25/08/2015

By Nelu Abeygunasekere, Partner, Thomas Eggar

The controversial topic of zero-hours contracts continues to grab the headlines. Despite a great deal of negative press and the suggestion that they should be out-lawed, for a number of employers and workers, when used appropriately, they can provide more adaptable working opportunities.

This type of contract can provide much needed flexibility – for employers, in terms of costs and staff numbers and for some workers such as, parents of young children who want a greater work-life balance, students, carers and the retired who want to supplement their income.

However, it is worth bearing in mind that “zero-hours” is not actually defined in law and just because an arrangement is referred to as a zero-hours contract it does not necessarily mean this is the case.

Under a zero-hours contract, the employer is not obliged to provide a minimum amount of work and the worker is under no obligation to accept work that is offered. The advantage for employers is that it does not create an employee-employer relationship and in turn the worker has no entitlement to minimum periods of notice and no unfair dismissal rights.

But whilst individuals employed under genuine zero-contracts are not employees, despite the urban myth they still have basic legal rights as workers to the National Minimum Wage, paid annual leave pro-rated in accordance with the time they work and in some cases to be auto-enrolled to a pension. As for contractual benefits or discretionary bonuses, each employer will need to decide whether to offer these rewards as a way of keeping its workforce incentivised.

The recent data from the National Office of Statistics suggests that there could be about 1.4 million zero hours workers in the UK. The data also shows that these individuals work on average 25 hours per week. If then despite being on zero-hours contracts, individuals work on a regular weekly basis and do not have an option of refusing work, then employers be aware, there is a real risk that such staff may be part-time workers.

For example, if a worker has a zero-hours contract, but consistently works set days and hours over time, it is likely that the pattern of work would be deemed to be part-time work. Part-timers have the right not to be unlawfully discriminated against and must be treated at least as well as their equivalent full-time workers. This means the same rates of pay and training and contractual benefits, unless this can be objectively justified.

If however, employers want to tie workers to be engaged exclusively with their company with no guarantee of work, this is plainly unfair. Flexibility has to work both ways and workers need to be free to work for whichever organisation is going to provide them with work.
It is also worth considering whether workers that work regular hours, for example, over a six month period with the same employer, are given fixed hour contracts. Also, the period of time they spend on the zero-hours contract is recognised as part of their continuous employment.

As zero-hours contracts are used mainly by larger employers and certain sectors, it might be that organisations over a certain turnover are limited on the number of workers they take on these types of contracts in any given financial year. Some employers will probably say that limiting them in this way is impractical and would be unworkable, but imposing some constraints might help ease the abuse that is more common-place in certain sectors.

The National Institute of Economics & Social Research shows that Britain’s youngest workers have suffered a fall of more than 14% in real wages since 2008. Some critics attribute this fall almost exclusively to the excessive and abusive use of zero-hours contracts. The national issue of in-work poverty is complex and in my view such levels of poverty are unacceptable, but we need to have a sensible and fully informed discussion about how we tackle this and the extent to which zero-hours contracts contribute to in-work poverty.

Striking a balance between running an efficient, dynamic company and having some flexibility on the one hand and developing staff engagement and motivation on the other, is not easy. Zero-hour contracts are not going to work for the majority of employers or workers and nor are they intended to, but in some situations they have the potential to be a win-win for both parties. But, let us also not forget there was a time, not so long ago, when barely anyone used zero-hours contracts and businesses and the economy did fine.

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