Future changes to zero-hour contracts

Zero-hour contracts have attracted headlines in the last couple of years, due to their remarkable increase that has flooded the employment market. According to the Office for National statistics, around one in fifty people in the UK were employed on a zero-hour basis in 2013. Whilst a survey by the Chartered Institute of Personnel Development estimated that there are more than a million zero-hours contract workers – 3.1% of the UK workforce. The negative response from both the government and from employees, is founded upon the lack of security which zero-hour contracts offer the labour market. This insecurity stems from the fact that staff are paid only as and when they are needed, and importantly at short notice, which as a result prevents the employee from scheduling other potential work opportunities. There is also no legal definition for zero-hour contracts, but the Chartered Institute for Professional Development defines it as follows:

‘An agreement between two parties that one may be asked to perform work for another but there is no minimum set contracted hours. The contract will provide what pay the individual will get if he or she does work and will deal with circumstances in which work may be offered and possible turned down’

Zero-hour contracts were initially set up to offer flexible work for students, older people and candidates looking to top up their income. Yet some clearly exploitative employers are abusing the flexibility which these contracts offer. Vince Cable, the business secretary, is forging an attack on these contracts and proposing that those on zero-hours contracts should have the right to request a fixed term contract. In addition, they should be able to request permanent work after 12 months. There is also a parliamentary bill which, if the legislation is carried out, will limit the use of zero-hour contracts. This parliamentary debate was adjourned last year and is set to resume on the 23rd January, 2015. Cable also plans to ban exclusivity clauses in zero hour contracts that prevent casual employees from working with other companies. This ban was introduced in July 2014, by the Small Business, Enterprise and Employment Bill and published by the UK government. In terms of the rights of an individual who is engaged in a zero-hour contract there is a great deal of variation. This is due to the fact that there is is no legal definition of a zero hours contract. This means that pay arrangements and benefits, can vary from business to business. However, zero-hour workers could legally be employees, even if the contract states otherwise. If they are not legally considered an employee, an individual may potentially fall within the wider bracket of a worker. If they are considered a worker, they would accrue holiday pay, and be entitled to statutory sick pay.   In conclusion here are some disadvantages for both the employee and the employer:

  • For the employer there is a risk that the zero hour worker obtains legal employment rights that the employer had not anticipated.
  • In contrast, the worker can enter a contract not appreciating the legal implication of not having any guarantee of work.
  • Some contracts also have exclusivity clauses, which are there to prevent employees working for any other employer.
  • It can be difficult for the worker to manage their finances and claim benefits to tax credits if they do not know what their hours of work or earnings will be.

All in all, zero-hour contracts leaves a grey area in contractual law and it is hoped that the government consultation  will create new legislation which is fairer and more understanding of the employee’s position.