Following widespread press coverage over the Summer, the Business Secretary has announced that there will be a consultation on zero hours contracts and pledged to address any abuses revealed by this consultation.

Vince Cable's statement mentions four "particular areas of concern" arising out of an initial review:

  • Exclusivity – contracts that do not guarantee a minimum number of hours but stop workers from working for another company.  
  • Transparency – workers are not always aware that there is a possibility that they may not be offered work on a regular basis.  
  • Earning/benefits uncertainty – the amount of money a person can expect to earn is dependant on actual hours worked.  
  • Balance of power – workers believe they will be penalised if they do not take the hours offered even if the offer is at very short notice and is not suitable for them.

The statement does not mention the wider issue of employment status and it is not clear to what extent the consultation will tackle this. Zero hours contracts appear to lack one of the essential requirements for employee status – mutuality of obligation – but following the 2011 Supreme Court decision in Autoclenz v Belcher, tribunals are prepared to look beyond the terms of a written agreement to see if it reflects the true nature of the relationship, particularly for roles where there is some inequality of bargaining power between the parties.

Last year, the EAT in Pulse Healthcare v Carewatch Care looked at whether five care workers with zero hours contracts with Carewatch and supplied to a PCT to provide round the clock care for a severely disabled individual, were employees. Under the contracts, Carewatch was under no obligation to provide work and the carers were free to work elsewhere. However, the Tribunal, whose decision the EAT upheld, found that this did not reflect the true agreement between the parties which was that the employees worked fixed hours on a regular basis. The contracts made repeated mention of employment and contained references to annual leave, sickness, pension and uniforms. The business involved was key – the EAT commented that in a critical care service such as this, it was clear that the employer would not be able to rely on ad-hoc arrangements.

Even if they are not employees, those on zero hours contracts will be workers and entitled to the national minimum wage (NMW). In the same statement the Business Secretary reports that he has asked the Low Pay Commission (the body that advises the Government on the level of the NMW) to look at whether there might be a possibility of the NMW rising "faster than current conditions allow" over the medium term.

In the meantime, the NMW rates will go up next week. The standard adult rate for workers aged 21 and over rises to £6.31 on 1 October.