours Employment Contracts are a form of contract that enable employers to have workers on call to work when required but do not guarantee a set number or even a minimum number of hours. Employees are only paid for the time they work and therefore these types of contract are often seen as a cost effective solution for companies that need staff to be readily available but where hours of work vary widely from week to week. They are also often used by agencies that supply temporary workers. The employment agency is legally the worker’s employer but, as the agency cannot always guarantee work these types of contract allow them to have a pool of workers available from which they can supply client companies.

Notwithstanding the lack of guarantees in terms of hours, where employment rights are concerned, workers have the same statutory rights as any other worker, albeit on a pro rata basis. These include holiday and sick pay and equal pay after 12 weeks of working. Workers also have the usual protections in the areas of equality and unfair dismissal.

The exact number of workers in the UK on Zero Hours Employment Contracts is difficult to assess. The Office for National Statistics has put the figure at around 250,000 workers (0.84 percent of the workforce), but the Chartered Institute of Personnel Development (CIPD) estimates the prevalence to be far higher, with around 19 percent of employers having at least one person on a Zero Hours contract (equivalent to 4 percent of the workforce). The CIPD found that industries where Zero Hours Employment Contracts are common include hotels, catering and leisure, education and healthcare. In addition, larger organisations – those with 250 employees or more – are more likely to employ workers on this basis.

Zero Hours Employment Contracts have come in for criticism by opposition politicians and by unions. Labour leader Ed Miliband has called for a ban on any contracts that exploit workers and Donna Hutton, Unison regional organiser has said: ““Casual work should only be used in emergency situations as staff don’t know if they will be working the next week. For some people it works but it doesn’t for the majority.” For the government, Business Secretary Vince Cable, has promised a review of the area and said that he will consider legislating against situations of abuse.

Zero Hours Employment Contracts have raised some debate for a number of reasons. There are concerns that employees are left vulnerable to financial hardship due to the uncertainty of earnings and lack of security offered. Some have warned that managers may threaten to withhold hours of work as a way to control workers. Moreover, where employees cannot show a guarantee of earnings they may find it difficult to obtain credit in the form of mortgages, loans or even current accounts. Individuals may also have less freedom to take time off to go on holidays as they are required to be available under these types of contract.

However, some industry figures have pointed out the benefits of Zero Hours Contracts, particularly for those seeking an additional income that fits around other activities, such as students, carers and parents of young children. CIPD CEO Peter Cheese said:  ‘… the assumption that all zero hours contracts are “bad” and the suggestion from some quarters that they should be banned should be questioned… Zero hours contracts, used appropriately, can provide flexibility for employers and employees and can play a positive role in creating more flexible working opportunities.”