Economists found that in 2021, 2.6% of all UK employees work on zero hour contracts.
The number of zero hours contracts have been steadily increasing since they were legalised in the early 2000s.
Workers on zero hour contracts get more employment benefits than one might think. And they get access to greater working flexibility.
This means people don’t need to be fully committed to one job. So, it makes it easier to have multiple jobs, concentrate on studies, or even work on personal goals without guilt.
This guide outlines what zero hour contracts are, how to legally manage them, and what legal benefits these workers should receive.
What is a zero hour contract?
A zero hour contract is an employment contract where an employer doesn’t need to provide minimum working hours. These types of contracts are also known as casual contracts.
Offering a full day’s work isn’t obliged in zero hour contracts, meaning you can offer work hours when necessary.
Zero hour contract jobs can include:
- Gig economy work.
- Hospitality work.
- Warehouse work.
- Casual work.
Gig economy businesses often hire workers on zero hour contracts. These jobs can range from food deliveries, rideshare driving, and freelance work.
They can also be given as piecework (one-off jobs) or on-call work. In zero hour contracts:
- Employers can provide work when needed.
- Employers don’t have to give any work hours.
- Workers don’t have to accept work hours.
Both employees and workers can be on a zero hours contract. Employees have more rights than workers, but they must accept the work that is offered to them.
Why should you use zero hour contracts?
Zero hours contracts are generally favoured because of work flexibility. And so, it’s ideal for those with more than one job, family commitments, or who’re in full time education.
This is extremely useful if your business when dealing with:
- A sudden increase in work demand.
- A need for extra staff to cover an event.
- Absences or short-term leave at work.
- A new business where funding may be limited.
Zero hour contracts rules on employment status
You may decide to include additional benefits to your workers’ contracts. Ideally, it depends on their employment status – which needs to be clearly defined in their contract.
If they’re classed as an employee, you must provide legal rights and benefits.
You must clearly outline zero hour contract rights like:
- National Minimum Wage.
- National Living Wage.
- Statutory annual leave.
- Pay for work-related travel.
- Pay for being on-call.
Zero hour contracts holiday pay
So long as zero hours contract workers are employed, they’re legally entitled to 5.6 weeks of holiday pay per year. They’re also entitled to a week’s pay for each week of statutory leave they take.
It’s calculated based on the average pay from the previous 52 weeks of paid work. If there are gaps where no work is performed, you need to count back to the previously paid week.
If they haven’t work for you for 52 weeks, only count the weeks in which they were paid.
Zero hours contracts in UK legislation
The rules on health and safety requirements are very clear. Those workers on zero hour contracts must be cared for exactly like all other employees.
You must action your legal duty and protection, under the Health and Safety at Work Act (1974).
Exclusivity clauses in zero hours contracts
You can’t enforce an exclusivity clause on zero hours workers. This is outlined in the:
- Small Business, Enterprise, and Employment Act (2015).
- Exclusivity Terms in Zero-hours Regulations (2015).
Employers have no right to stop a zero hours contract worker from obtaining additional work elsewhere. And if you do decide to add these clauses, they can legally ignore them.
You may decide you want to change the employment status for a staff member. Maybe you want to hire them as a part-time worker. Or want to offer them a full-time management role.
If you change their employment status, you must issue a new contract, with legal benefits and entitlements.
Terminating a zero hour contract
If you are thinking about terminating someone on a zero hour contract, you need to consider a few things.
Firstly, you should check if you have hired them as an employee or a worker. This will outline all the legal rights they’re entitled to, especially when being let go. The nature of their job and what progress they’ve made should be considered.
But if you do decide on terminating a zero hours contract worker, you should:
- Clearly present the placement as a zero hours job.
- Include their employment status and rights in the contract.
- Demonstrate how shifts are given out and the rules on accepting or rejecting them.
- State the procedure for ending their contract.
There’s no notice period owed for zero hours work. As long as they’re genuinely a worker, the employer can bring the employment to an end at any point.
Notice periods for zero hour workers
Zero hour contract notice periods are not a legal requirement. You can let workers go without notice - and on the flip side, they can leave without giving notice.
However, it’s good business practice to provide a notice period. That way, it allows them a good amount of time to find alternative employment.
Zero hour contract and redundancy
Redundancy benefits are only available based on their employment status.
You can’t make workers redundant, this only applies to employees. Workers don’t have the right to redundancy payment or unfair dismissal claims.
Redundancy for zero hours contracts only applies to employees. Their redundancy pay is calculated the same as for any other type of employee: weekly pay, age and length of service.
How do I use zero hours contracts?
It’s good business practice to have transparent contracts so your staff know their job specs and legal rights. To efficiently manage your zero hour contract workers, the CIPD recommend you should provide:
- Zero hours work only if your business/workforce requires it.
- Workers with the terms and conditions of their contract.
- Alternative work methods (like flexible working options or annualised hours).
- Comparable wages and working conditions that full/part time workers receive.
- Management training for handling workers.
- Access to career development opportunities.
- Reasonable compensation for shifts cancelled at short notice.
Get expert help on zero hours contracts with Peninsula
You should follow a strong procedure in place when you create employment contracts. That way you’ll meet the entitlements and rights of your zero hour workers.
Your workers will appreciate having a clear understanding of their contract terms. And this can help with staff retention, and help to protect you from employment tribunal claims.
Peninsula offers expert employment contract and documentation services for all types of businesses.
Our expert HR consultants deal with all kinds of contract issues. And can build employment contracts specifically for your business needs.
Call us today on 0800 028 2420.