Zero-Hours Contract

With the rise in flexible working, more employers are offering jobs to meet this demand. A popular way to do this is by offering zero-hours contracts.

Such contracts allow employers to grow their businesses at their preferred speed - with a workforce of their choosing.

However, zero-hours contracts do come with certain legal and moral responsibilities. If employers ignore them, they could end up facing unfair dismissal claims, paying compensation, and causing reputational damage.

In the guide, we'll look at what a zero-hours contract is, what legal rights apply, and how to legally raise these work contracts.

What is a zero-hours contract?

A zero-hours contract is an employment agreement that doesn't include set hours. It's also known as a 'casual contract'. They provide people with the freedom to work flexibly - without fixed hours.

Zero-hours contracts usually outline what the role covers and how much workers are paid. They can also include:

• Whether individuals class as an 'employee' or 'worker'. (This is crucial when it comes to statutory employment rights).
• Whether they're obliged to accept shifts or allowed to decline them.
• How their job differs compared to a permanent employee in the same role.

The full terms of zero-hours contracts will vary from business to business. However, it's important for the contract to include terms on employment status, statutory rights, and employer obligations for their staff.

Who uses zero-hours contracts?

There are several industries that count on the use of zero-hours contracts. That's because their working arrangement consists of fluctuating work, irregular hours, and the need for flexible staff.

Zero-hours contracts are often used for jobs in:

• Hospitality and care.
• Retail and customer service.
• Gig economy.
• Food delivery.
• Transportation.

An employer must carefully consider the pros and cons before using zero-hours contracts. Think about why you need them and whether other employment contracts might be just as suitable.

What is the law on zero-hours contracts?

Under UK law, there are several legal requirements that come with zero-hours contracts. Let's take a look at them in more depth:

Employment status

Depending on the terms of a zero-hours contract, a person's employment status may vary. Under employment law, they could class as:

• Employees: For example, if they and their employer have an obligation of personal service, mutuality of obligation and control in their employment contract.
• Workers: For example, if they're working as a sales assistant during busy Christmas periods.
• Self-employed: For example, if they work as an independent contractor within the gig economy.

Employees have more employment rights than workers; and they'll have more than self-employed people. For the employer, it's important to highlight what employment status you're offering; as well as, what statutory employment rights they have.

Exclusivity clauses

As of 2015, businesses are no longer allowed to include exclusivity clauses within their zero-hours contracts. This means you cannot stop zero-hours workers from having more than one job or working with other employers.

Zero-hours contract employees are also legally protected from discrimination and unfair dismissal for failing to comply with an exclusivity clause. If they do, they could be awarded with compensation through employment tribunals (ET).

What to include in a zero-hours contract

Whether you need staff for casual hours or quiet periods, zero-hours contracts can be useful for all kinds of workplaces.

However, before you hire anyone, you should provide them with a contract in a fair and honest manner. By doing so, you'll be able to protect the employment relationship between you and your zero-hours staff.

Let's take a look at what to include in a zero-hours contract:

Written statement

It is a legal obligation to provide all workers with a written statement. (This is also known as a 'written statement of employment particulars').

This documentation outlines the terms of the contract, what the job includes, and what statutory employment rights apply (for the worker). A written statement is made up of two sections:

• Principal statement: This sums up the main terms of the job; like, what the job-title is.
• Terms of employment: This outlines specific needs for the role; like, how to accept (or decline) future shifts properly.

Pay and benefits

Employers should clearly state how much a zero-hours contract worker is paid per shift. This could be presented as an hourly or daily rate. If they're eligible for certain additional benefits (like bonuses or commission), these should be included, too.

Whilst their wage may change from week to week, it's important that it doesn't go lower than the National Minimum Wage (NMW). Here, the employer could be forced to pay back missing wages, along with other compensation penalties.

Paid holiday entitlement

Zero-hours contract workers have a legal right to paid holiday entitlement. Because their minimum working hours are irregular, annual leave and holiday pay works out differently compared to a permanent employee.

Permanent employees entitled to a minimum of 5.6 weeks of paid annual leave. Employers need to work out the average pay of their zero-hours contract worker - in the last 52 weeks. Avoid any weeks where they didn't have paid work (so it doesn't bring their average down).

Statutory sick pay (SSP)

Only certain zero-hours contract workers are entitled to statutory sick pay (SSP). To qualify for sick pay, they must:

• Have an employment contract and completed part of their working arrangement.
• Have been sick for four or more days in a row (including non-work days).
• Have provided the correct notice (according to your sickness absence policy).
• Earn an average of £123 per week (before tax).

If they work in self-employment, they aren't entitled to sick pay (or even holiday pay). That's why it's crucial for every employer to include employment status within their zero-hours contracts.

Notice periods

Zero-hours workers don't qualify for notice periods. And employers aren't legally obliged to provide notice periods, either.

Because of the nature of the contract, they can be terminated without say - hence, no need for a notice period. However, zero-hours contracts will come to a natural end if workers don't receive paid work over a significant time. Here, you will need to offer accrued holiday pay owed to them.

Termination of contract

Zero-hours contracts can be presented as an ongoing contract or a series of short ones. Despite that, it's important to know what happens when they come to an end. But, this only applies to those classed as employees.

As mentioned, zero-hours contracts can be terminated by employees or their employer. During this time, employers must provide:

• Holiday pay that's been accrued and not used.
• Any outstanding wages.
• Notice period pay (if they've been employed for at least a month, are classified as an employee, or if it's a contractual right).

If you're facing redundancies, zero-hours workers should only be selected through fair means. Employers should also offer them statutory redundancy pay (SRP) – if they have at least two years’ service - as well as any other entitlements given to permanent employees in the same role.

Get expert advice on zero-hours contracts with Peninsula

As an employer, it's your responsibility to provide fair and lawful zero-hour contracts. This allows you to protect your working relationship with them, whilst maintaining the progression of your business.

If an employer ignores any legal requirements for zero-hours contracts, employees could claim unfair dismissal against them. This could result in losing talented staff, paying compensation, and causing reputational damage.

Peninsula offers expert advice on zero-hour contracts. Our teams offer 24/7 HR advice which is available 365 days a year. We take care of everything when you work with our HR experts.

Want to find out more? Contact us on 0800 029 4377 and book a free consultation with an HR consultant today.