The issue of employees employed on ‘Zero Hours’ or low hours contracts has recently been in the spotlight with the Dunnes Stores workers dispute. How can employers ensure they are in compliance with the laws but still maintain a flexible satisfied workforce?

‘Zero Hours’ Contracts in the headlines

Dunnes Stores workers recently took industrial action in relation to working conditions in response to low hours contracts and union negotiating rights.  As a result of this media coverage, there may be an impression given that such workers enjoy no employment rights in Ireland. This is not in fact correct, as there are some legislative protections in place for such workers.

The position in Ireland is quite different  to the UK, where there is in fact very little protection for employees engaged on zero hours contracts. Sinn Fein has called for ‘zero hours’ contracts to be abolished. The Government has recently commissioned a study on ‘zero hours’ working practices  at the University of Limerick in order to provide economic data on such practices in Ireland.

Suiting Employers/ Suiting Employees

The use of zero hours contracts is quite common in businesses where the need for employees can fluctuate due to seasonal demands or otherwise. It can be a very efficient means of ensuring an adequate level of resources but also maintaining labour costs at a level close to actual needs.

As well as suiting employers’ needs,  these arrangements can sometimes suit employees who enjoy an element of flexibility in their employment. A study in the UK found that zero hours contracts are typically taken up by young workers, including students, and older workers.

That said, the abuse of such arrangements by employers as an alternative to more standardised employment contracts, for example, part-time contracts, has led to controversy. A feature of these contracts  is a lack of stability for employees who have little certainty in relation to their hours and income from week to week. This has consequences for employees’ ability to obtain mortgage approval, loans, accommodation etc.

Zero hours – Zero €?

  • A “zero hours contract” is essentially a contract with no guaranteed minimum hours for an employee.  An employee is required to work by the employer on the basis of either
  1. a certain number of hours per week, or
  2. as and when required by the employer, or
  3.  a combination of the foregoing.
  • Section 18 of the Organisation of Working Time Act 1997 gives zero hours employees an entitlement to receive compensation in respect of the hours that they are not required to work. The entitlement is calculated on the basis of 25% of the contracted hours or 15 hours, whichever is less.
  • There is no protection in the legislation, however, where employees do not have any guaranteed number of hours worked. If an employee is not required to accept work and an employer is not obliged to provide work, Section 18 above does not apply. This is where the criticism has been levelled at the protections in place for such workers. In addition employers can understate the contracted hours even where the employee consistently works increased hours so as to reduce its liability to  pay compensation by reference to the reduced hours.
  • Zero hours arrangements should be distinguished from a casual working relationship where employees work on an informal ad hoc basis with no obligation on either the employer or the employee to provide or accept work. This raises the age old question as to whether an individual is in fact an employee at all or whether they are an independent contractor.

Tips for Employers

  • It is difficult for employers to sustain casual/zero hours working arrangements for significant periods of time, for example, more than one year. In that time, patterns of employment hours have become established, such that an employee may seek to rely on certain hours as a custom and practice which may have become an implied term in their contract of employment. It is generally difficult to ring-fence these employees as there is usually a drift towards more stable employment in the longer term.
  • These types of arrangements are  at best tenuous and should only be used to serve short term needs of an employer again depending on the area of employment. They can also be the basis for industrial relations unrest where employees feel they are not being treated fairly on a consistent basis.
  • If an employer chooses to have these types of atypical contracts, it is important for employers to ensure that someone in the organisation e.g. (HR) closely monitors such arrangements. This is to ensure that the adequate compensation is paid where the employee’s hours worked fall under the thresholds in the legislation.
  • Further, to the extent that an arrangement changes over time whether in terms of hours or employment status this should be accurately reflected in the contractual documentation.