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Zero-hours contracts: what’s all the fuss about?

Employment Law & HR
BG Purple

Recent weeks have seen MPs and the media whipped up into a minor frenzy over the use of zero-hours contracts in British workplaces. Figures released earlier this month by the Chartered Institute of Personnel and Development are certainly illuminating.

They estimate that more than a million UK workers are engaged on zero-hours contracts; that’s around 3% of the UK workforce and more than four times the official estimate. Further research also suggests that young people under 24 are most likely to be on zero-hours contracts and that they earn on average £6 an hour less than other workers. 

As is the way of these things, politicians are frothing with indignation at the rise of this new evil, despite the fact that casual work arrangements are as old as the marketplace itself. They also deftly fail to mention that many political parties and institutions often utilise these contracts (hullo local councils, yes we mean you). Soap boxes are creaking under the weight of moral outrage, big businesses are being accused of fat-cat tactics, inquiries have been ordered and no doubt at some point, somewhere, a head or two will roll.  

But what exactly is all the fuss about? Well, for a start, a major stumbling block in distilling the arguments is that many politicians and commentators have failed to agree on a common definition of a zero-hours contract. The truth is that there is no specific definition, and certainly no legal one. Getting to the bottom of the quandary necessitates some legal chat I’m afraid; stay with me while I examine the various legal interpretations and what the consequences are. 

The first interpretation is that a zero-hours contract is a contract under which the employer does not guarantee to provide the worker with any work and pays the worker only for work actually carried out. Crucially, the worker is expected to be available for work when or if called on by the employer. A person engaged on this sort of contract is likely to be considered an employee and therefore has full employment rights (subject to qualifying service for unfair dismissal claims). 

By contrast, other employers commonly use the term “zero-hours contract” simply to describe a casual or “bank” worker contract under which the worker is free to accept or refuse work when offered. It is this lack of "mutuality of obligations" which defines a worker contract and usually prevents the worker from having full employment rights. This interpretation means that the person is unlikely to be considered an employee (based on the contract alone- what happens in practice might change this). 

“What?” I hear you cry, “a casual worker? But do they not have rights under the law anyway?”. Why yes they do, my observant friends. A worker is a creature of statute gifted to us by our European cousins in Brussels. Workers are entitled to many of the same rights as employees, such as the right to holidays, to sick pay, to minimum wage and to raise HR and whistleblowing claims. They do not have the right to raise unfair dismissal claims.  

However, remember that even employees need two years’ service to raise unfair dismissal complaints. Defenders of zero-hours contracts have pointed out that, in high turnover sectors such as retail and hospitality where use of these contracts is widespread, staff are unlikely to make it to the two year mark whether they are employees or workers. 

The other concern of opponents of zero-hours contracts is that, naturally, working patterns leave staff with a great deal of uncertainty. The counter-argument that has been made is that many workers like the flexibility this affords them. After all, that has always been the nature of a casual contract. And, at least one commentator has noted that most employers are not using these contracts to trample over staff and their rights, but to adapt and survive in a challenging economy.  

As it stands the economy is far from booming and use of zero-hours contracts, in whatever form, is on the rise. Businesses have said that the flexibility this gives both employer and employee means that they have been able to offer more employment to meet demand than would otherwise have been the case. 

Whatever the answer, it is unlikely to be the case that an outright ban (as some trade unions have called for) will fix this problem. As ever, some unscrupulous employers may abuse the use of zero-hours contracts, but for many employers and staff, the zero-hours system is one that works well. What certainly does NOT help the debate is that the media and politicians fail to recognise that there is a spectrum of employment relationships and it is not correct to assume that all employers use zero-hours contracts in the same way. Readers with strong views on the matter who want to contribute to the debate are welcome to do so through our LinkedIN discussion group.

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