Zero hours contracts

You may be aware of a lot of recent news coverage regarding the use of “zero hours”contracts, with ACAS recently stating that they “breed mistrust and feelings of insecurity”. The Office for National Statistics recently published the results of a survey estimating that there are around 1.4 million people engaged on this type of contract. In this article we will look at what they are, how opinion on their use differs and the calls for reform.

What are zero hours contracts?

There is no actual legal definition of a zero hours contract, although the term is used to refer to contracts for casual work under which the employer does not guarantee to provide the worker with any work and only pays the worker for work actually done. The worker is usually expected to be available for work if called upon by the employer but has no guaranteed hours or times of work (hence “zero hours”). Workers on zero hours contracts are entitled to statutory holiday, although given their often irregular hours the method for calculating their holiday entitlement and their rate of holiday pay can often cause administrative difficulties.

Why are they in the spotlight?

The employer-based findings from the Office for National Statistics have highlighted that there are many people on zero hours contracts, much more than originally thought. These contracts have been popular in the hotel and restaurant industry for a while, but the statistics suggest that they are being used much more widely and across a much wider range of industries.

Pros and cons

Employers tend to welcome the use of zero hours contracts, as it provides flexibility and allows them to meet fluctuating demands. Critics, however, say that they result in financial insecurity for workers and can lead to workers being exploited. An added complication is the status of individuals on zero hours contracts, as generally they are classed as workers and not employees and as such do not earn key employment rights. Concern has also been raised about so called “exclusivity” clauses, which prevent individuals from working for other employers, even though they may not have any guaranteed hours.

A call for reform

Last autumn, the government launched a consultation into the use of zero hours contracts and they are currently analysing the results. Some trade unions have called for a complete ban on the use of these contracts, and Ed Miliband has pledged to crack down on abuses of zero hours contracts if Labour is elected to power. The Department for Business Innovation and Skills will soon decide whether or not to hold a formal consultation on proposals for legislation in this area.

Conclusion

Zero hours contracts are certainly useful in some circumstances where flexibility is required, although they may not be suitable for all. With calls for a change in the law prevalent, employers may need to consider alternatives if the law is changed such as a move to fixed term contracts. Whilst it seems unlikely that this government will announce a total ban, it could be that we see a removal of exclusivity clauses in the future. We will be keeping a close eye on how things develop, as there is sure to be more debate ahead.

This content is correct at time of publication