Zero-hours contracts: the facts
21st March, 2014
One of the buzzwords over the last couple of years in the workplace has been the idea of "flexibility". The idea of "flexibility" has led to a dramatic rise in recent years in the use of "zero-hours" contracts.
The Office for National Statistics estimates that there are 250,000 such contracts in place, whereas the trade union UNITE put the figure at 5,500,000.
However, for some months now, zero-hours contracts have been the focus of much negative media attention, and as a result of public consultation initiated by the government, it is likely that the flexibility and scope of zero-hours contracts will be curtailed.
Put simply, zero-hours contracts allow companies to take on staff, where staff agree to be available for work as and when required, but have no guaranteed hours or times of work.
This gives the company access to a pool of staff which can be used as and when there is a peak in demand or a need to increase the range of services on offer.
Such flexibility is a great advantage to companies who can draw on this extra support in peak times, and not find themselves burdened with fixed staff overhead during lean periods.
Zero-hours contracts suit people who are looking for occasional earnings and are able to be flexible about how often and when they work.
In many instances they also act as a stepping stone into permanent employment.
They can be a “foot in the door” allowing workers to gain experience in a sector that they may wish to work permanently in the future.
However, the unpredictable nature of working times means that they will not be for everyone, and they also attract a number of statutory employment rights.
It is important to establish the employment status of a worker on a zero-hours contract (ZHC) in order to be aware of the accompanying legal rights.
Zero-hour contracts may sound like self-employment but the individual is often classed as a “worker” and is under the same degree of control and subordination as an employee contracted on fixed hours.
Unlike self-employed contractors, a zero-hours worker is subject to the employer’s disciplinary, conduct and absence procedures.
Employers usually intend for an individual to be a worker, rather than an employee, but Tribunals will always look at the facts rather than the contract.
It is important to be aware that even if the individual is a worker, they will still be entitled to national minimum wage and holiday pay.
Pensions auto-enrolment is complicated for employers of zero-hours workers.
With varying working hours and earnings, it is difficult to calculate when the relevant threshold has been reached to trigger auto-enrolment.
Once enrolled, it is then possible that the worker’s earnings will drop below the qualifying threshold.
In this situation, any deductions made for that period will not be deductable by statute and therefore the employer risks a claim for unlawful deductions from wages.
To avoid this, employers should consider contractually enrolling all workers into the pension scheme. Alternatively, payroll software can monitor earnings and make appropriate deductions.
* For further information on the issues raised by this article, please contact Harmajinder Hayre.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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