What is a zero hours contract?

A zero hours contract is one where the employer doesn’t guarantee the individual any minimum number of hours of work. It is sometimes referred to as a casual contract.

It is important to remember that a zero hours contract does not mean no rights for the individual. The individual engaged on a zero hours contract can have any type of employment status depending on the circumstances: worker, employee or even self-employed.

Are zero hours contracts legal?

Yes, it is lawful to engage someone on a zero hours contract. Although their use continues to be controversial, and some reform has been introduced to provide greater protection (e.g. written statement of terms from day 1 for all workers), it doesn’t look as though zero hours contracts will be going anywhere for the time being. You are also still responsible for the health and safety of employees on zero hour contracts.

What are the benefits of a zero hours contract?

For employers the biggest benefit is being able to meet fluctuating demand and having the flexibility to adapt the workforce to that easily. It’s usually a more cost effective option than using agency workers, who otherwise might be used for short term/seasonal demands.

Zero hours contracts have benefits for individuals too – especially those who want flexibility in their working pattern. It helps balance other demands, like study and caring responsibilities.

What’s the downside of zero hours contracts?

The flexibility provided by a zero hours contract can be a double edged sword, for both parties.

Typically, the individual will not be obliged to accept work when offered, so you might find yourself without staff when needed. Loyalty and positive employee relations might also be more challenging in the context of a zero hours contract – which by its very nature creates distance.

Employers are not allowed to prevent staff on a zero hours contract from working for anyone else – including competitors – so it could present challenges to your business interests.

Practical points

From a practical point of view, it can be very complex administering rights around pensions and holiday to zero hours’ staff. Also, the confusion caused around employment status could lead to claims an employer might not have expected a casual member of staff to bring.