Much has been made of zero-hours contracts in recent months. There are two, more or less, diametrically opposed views on what these contracts are and what they mean for employees and employers. Both have had their share of coverage in the media and have been discussed in great depth by politicians of all stripes.
On one side of the debate, some claim this form of employment is tantamount to exploitation, with the Resolution Foundation think-tank, among others, arguing that workers on these contracts live with permanent uncertainty and earn significantly less compared with employees on other deals.
On the other, a recent survey from the Chartered Institute of Personnel and Development showed that workers on zero-hours contracts are more likely to be happy with their work-life balance than other staff. The same poll also found that over half of respondents on these contracts didn’t want more hours.
In the midst of this lively debate, many of the facts have become obfuscated in political mud-slinging. To get a clearer understanding, it’s worth reminding ourselves of what a zero-hours contract actually entails.
In their most basic form, zero-hours contracts are terms of employment that do not guarantee staff a set number of hours, while they are also only paid for work carried out.
Estimates suggest that the number of workers that are on this form of employment in the UK range between 250,000 to one million. Some unions – the UK’s largest, Unite, among them – suggest the figure is substantially higher. Unite claims that there are 5.5 million people in the UK on contracts of this nature.
Despite the arguments around the subject, zero-hours contracts remain a significant part of the UK’s employment landscape. Here are four things that employers need to consider in making a decision on their use:
• Is the worker actually an employee? In many cases, workers on zero-hours contracts are not, in fact, employees in the sense that there is no obligation for the employer to provide work. Yet this is a double-edged sword as the worker is also under no obligation to accept any work offered to them. The lack of this guarantee in contracts often means that zero-hours contract workers are not classified as employees. However, it is possible to elevate them to this status, at which point they would acquire full employment rights.
• Is the worker entitled to holiday rights? Lost in much of the recent debate was that zero-hours workers are still entitled to paid annual leave through Working Time Regulations. This can be tricky to calculate, but employers have come up with a number of ways of doing so. Some allow workers to accrue holidays on the basis of the hours they have worked each month, meaning they can take days when they choose. An alternative is to estimate how much holiday a worker will accumulate over a particular period and then adjust final pay according to holidays taken.
• Is the worker entitled to the minimum wage? Zero-hours workers are entitled to the national minimum wage while they are working, but this doesn’t include rest breaks. Likewise, the worker is entitled to pay for any time they have to be available at, or near, a place of work. However, this does not apply to workers who are on stand-by or on-call at home.
• Do they indirectly discriminate? Statistics show that it is overwhelmingly women who require part-time work to meet childcare and other carer commitments. As most zero-hours contacts afford workers few contractual benefits, businesses that only offer their part-time staff these forms of contract will need to be able to objectively justify this policy or risk claims of indirect gender discrimination. Equally, such arrangements that require workers to be available at all times put those with caring responsibilities at a distinct disadvantage.
Inevitably, contracts of any sort need to be well thought-out and considered fully to ensure they are suitable for both the employer’s and the employee’s needs. The attention placed on zero-hours contracts may bring into focus whether or not they are appropriate.
In any case, the debate over their use looks set to rage for a good while yet. A private member’s bill, named the Zero Hours Contract Bill, sponsored by Andy Sawford MP, will have its second reading on 24 January, 2014. Some might argue that this is unlikely to become law. It does seem likely, however, that it will generate many more headlines.
• Jacqueline McCluskey is an employment partner at HBJ Gateley