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Industry Comment on Zero Hour Contracts

Industry Comment on Zero Hour Contracts

Charles Russam, Chairman of Russam GMS says, ““Research published by the Chartered Institute of Personnel tells us that over 1 million workers in the UK are now on zero hour contracts, under which staff are not guaranteed work from one week to the next.  Such contracts are used widely in the hotel and leisure and catering industries and are also favoured by one third of voluntary sector organisations. There has been much controversy around these contracts, with the assumption is they are a bad thing. However, these contracts can suit both the employer and employee.

Zero hour contracts provide businesses with much needed flexibility in unpredictable times, allowing them breathing space to scale up and down their staff to match the ebbs and flow of demand. I would argue that such flexibility is essential in sectors such as hospitality and retail where there are seasonal peaks in demand. These contracts can work well for students or perhaps mothers who want extra hours at certain times of the year to earn money and work around other commitments.

This is much like how businesses use interim managers  - they pull them into a business to work on a project at very short notice and they interims only work for as long as needed and are paid for the work they deliver. It is a low risk, flexible resourcing method which works well for both parties. The growth in zero hour contracts also supports another general trend which until now, hasn’t been the subject of much discussion – the rise in the number of people who are not on the pay roll in Britain.  According to The Office for National Statistics there are 29.7 million in work, but 46.5% are not full-time employees. It is estimated 4.2 million are self-employed, 8 million work part-time and just under 1.6 million are temporary workers. The workplace has been undergoing a transformation over the last couple of decades and the way people are working has changed, with half of UK workers working as independents. Many people are making life style choices to work in this way. We think this trend is growing and isn’t likely to go away and we believe that far greater work is needed by government to understand and support this growing & lsquo;independent’ workforce.

Lucy McLynn, Partner at law firm Bates Wells Braithwaite comments, “Zero hour contracts are getting a lot of bad press at the moment, but they actually offer employees a number of benefits.   The employee has a contract of employment, and so is accumulating continuous service for the purposes of protection from unfair dismissal and being entitled to a redundancy payment.  Although the employee is not guaranteed any work under such a contract, if the employer was consistent in not providing them with any work there would be a good argument that they were redundant and (if they had worked under the contract for two years or more) would be entitled to a statutory redundancy payment based on their earnings in previous weeks when they had received wages. 

Employees under zero hours contracts are also entitled to statutory holiday pay – contrary to what is being suggested by some commentators.  Again, this should be based on their actual earnings, and should be paid to them at the time that they take holiday and not included within their hourly rate.  If there are full time permanent employees doing comparable jobs, the zero hours employees may be able to rely on the Part Time Workers (Prevention of Less Favourable Treatment) Regulations 2000 to claim the same rights in respect of contractual entitlements such as sick pay, and the amount of holiday given as their colleagues.

The position of zero hours employees is therefore in many respects materially better than that of casual workers – although casuals do of course have the freedom to decline work and take up work elsewhere (which zero hours employees can only do with their employer’s permission).  In my experience, casual worker contracts are far more often abused to deprive workers of employment law protections that they would otherwise enjoy.  Zero hours contracts are common in sectors such as health and social care and education where service user demand can fluctuate dramatically, and so they are meeting a genuine business need for flexibility about hours of work.  The business is nonetheless is accepting its responsibilities as an employer. I do not see why this should be considered to be objectionable.”

Syma Spanjers, Associate in City Law Firm Charles Russell LLP’s Employment Team:

Popularity of zero hours contracts for employers
“In these uncertain economic times, zero hour contracts can be an attractive option for those employers requiring a flexible workforce in order to quickly respond to fluctuating business needs.  Having access to a "bank" of ready and willing workers during short term busy periods takes away the pressure and costs of recruiting extra staff during busy periods, only to have to consider letting them go when workload reduces.  Employers can therefore protect their core workforce whilst still meeting the demands of their customers during short term busy periods.

Difficulties in legislating against them

“The popularity of zero hours contracts would make it difficult for the Government to eradicate their use completely.  It is clear that some workers actually enjoy the flexibility they offer if they are unable to commit to a fixed number of hours per week, perhaps due to family commitments or because they are studying or retired but keen to have occasional work.  It is more likely that their use will become more regulated, similarly to other atypical working arrangements (such as agency, part-time and fixed-term workers), with guidance being offered to both workers and employers to make the implications of the contracts clear before they are entered into.  Of course greater regulation will reduce flexibility and so legislating against them would result in such casual arrangements losing their appeal for employers, which could mean less opportunities for the unemployed and increased pressure on existing workforces to pick up the slack during busy periods.”


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