Zero hours employment contracts are a controversial subject that has been in the news headlines over recent weeks. There is no legal definition of a zero hours contract and it covers a wide variety of arrangements. In some cases, a zero hours contract is where an employer pays the worker only for the work carried out and does not guarantee any hours of work to the worker.  It can also cover a situation where the worker is expected to available for work when told by the employer and also situations where the worker is able to accept or reject a request to work.

Examples of companies which use zero hours contracts include Sports Direct, whose entire 20,000 part-time workforce are unaware exactly how many hours they will work each week. It has also been reported that Amazon use zero hours contracts extensively. Employees must be available to work with no guarantee that they will actually be given a shift. In fact the Office for National Statistics stated that 250,000 British workers were employed in this way at the end of last year. However, the Chartered Institute of Personnel and Development asserted that its survey of 1,000 employers revealed that one in five employed at least one person on a zero hours contract. This means that the number of workers on zero hour contracts could be as high as one million.

Trade unions and some politicians have been campaigning to ban the contracts and to urge employers to consider introducing part-time contracts with guaranteed hours. Vince Cable, the Business Secretary, has ordered a review of their use. Now that this is a topical issue, employers should be aware of what rights employees on zero hours contracts are entitled to.

National Minimum Wage

Employees on a zero hours contract have the right to be paid for any time they are at work premises waiting for work to come up, provided that their employment contract does not state anything to the contrary. Employers must pay the usual hourly rate or, at the very least, the National Minimum Wage. The current National Minimum Wage is £6.19 for people aged 21 and over (to rise to £6.31 in October 2013), £4.98 for workers aged 18 to 20 (to rise to £5.03 in October 2013) and £3.68 for employees under the age of 18 (to rise to £3.72 in October 2013).

Working Time Regulations

Employees with zero hours contracts working at Amazon informed the press that they had worked ten-hour shifts with just one 30-minute break. The Working Time Regulations 1998 apply to all employees regardless of their contracted hours. Workers have the right to take an uninterrupted 20-minute rest break if their day’s working time is more than six hours. A worker is entitled to daily rest of 11 uninterrupted hours in every 24-hour period and weekly rest of 24 uninterrupted hours in every seven-day period. Employees are not permitted to work more than 48 hours in a week unless they specifically contract out of the Regulations.

Statutory Holiday and Sick Pay

It has been reported that employees on zero-hours contracts often get no holiday or sick pay. However, workers are entitled to 28 days’ (including bank holidays) holiday reduced pro rata, according to the average number of days they work each week. Employees are also entitled to statutory sick pay from the fourth day of absence where they are working an employment contract, have been ill for at least four consecutive days and have average weekly earnings of not less than the lower earnings limit (currently £109 per week) on the basis of the previous eight weeks.

Otherwise freedom of contract

With the exception of a few other rights such as entitlement to minimum notice period, there is a certain degree of freedom as to how zero hours employment contracts can be drafted. By way of example, it a common clause is to put employees under an obligation to ask permission before seeking additional work elsewhere.

Advantages and disadvantages

The advantage of zero hours contracts is that they can create more a more flexible workforce for the benefit of both employers and employees.  Sectors such as retail need more workers during particular seasons such as the Christmas period and can use these contracts to positive effect. Having a number of employees to call upon can assist businesses in adapting to a changing marketplace. Such contracts are advantageous to individuals who require flexibility in their own working arrangements for a variety of reasons such as those with other major commitments including parents of young children, carers and students.

The disadvantage to individuals is the lack of security of employment and lack of certainty in their working hours and earnings, which makes financial and other planning difficult. Also, depending on the terms of the zero hours contract some individuals might be left without any employment protection rights. For example, workers may be unable to accumulate the requisite two years continuity of employment needed to pursue an unfair dismissal claim.

There is a downside for employers too – companies that make extensive use of zero hours contracts may be subject to public criticism and negative PR, such as that received by Sports Direct and Amazon. The Government is looking at the issue of zero hours contracts and may even consider putting in place legislation to prevent abuse of such contracts. However, it is unlikely that they will abolish their use given the flexibility they provide employers and the potential boost to the economy.

For now employers are advised to carefully consider whether the benefits of zero hours contracts outweigh the detriment to their company, and always ensure that they grant workers the rights that they are entitled to.