25/08/2015

By Neil Lagden, Head of Bond Payroll Services

Last year, the Government announced a change in zero hours contracts with employers being banned from preventing staff with zero hours contracts from seeking work with other employers.

The ban was set to benefit in excess of 125,000 zero hour contract workers who were estimated to have signed exclusivity clauses and were therefore struggling to make ends meet — under the new government guidelines these workers can now look for additional work and boost their income accordingly. In this blog, I will look at the pros and cons of zero hour contracts.

A new regime

The consultation to discuss the removal of exclusivity clauses from zero hour contracts received more than 36,000 responses — with 83% in favour of banning the clause. This is unsurprising given that the Office of National Statistics recently estimated that employers held 1.4 million contracts with workers that did not guarantee a minimum number of hours.

The main concern regarding such contracts has been their potential misuse by companies looking to exploit the inherent business flexibility. Employees on zero hour contracts, in contrast, have historically have relied on the employer to give them an outline of the number of hours which they would be expected to serve — with no guarantees — resulting in many employees taking home minimal earnings.

But with the new legislation, employees have the right to work multiple zero hour contracts, rather than just the one, as before, which may not have guaranteed a minimum number of hours per week.

The Pros

Zero hour contracts have always had a place in business — the leisure industry is a prime example of a vertical which requires support staff on an event-by-event basis and this type of contract provides essential business flexibility. In addition, zero hour contracts work well for seasonal peaks, which require multiple additional staff to be employed for a short timeframe.

Given the change in legislation, the employee should in theory have more control over contracts. Individuals will be able to choose the best employer(s) — based on earnings and/or lifestyle requirements — and gain far more control over their earnings.

The Cons

As with any legislation change, there are still areas which need to be addressed — namely when an employee is faced with many calls from multiple employers at the same time. Working out which employer has the priority in such a situation is difficult as there is no formal, scheduled contract.

Zero hours contracts have historically been seen as a winning contract for the employer — having readily available employees who are already struggling financially. These contracts have been seen as unethical with many workers not being able to budget on a week-by-week basis because they do not know what hours they will be working or how much money will they will be earning.

The resolution

Since the ban of exclusive zero hour contracts, many employers have been urged to switch to minimum hour — thereby offering the employee the security of a set amount of monthly hours, as well as protecting themselves from being left in the lurch if the employee gets a better offer.

It is critical given the changes, that employers take into account the fact that employees now hold the power when it comes to choosing who gets their time. As the implications of this change continue to evolve, employers should be looking to provide benefits and minimum hours to ensure employees are available when they are required.