How Do Zero Hour Contracts Work?

15 March 2024|Related :

With nearly two million in the UK working on zero hour contracts, it’s important that you understand the laws to make sure your business stays compliant.

What are Zero Hour Contracts?

Zero hour contracts are employment contracts without specified hours of work. Under these contracts, employees are not guaranteed a certain number of working hours each week. 

Instead, they are offered work ‘as and when’ it’s available, giving them the flexibility to accept or decline offers of work based on their availability and needs.

The characteristic features of zero hour contracts include:

  • No Guaranteed Hours: Employees are only called to work when needed, which can vary widely from week to week.
  • Flexibility: Both the employer and employee have the flexibility to arrange work schedules that suit their needs, making it a beneficial arrangement for those looking for work-life balance.
  • ‘As and When’ Work: Offers of work can come at short notice, and employees can usually choose whether to accept or decline work without penalty.

Sectors That Commonly Use Zero Hour Contracts

Zero hour contracts are especially common in sectors where work demand can fluctuate significantly, such as:

The versatility of zero hour contracts makes them a valuable tool in these and other sectors, allowing businesses to adapt to market demands while offering individuals opportunities for employment that can fit around other commitments.

However, it’s essential for both employers and employees to understand the rights and obligations associated with these contracts to ensure fair and beneficial working relationships.

Rights Under Zero Hour Contracts

Employment Status and Rights

If you’re on a zero hour contract, understanding whether you’re classified as an ’employee’ or a ‘worker’ is important as this status determines your rights in the workplace. 

Despite the flexible nature of zero hour contracts, individuals are still entitled to certain employment rights. These rights include receiving the National Minimum Wage and National Living Wage, entitlement to paid holiday, rest breaks during work, protection from discrimination, and the right to receive payslips.

This classification matters because it affects your employment protections and benefits. For instance, employees generally have a broader range of rights, including maternity pay and the ability to claim unfair dismissal, whereas workers’ rights are more limited.

Protection Against Unfair Treatment

Zero hour contracts also come with protections against unfair treatment. This means your employer cannot treat you poorly or worsen your working conditions because you’ve asserted your rights under the contract.

Unfair treatment can manifest as reduced work hours, bullying, harassment, or being unfairly passed over for training and promotion opportunities.

If you’re classified as an employee and face dismissal connected to asserting your rights under a zero hour contract, this could be deemed an automatic unfair dismissal. Workers, while they cannot claim unfair dismissal, might argue that termination of their contract was a form of detriment, a complex area that often requires legal advice.

The Legal Framework

Working for Multiple Employers

One of the freedoms of zero hour contracts is the legal right to work for multiple employers. Your main employer cannot legally include exclusivity clauses in your contract that prevent you from working for someone else. Nor can they treat you unfavourably or dismiss you for taking up work with another employer.

This right is protected under the Employment Rights Act 1996, making sure that individuals on zero hour contracts can seek additional employment to meet their financial needs or gain more work experience.

Rest Breaks and Working Hours

Despite the variable hours associated with zero hour contracts, individuals are entitled to rest breaks and rest periods similar to those in more traditional employment forms. You have the right to take short breaks during your workday, enjoy rest between working days or shifts, and have weekly rest periods.

These entitlements are designed to make sure that all workers, regardless of their contractual arrangements, have adequate time to rest and recover, supporting their health and wellbeing in the workplace.

Ending Zero Hour Contracts

Contract Termination and Notice Periods

The process of ending zero hour contracts can vary significantly based on whether the individual is classified as an employee or a worker. For employees, standard notice periods as outlined in employment law or the contract itself apply, making sure both parties have clear expectations about the end of employment.

However, for workers under zero hour contracts, the legal requirements for notice periods are less stringent. Often, there may be no formal requirement for notice, though any agreed terms should be respected.

This distinction emphasises the importance of understanding your employment status and the terms of your contract. It’s also crucial for employers to communicate clearly about contract termination to avoid misunderstandings and ensure a smooth transition for both parties.

Continuous Employment and Breaks

Continuous employment under zero hour contracts can sometimes be complex to determine but is crucial for understanding certain rights. Continuous employment refers to an unbroken period of service with an employer, and it can affect eligibility for various employment rights, such as maternity leave or redundancy pay.

A break in employment is typically defined as a week (Sunday to Saturday) without any work. However, certain exceptions exist, such as absences due to sickness or maternity leave, which do not interrupt continuous employment. Understanding what constitutes a break in employment is essential for both employers and employees to recognise the impact on employment rights.

Employer Responsibilities and Best Practices

Ensuring Fair Treatment

Employers have a duty to ensure that all staff, including those on zero hour contracts, are treated fairly and have access to their statutory rights. This includes providing a clear understanding of their employment status, rights to paid leave, and ensuring they receive the National Minimum Wage.

Transparency in how work is distributed among zero hour contract staff is also vital, as it helps prevent discrimination and ensures a fair working environment. Adopting clear policies on these matters can help foster trust and loyalty among all staff.

When to Use (and Not Use) Zero Hour Contracts

Zero hour contracts can offer valuable flexibility for both businesses and individuals, but they are not suitable for all situations. They are most effective in industries with variable demand, allowing employers to manage staffing levels efficiently.

However, relying on zero hour contracts for long-term, regular staffing needs can be inappropriate and potentially exploitative.

It’s advisable for employers to use zero hour contracts responsibly, ensuring they are used to provide flexibility rather than to circumvent the provision of fair employment terms. Alternatives, such as part-time or fixed-term contracts, might be more appropriate for regular, ongoing work needs. Understanding when and how to use zero hour contracts can help businesses maintain a positive and productive working relationship with their staff.

Zero Hour Contracts FAQs

Are zero hour contract workers entitled to holiday pay?

Yes, individuals on zero hour contracts are entitled to holiday pay, just like other workers and employees. The amount of holiday pay is calculated based on the average hours worked over the previous 52 weeks. If no work was done in a particular week, then the nearest previous week is used for the calculation.

Can employers require zero hours contract workers to take holidays?

Employers can request that zero hours contract workers take their holiday at specific times, provided they give adequate notice—typically twice the length of the holiday being requested. For instance, if an employer wants a worker to take 2 days off, they should give at least 4 days’ notice. This requirement ensures that workers have sufficient notice to plan for their time off.

Can you be on a zero hour contract and still work for another employer?

Absolutely. Workers on zero hour contracts can work for other employers. In fact, it’s illegal for an employer to include exclusivity clauses in zero hour contracts that restrict workers from taking up other employment opportunities.

How does sick pay work for those on zero hour contracts?

Individuals on zero hour contracts may be eligible for Statutory Sick Pay (SSP) if they meet the eligibility criteria, which includes earning an average of at least £120 per week before tax over the previous 8 weeks. The calculation of these earnings takes into account the fluctuating hours and pay.

What rights do zero hour contract workers have regarding rest breaks?

Workers on zero hour contracts are entitled to the same rest breaks as other workers and employees. This includes a 20-minute rest break during working days that are longer than 6 hours, daily rest of 11 consecutive hours between shifts, and weekly rest of 24 uninterrupted hours per week or 48 hours per fortnight.

How is continuous employment determined for those on zero hour contracts?

Continuous employment is calculated by looking at the duration an individual has worked for an employer without significant breaks. For zero hour contracts, any week where no work is performed counts as a break, but exceptions exist, such as periods of sickness or maternity leave. Continuous employment can impact various rights, such as eligibility for redundancy pay or maternity leave, so understanding your status is crucial.

Can workers and employees refuse hours offered on a zero hour contract?

Absolutely. One of the defining characteristics of zero hour contracts is the mutual flexibility they provide. Workers are not obligated to accept every work offer made by their employer. If you’re unable to work a shift for any reason, you have the right to turn it down without penalty.

Can you claim maternity pay on a zero hour contract?

Yes, individuals on zero hour contracts may be eligible for Statutory Maternity Pay (SMP) provided they meet the necessary conditions, such as earning an average salary that meets the minimum threshold through a PAYE system and having worked for their employer for a continuous period. Being on a zero hour contract doesn’t automatically disqualify you from receiving SMP.

How much is Shared Parental Pay (ShPP)?

For the period from April 2024 to April 2025, Shared Parental Pay (ShPP) is set at a flat rate of £184.03 a week, or 90% of your average weekly earnings if this amount is lower. ShPP is paid in the same manner as other statutory payments, such as Statutory Maternity Pay (SMP) or Statutory Paternity Pay (SPP), directly by your employer.

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