Employment FAQ: Zero Hours Contracts

Employment FAQ: Zero Hours Contracts

What is a Zero Hours Contract? Answering FAQs

‘Zero hour contracts’ are loosely understood as being a type of contract between a business and a casual worker where the worker is engaged by the business but with no guarantee of work from the business. Confusion can and does arise as to what the status is of individuals who provide work or services to businesses under such contracts and what their obligations are.

What is the definition of a ‘Zero Hours Contract’?

Section 27A(1) of the Employment Rights Act 1996  provides the following definition of a zero-hours contract as meaning:

“…a contract of employment or other worker’s contract under which-

(a) the undertaking to do or perform work or services is an undertaking to do so conditionally on the employer making work or services available to the worker, and

(a) there is no certainty that any such work or services will be made available to the worker”.

When is it appropriate to use zero hours contracts?

Some businesses use zero hours contracts where work demands are irregular and there is not a constant demand for staff. Zero hours contracts can suit some individuals as they may offer the flexibility to work around other commitments such as studying or child care.

High profile concerns have been raised in the media that zero hours contracts might be used to exploit workers.

The Government issued guidance for employers (published on 15 October 2015) on zero hours contracts and the details can be found using the following link:

Zero hours contracts: guidance for employers - GOV.UK (www.gov.uk)

The Government guidance gives examples of where the use of zero hours contracts may be appropriate such as: for new business start-ups where the workload is uncertain and unpredictable; seasonal peaks in work such as Christmas in the hospitality and retails sectors; where cover is required for staff falling unexpectedly ill; provision for special events such as catering for weddings.

The guidance warns that it may be inappropriate for businesses to use zero hours contracts for individuals who are required to work regular hours over a continuous period of time and suggests that permanent employment contracts on a part-time or fixed-term basis may be more appropriate.

Can a zero hours contract require a worker to work exclusively for that business?

Exclusivity clauses of this nature purporting to prevent workers on zero hours contracts from working for other businesses have been condemned as unfairly onerous on workers. With effect from 26 May 2015, the Government legislated to ban exclusivity clauses of this nature and any such clauses contained in zero hours contracts are unenforceable against workers. 

Section 27A(3) of the Employment Rights Act 1996 provides that:

“Any provisions of a zero hours contract which-

(a) prohibits the worker from doing work or performing services under another contract or under any other arrangement, or

(a) prohibits the worker from doing so without the employer’s consent,

is unenforceable against the worker.”

What is the employment status of individuals engaged under zero hours contracts?

The status of individuals engaged under zero hours contracts is not always clear. What is specified in a zero hours contract regarding the status of the individual providing services is not necessarily determinative.

The rights and benefits available to individuals working under zero hours contracts will depend on whether they are workers, employees or self-employed contractors.

Employees are entitled to greater statutory rights and protections compared to workers but whether an employment relationship exists is a question of fact. Sometimes the written terms of any contract do not reflect the reality of the working relationship between the parties and in considering the employment status of an individual working under a zero hours contract, it is important to consider the terms of any contract, the conduct of the parties and the other circumstances.

What rights are available to zero hour workers and employees?

Provided an individual working under a zero hours contract is a worker or an employee as defined by the relevant legislation, they may have rights that include (please note these examples are not definitive):

• rights under the Working Time Regulations 1998 to a 48 hour limit on the average working week; 5.6 weeks’ annual leave and daily and weekly rest periods and rest breaks.
• rights to the national minimum wage under the National Minimum Wage Regulations 2015.
• the right to receive a written statement of terms.
• protection against discrimination.
• the right to receive itemised pay slips.
• the right to receive statutory sick pay if earnings are liable to Class 1 National Insurance contributions.

What terms are usually included in zero hours contracts?

Terms will vary from business to business but where businesses want to try to avoid zero hours workers from attaining employment status, they may attempt to draft the terms of their zero hours contracts carefully to include, for example:

1. the job title as ‘zero hours worker’ rather than a specific employment title;
2. no guarantee of work from the business;
3. that any casual work will be given as assignments with each assignment constituting a new and severable contract;
4. specific mention of a worker’s ability to decline work that is offered;
5. a substitution clause allowing for the individual to provide a substitute for the work;
6. limiting access to benefits and references to staff handbooks and policies;
7. no restrictive covenants setting out what an individual can do after any assignment has ended.

Contact our Employment Solicitors Today

If you require any specific advice or assistance about any of the issues referred to in this blog, or any other employment issues, please contact Yvonne Addy by telephone on 0207 486 5131 or by email to yvonne.addy@mwh-law.co.uk or make an online enquiry here.

This blog was prepared on 14 July 2021. It is not intended to be advice and should not be relied upon as such.