Zero-hours contracts have some damaging connotations, having been seen as exploitative. Nonetheless, some argue that they provide precious flexibility to each staff and employers.
Operating an organization in 2025 is a disturbing endeavour, even with the assistance of the finest HR and payroll software program, so it’s comprehensible why employers take into account zero-hours contracts. Simply bear in mind, it’s your accountability because the employer to ensure you’re not making the most of your employees and that you simply each clearly perceive the association.
In fact, there are many pitfalls to keep away from, so we’ll spotlight all you must know. We’ll take you thru the professionals and cons of zero-hours contracts, and whether or not they’re a viable choice for your corporation.
💡Key takeaways
- A zero-hours contract means an employer isn’t obligated to supply a set quantity of labor, and the employee isn’t obliged to just accept it
- No matter contract sort, a rent’s authorized rights are decided by their employment standing as both a ‘employee’ or an ’worker’
- Employees are entitled to the Nationwide Minimal Wage, statutory annual go away, protections from illegal discrimination, and relaxation breaks
- Exclusivity clauses have been banned, which suggests you can not stop a zero-hours contract employee from taking a job with one other employer
What’s a zero-hours contract?
Often known as informal contracts, zero-hours contracts are a particular sort of employment contract. They’re used for on-call work or “piece work”, which means a employee on a zero-hours contract is on name for work once you require them.
Principally, it means the employer is not required to present a employee on a zero-hours contract a set quantity of labor. It’s a two-way avenue, although, as a zero-hours contract employee isn’t all the time obliged to just accept the work given to them.
Notion of zero-hours contracts has been largely damaging within the media as a result of the hours might be unpredictable, they’ll go away staff in a financially weak place, and there’s an general lack of job safety.
Nonetheless, they may also be engaging to staff as a result of:
- They provide lots of flexibility, particularly for staff who have to take care of households or college students on the lookout for work round full-time training.
- It provides staff the liberty to have a number of jobs concurrently.
- They supply work expertise, as a zero-hours contract can act as an prolonged, sensible trial interval.
What’s the distinction between an informal employee and zero-hours contract employee?
When you may see the phrases ‘informal employee’ and ‘zero-hours contract employee’ used interchangeably, there’s a key distinction. Expectation of labor is what distinguishes the 2 sorts of staff.
Informal staff can flip down work if it’s provided to them by the employer, whereas zero-hours-contract staff (relying on their contract) could also be required to just accept the work.
Zero-hours staff may additionally have an agreed minimal variety of work hours, whereas informal staff don’t.
What are the employer’s tasks?
This 12 months noticed the introduction of the Employment Rights Invoice, which goals to extend protections for informal contract staff. Media headlines have mentioned a “ban” on zero-hours contracts. However that’s not completely true.
As a substitute, the brand new laws goals to finish exploitative practices slightly than ban the contracts completely. Meaning, new protections can be launched for zero-hours staff over the subsequent two years.
One of many key adjustments employers have to know is that after a 12-week ‘reference’ interval, workers acquire the correct to request a fixed-term contract. Employees may also acquire protections round short-notice cancellations, with staff entitled to compensation for diminished or cancelled shifts.
A employee on a zero-hours contract remains to be entitled to statutory annual go away and the Nationwide Minimal Wage. Employers are additionally nonetheless absolutely liable for the well being and security of staff, no matter contract sort.
What are the employees’ rights beneath a zero-hours contract?
A employee’s rights are decided by their employment standing, which is both as an worker or a employee, and never by having a zero-hours contract. Figuring out the distinction is crucial, as incorrectly classifying your zero-hours employees as a employee as an alternative of an worker can have authorized penalties.
Figuring out the classification might be tough, because it will depend on the written phrases of the contract and how these phrases are utilized in apply.
For zero-hours contract staff, it will imply they’re entitled to:
- A written assertion of employment, to be given to the employee both on or earlier than the beginning date
- Nationwide minimal wage
- Paid annual go away (statutory minimal vacation entitlement of 5.6 weeks)
- Relaxation breaks
- Pension auto-enrolment (relying on qualifying situations)
- Statutory sick pay (relying on whether or not particular eligibility has been met)
- Payslips
- Safety from illegal discrimination
- Safety for whistleblowing
For workers, employees are assured the identical rights as above, however moreover, they’re additionally entitled to:
As of 2015, there was an exclusivity ban on zero-hours contracts. Which means that an employer can not embrace a clause of their zero-hours contract banning employees from in search of or accepting work from one other employer.
As a part of this, zero-hours contract staff have protections towards discrimination for working for different employers. It’s unlawful for staff to face unfair remedy in the event that they select to work for a distinct employer.
Zero-hours staff are absolutely entitled to have interaction in work elsewhere; you possibly can’t stop them from enterprise different work.
Are zero-hours contracts proper for my enterprise?
Typically talking, zero-hours contracts are favoured by companies which have seasonal necessities or continuously want employees on quick discover. This enables employers to save lots of on overheads, as you’ll solely be paying for the hours you want the employees for.
Companies that zero-hours contracts may match for
Companies that will most profit from zero-hours contracts are people who see a big and predictable fluctuation in employees, particularly people who see a rise and fall in demand for labour throughout quieter buying and selling durations.
Listed here are some examples under of companies that will most profit from zero-hours contracts:
- Development
- Deliveries
- Warehouse work
- Retail
- Hospitality
- Catering
- Care work
- Schooling
Companies that zero-hours contracts could not work for
Zero-hours contracts are largely unsuitable for companies that depend on continuity, stability, and extremely educated skillsets. Utilizing zero-hours contracts in a majority of these environments might trigger nice hurt to the firm tradition and infrastructure.
Some examples of a majority of these companies embrace:
- Skilled companies like legislation companies, accountancy companies, engineering companies, or consultancies
- Specialist producers
- Tech and software program industries
- Essential public sector and civil service roles
- Flexibility: An employer can name upon staff when wanted, matching staffing to their wants and responding rapidly to surprising labour calls for.
- Financial savings: Employers can considerably cut back their payroll prices, as they’ll solely pay for the hours labored, with no pay for downtime.
- Simplicity: The day-to-day administration of admin can be easier than with full-time employees.
- Excessive employees turnover: Counting on employees to just accept the work can result in unpredictability, and the prices of a fast employees turnover might be excessive.
- Lack of cohesion: Excessive turnover of staff can result in communication points, hurt firm tradition, and affect customer support.
- Reputational injury: Public notion of zero-hours contracts has been damaging, as they’re seen as exploitative. Subsequently, utilizing them might lead to injury to your model fame.
What do you have to embrace in your zero-hours contract?
For those who resolve to implement a zero-hours contract as a part of your corporation, you’ll want to make sure it’s drafted accurately and exactly. Crucially, you must embrace that you’re beneath no obligation to supply work to the employee.
Employment standing should be clearly outlined within the phrases of the contract. For those who intend to have interaction them as a employee, slightly than an worker, then the contract should state that there isn’t any obligation to just accept the work you provide and that it’s not the intention of both get together to enter into an employment contract.
You must also state that there can be no persevering with employment relationship between the durations of labor. You have to embrace the specifics of how the work can be provided, in addition to the discover interval, advantages, and related pay. If the advantages differ from these of workers on assured hours, you must make this extraordinarily clear within the contract.
You must also clearly state within the contract that annual go away entitlement is strictly accrued based mostly on hours truly labored. Additionally, do not forget that it’s unlawful to incorporate an exclusivity clause.
Abstract
It’s best to think twice earlier than implementing a zero-hours contract for your corporation. There are different choices that is likely to be extra appropriate, like part-time employment, fixed-term contracts, providing additional time, or utilizing a staffing company.
Guarantee that you’re very clear in your commercial and throughout the interview that you simply’re providing a zero-hours contract, not fixed-term or full-term employment. As an employer, you must also have a transparent and constructive dialog together with your potential employee as as to if a zero-hours contract is true for them.
You must also usually evaluate the character of your relationship to find out if it nonetheless matches the standards of a zero-hours contract. Keep away from cancelling shifts on the final minute and provides your staff as a lot discover as attainable.
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