By Becky Hill, director, HR Now

From May this year, under the newly implemented revisions to the Small Business, Enterprise and Employment Bill, employers no longer have the right to insist on exclusivity from staff on zero hour contracts.

As one of the biggest users of zero hour contracts, small and medium-sized enterprises (SMEs) could find productivity taking a serious hit as they fight for the best workers during critical periods and deal with up-lifts in workload or to cover periods of staff absence as a result of the new rules.

The good news is, SMEs can remain productive and continue to attract good staff, but only if they put the employee first.

Zero hours – the rules

Zero hours contracts are commonly used when an employer requires a ‘bank’ of casual workers who can be called upon to meet temporary staffing needs, for example when there are fluctuations in workload demand or to cover during periods of staff holidays or absence. There is no obligation for the employer to offer work or for the worker to accept the work offered.

Many employers embraced zero hours contracts in order to meet increased consumer demand, and a number of those in the belief that they were protected from claims for unfair dismissal or redundancy payments under employment law should they need to terminate the contract.

All well and good for employers looking for zero responsibility for their employees’ welfare, who used zero hours contracts in place of regular contracts in the hope of retaining protection from tribunal claims, thereby abusing the objective of these contracts, but not such good news for employees looking for job security. So the Government stepped in.

Now, employees on zero hours contracts can work for more than one company without the fear of being disciplined or fired, significantly increasing their chances of steady employment and a regular income.

For businesses looking to meet increased demand in productivity, the new rules mean that the fight is on to attract workers to the fold.

The answer is to offer the best terms and conditions you can, using the right contractual arrangement that suits both your business needs as well as your employees' interests.

But first, think about your business rationale for hiring temporary staff.

Understand your business rationale

Zero hours contracts are just one form of flexible working agreement, but they might not be the right one for you. You just might need to know that the employees you have worked so hard to find, or paid so much to train, will want to stay.

Answering the following questions will help you identify your business rationale for hiring temporary workers, and ensure you get what your business needs:

• How do the working arrangements need to operate? Will a zero hours contract foster a relationship where there is a ‘mutuality of obligation’ to provide work or provide a service, for example? If the answer is no, then a zero hour contract is not the right contract for you.
• How much do you need to control the way in which the work is done? Training can be costly, so you need to ensure that if you need to train new staff that they will want to stay so that you get an adequate return on your investment
• How far do you need to integrate the employee into the business? If the position is integral to the successful running of a team, will a zero hours contract provide you with the certainty that you can meet your business goals?
• How long does the engagement need to be? Zero hour contracts can be long-term, but will they sufficiently entice employees to continue in your employ week-by-week, or month-by-month, depending on your need?
• What benefits or incentives will attract potential recruits? Incentives such as longer notice periods, holiday and sick pay, even staff discounts will not only entice employees to join your business but could also help them remain for duration.

Once you identify the rationale behind hiring a temporary workforce, then it will become clear what kind of contractual arrangement is best for your business – one that will ensure you get the value out of your investment, while attracting potential employees.

The right kind of contract

The good news is, there is a number of different flexible working agreements that offer the greater level of job certainty that employees are undoubtedly looking for, but still give employers a sufficient level of workforce flexibility, including:

• Variable hours contracts enable employers to agree to a minimum or set number of hours or pay per month, but with the ability to set different hours each week to suit business demand or indeed the employee’s lifestyle. They offer flexibility for the employer as well as the employee, and can be for a fixed term or on-going basis.

• Fixed-term contracts are commonly used to supplement the workforce during busy periods, such as the summer season or Christmas. The benefit of fixed-term contracts, of course, is that you are likely to retain the employee for the full duration that you need. Although, with the fight for good employees during such times, including some form of incentive, such as longer notice periods or holiday pay, could put you ahead of the competition.

• Permanent, part-time contracts are designed for a defined number of hours, at set times. Of course, permanent contracts by their very nature offer greater certainty to you and, importantly, to the employee, but are well worth considering if you are looking to attract skilled workers looking for a mutual commitment to work and be paid on a part-time basis. Parents are a good example of this.

• Agency workers are not employed directly by the employer but by the agency. They can fulfil a short-term capability or capacity requirement. Agency workers are entitled to, on balance, the same terms as permanent employees in comparable roles when they have been with an employer for 12 weeks.

Of course, zero hours contracts may continue to be the best choice for you and the employee, but choosing the right contract will not only ensure you meet productivity requirements, but also keep businesses on the right side of complex employment law. And in the case of zero hours contracts, it’s very easy to come down on the wrong side of that law.

For example, if an employee works regular hours, such as Monday to Friday, 9-5, and this happens over a prolonged period of time, which could be anything from two to three months onwards, the employee is essentially seen as ‘full time’ in the eyes of the law. Then the employee becomes eligible for employment protection for unfair dismissal, even if they are in fact on a zero hours contract. And we know where that could lead should you decide to terminate the contract – in court.

At the end of the day, offering contractual agreements with the appropriate level of job security will attract the employees employers need in times of increased demand. Offering some form of incentive too, such as a longer notice period or holiday pay, could entice those employees to stay. Then, and only then, will a business see productivity rise, and their business succeed.