Zero-hours contracts – what employers need to know

During the run-up to the 2015 General Election, zero-hours contracts became a high-profile debating point, with politicians from all parties entering the fray. Whilst zero-hours contracts are seen by some as exploitative and lacking in the rights that are given in traditional employment contracts, others view them as a flexible way to manage a workforce and support business expansion plans.

Flexible working

Figures from the Office of National Statistics show that 697,000 (2.3% of the UK’s workforce) were employed on zero-hours contracts for their main job between October and December 2014.

Currently, there is no legal definition of a zero-hours contract. In essence, they offer no guarantees that any hours of work will be provided, and the worker is not obliged to accept any of the hours offered by the employer. When it’s freely entered into, a zero-hours contract is perfectly legal.

Why employment status matters

The law divides working individuals into three categories – worker, employee or self-employed. Each category has distinct rights and obligations. In theory, an individual on a zero-hours contract could fall into any of the three categories, however in most cases they are likely to be classed as workers or employees. This distinction matters as it determines an individual’s legal rights. Workers will generally have fewer rights than employees, while workers typically have more flexibility than employees. So, employers need to decide how the employment relationship operates in practice to ensure that they accurately reflect the individual’s status in their contracts. This is where it makes sense for businesses to regularly review the terms of their employment contracts to help prevent legal challenges and disputes.

Worker or employee?

Whilst workers on zero-hours contracts do not have the same employment rights as those on traditional contracts, they are entitled to statutory annual leave, sick pay and the National Minimum Wage in common with regular workers. In most cases, as they don’t have ‘employee’ status, they don’t have rights such as entitlement to claim for unfair dismissal, maternity pay or maternity leave, the right to request flexible working or an entitlement to redundancy payments.

New legislation in 2015

The Small Business, Enterprise and Employment Act 2015 has brought about changes to the clauses often included in these contracts and these came into force on 26 May 2015. Any employer who has exclusivity clauses in their zero-hours contracts needs to remove them, as any clause which prohibits a worker from working elsewhere, or stops them from doing so without the permission of their employer is no longer enforceable.

For further advice on this article, please call 01628 631051 or email employment@colemans.co.uk.

Categorised in: Employment Law, Latest news

This post was written by Colemans Solicitors LLP