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Zeroing in on Zero Hours Contracts

Zero hour contracts have their critics, thanks largely to their mis-use. For employers who urgently need short-term cover, they are an essential tool.

Who uses zero hours contracts?

 According to the Office for National Statistics (ONS), around more than 800,000 people in the UK have zero hours contracts. Used properly, they offer both parties flexibility. The Company does not have to offer work and the worker does not have to accept it.

Employers keep their costs down, having trained staff when they need them but no cost when they don’t. Workers can choose not to work if they have other commitments.

Working for another employer

If you haven’t much work to offer, your workers may find they don’t earn enough to pay their bills. A zero hours contract must not contain an exclusivity clause.  In other words, you must not stop them working for another employer.

Part of the deal is that each party has very little commitment.  Don’t expect these workers to hang around if something more permanent is offered elsewhere.

Holiday pay

All workers are entitled to holiday pay. In the past, this could be added to the hourly rate.

Some however, were on a zero hours contract but often worked full time. When they went on holiday, they were not paid. The law was changed so that holiday pay could not be rolled up into the hourly rate. It must be paid when the worker takes time off.

To calculate holiday entitlement, multiply the number of hours worked by 12.07%. For instance:

100 hours worked X 12.07% = 12.07 hours of holiday entitlement earned.

This change in the law was great for those working full time. However, those people never should have been on zero hours contracts in the first place. For those using zero hours contacts properly, it has become a logistical nightmare. I don’t think this was fully considered by law makers.

The future of zero hours contracts?

Following some high-profile cases surrounding the “Gig Economy”, the Government commissioned a review of modern working practices. The Taylor Review “Good Work” has just been published. Among its recommendations it suggests:

• That individuals be given the right to choose between holiday pay being rolled up into their hourly rate or paid time off.
• That individuals on zero hours contracts be given the right to request a permanent contract after 12 months.

While there is no guarantee that these proposals will be adopted, I hope they will. I will keep you posted.