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Zero hours contracts

A Zero Hours contract is a form of contract that a company may wish to use for casual workers where there is no guarantee of the amount of work available and they wish to appoint on an ad hoc basis. Where there is an employment relationship this involves obligations for the company to provide work and an obligation for the employee to carry out that work, as such there are various obligations and liabilities placed onto both parties. The advantage of a Zero Hours contract is that it provides for a more informal relationship which is suitable for casual workers.

There is no guarantee that the company will have to offer work and no guarantee that the worker will accept any work that is offered. The relationship that is created therefore  is not one of employee but self-employed contractor.

However, it should be noted that such contracts do not come without legal risks.

Even though a contract may be stated to be a zero hours contract and that there is no employment relationship, as with any self employed/employed grey area, the Employment Tribunal or Courts can decide that there is in fact an employment relationship. This in turn is generally decided by what is called the “control test”, focusing on the degree to which the so-called self employed person is able to decide when they work, how they work, the tools they use and whether they can sub-contract the work. If these factors are largely absent, it is likely there will be a finding that the degree of control is representative of an employer-employee rather self employed contractor basis.

With zero hours contracts, subject to the above caveat, a number of the employment provisions that relate to employees, particularly in relation to notice periods and unfair dismissal, can be avoided. However, there are a number of obligations which still apply; as with any worker they are protected from unlawful practices within the work place which include discrimination and health and safety.

The Zero Hours contract will usually state that any work offered is entirely at the company’s discretion. It means that the company can, if it has a down period, simply not engage the zero hours worker. However, companies do need to be careful if there are long standing relationships whereby the zero hours worker has a continual source of work and is used consistently by the company. There may come a point where he obtains full rights of an employee. It is important that companies take advice in relation to zero hours workers.

The advantage is that the company does not have to continue to engage the worker. The disadvantage is that they will not be obliged to work. Zero hours workers will still have to be paid the national minimum wage. In addition if the workers still on the premises are asked to wait around then this may be seen as working time under the Working Time Regulations 1998, if they are on call.

Using Zero Hours contract will enable companies to retain a pool of workers to fill temporary positions. The hours that a Zero Hours worker will undertake can be specified during each assignment. They will be entitled to breaks in accordance with the Working Time Regulations. In addition the company will need to consider whether they will work in excess of 48 hours a week, and if so, they will have to opt out of the relevant provisions in the Working Time Regulations.

Their holiday entitlement should be pro-rata in accordance with the amount of time they are working. A company can seek to terminate their arrangement by no longer providing work. Thy can also terminate immediately for gross misconduct in the normal manner. Generally speaking an employer will be protected against any unfair dismissal claim, however, they need to ensure that the worker has not worked for continuous periods which are sufficient to give them employee status. If, for example, they have been employed continuously for a year, then there is a chance that they obtain appropriate status and the company will need to review this at the relevant time.