Zero-hours contracts have become a significant topic of discussion in the UK employment landscape. In theory, these contracts offer flexibility for both employers and employees but they are controversial due to their inherent job insecurity and potential for exploitation.
Zero-hours contracts do not guarantee a minimum number of working hours, leaving workers uncertain about their income and employment stability. Critics argue that employers may use them to avoid providing benefits like holiday pay and sick leave, leading to financial hardship and mental stress for workers. Additionally, the lack of guaranteed hours can hinder career progression and development opportunities, making these contracts a contentious issue in the modern workforce.
Below, we have provided a comprehensive overview of zero-hours contracts, their legal implications, best practices for both employers and employees and proposals to reform these controversial employment contracts.
Employment status
Employees on zero-hours contracts can be classified as workers or employees, depending on the nature of their work and the terms of their contract. This classification affects their rights and entitlements.
- Workers – Entitled to basic employment rights such as the National Minimum Wage, paid annual leave, and protection against unlawful discrimination.
- Employees – Have additional rights, including statutory sick pay, maternity/paternity leave, redundancy rights, and protection against unfair dismissal.
Rights and entitlements
1. Pay – Workers on zero-hours contracts are entitled to the National Minimum Wage or National Living Wage, depending on their age. Employers must ensure that workers are paid for all the hours they work, including any time spent on mandatory training or on-call duties. As of April 2024, the current pay rates in the UK are as follows:
- National Living Wage (for those aged 21 and over) – £11.44 per hour
- National Minimum Wage (for those aged 18 to 20) – £8.60 per hour
- National Minimum Wage (for those under 18) – £6.40 per hour
- Apprentice Rate – £6.40 per hour
2. Holiday pay– Zero-hour contract workers are entitled to paid annual leave. The amount of leave is calculated based on the hours worked. Typically, this equates to 12.07% of the hours worked over a year.
3. Sick pay– Employees on zero-hours contracts may be entitled to Statutory Sick Pay (SSP) if they meet the eligibility criteria, including earning above the Lower Earnings Limit.
4. Maternity and paternity rights– Employees on zero-hours contracts are entitled to maternity, paternity, and adoption leave and pay, provided they meet the qualifying criteria.
5. Protection against unfair treatment– Workers on zero-hours contracts are protected against unfair treatment and discrimination. Employers cannot penalise workers for refusing work or asserting their employment rights.
Best practices for employers
1. Clear communication– Employers should clearly communicate the terms and conditions of zero-hours contracts, including the nature of the work, pay rates, and the process for offering and accepting work.
2. Fair treatment– Employers should ensure that zero-hours contract workers are treated fairly and consistently with other employees. This includes providing equal opportunities for training and development.
3. Record keeping– Maintaining accurate records of hours worked, pay, and leave entitlements is crucial for compliance with employment laws and for resolving any disputes that may arise.
4. Regular reviews– Employers should regularly review their use of zero-hours contracts to ensure they are meeting business needs and complying with legal requirements. This includes assessing whether zero-hour contracts are the most appropriate arrangement for their workforce.
Potential changes to zero-hour contracts
Prior to the General Election, the Conservative Government had passed legislation whereby those engaged on zero-hours contracts would have the legal right to request written terms that better reflect the reality of their working arrangements. This legislation has now been shelved by the Labour Government who has recently reemphasised its own aim to end the “one-sided flexibility” in employment, which they believe unfairly benefits employers at the expense of workers.
Under current proposals, the Government has said that it will:
- Ban exploitative zero-hour contracts – Labour plans to prohibit contracts that do not guarantee a minimum number of hours.
- Provide workers with the right to contracts that reflects the number of hours they normally work – Workers would have the right to a contract that mirrors the hours they typically work, based on a 12-week reference period.
- Notice for shift changes – Workers would receive reasonable notice for any shift changes, with compensation for short-notice cancellations.
For more details of the other proposed changes to employment law see our previous blog.
How can we help?
Laura Kearsley is a Partner in our expert Employment Law team. Laura has a strong reputation in all aspects of employment law, including Employment Tribunal litigation, discipline and grievance issues, and unfair and constructive unfair dismissal claims, and has particular experience in developing HR support services for businesses.
If you would like any advice concerning the subjects discussed in this article, please contact Laura or another member of the team in Derby, Leicester or Nottingham on 0800 024 1976 or via our online form.
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