Zero hour contracts are by no means a new phenomenon, however this issue has dominated recent press following evidence which suggests their use has been grossly underestimated. With this raft of media coverage, concerns have been raised about the ethical considerations of such contracts.
The Office for National Statistics estimated that 250,000 people in the UK were on zero-hours contracts at the end of 2012. However recently the Chartered Institute of Personnel and Development estimated that the real number is more than one million.
This has led the press to name and shame a number of high profile employers for the use of zero hours contracts. In the retail sector in particular, it has emerged that 20,000 of Sports Directs’ 23,000 employees are contracted on zero hours contracts, with 80 per cent of staff at pub chain JD Wetherspoon on zero-hours contracts and 90 per cent of McDonald’s employees in Britain also on such contracts.
Business Secretary, Vince Cable, is currently reviewing this matter and will decide in September whether a consultation over the use of zero hour contracts goes ahead.
A zero hours contract is a casual arrangement where an employer is not obliged to offer a worker any work and commonly, the worker is not obliged to accept any work where this is offered. Workers are only paid for the work that they undertake.
This allows companies to have a “bank” of staff to which they will offer work when shifts are available. This can work particularly well for the retail sector, which has natural peaks and troughs throughout the year with Christmas and summer sales.
Reports over the past few weeks have highlighted concerns that these zero hour contracts exploit workers.
There is a concern that no guarantee in work hours creates uncertainty for workers and a lack of stability. Indeed, the research from the CIPD found that 16 per cent of workers reported that they were often not given sufficient hours each week. It is therefore considered difficult for workers to plan and budget for their needs and their fluctuating income levels might make it difficult to obtain credit cards or mortgages. There are also concerns about the impact these contracts have on worker morale.
Furthermore, workers on zero-hour contracts do not have the same employment rights as those employed under contracts of employment. For example, they can often be dismissed with minimal/no notice, they have minimal rights to claim unfair dismissal and no right to redundancy payments. As such, there is a concern that employers will take advantage of these contracts as a means to avoid their employment obligations.
Zero hours contracts allow for flexibility which can be very useful for employers in the sector, allowing retailers to manage fluctuations and avoid a significant wage bill when the work is leaner.
Whilst there has certainly been a backlash with regards to such contracts and those that adopt their use, as evidenced by the demonstrations outside branches of Sports Direct following the press reports, there are circumstances where such contracts can be used positively.
Certainly there are workers who appreciate the flexibility afforded by such contracts, allowing them to work on their own terms, only accepting work where it is convenient for them or when they require occasional income. Indeed, zero hour contracts give students the opportunity to accept part-time work, older or retired individuals to keep a hand-in, parents to balance childcare arrangements and workers employed in other employment to supplement existing income.
Employers may be attracted to the flexibility of calling on a workforce who are ready to work whilst minimising the wage bill by only paying such staff as and when required. For those employers considering engaging staff on zero hours terms, it is important to be aware of their responsibilities.
The terms of the employment relationship should be clearly set out in a contract. Employers should bear in mind that staff on zero hours are entitled to holiday pay and may be entitled to statutory sick pay if they meet the requisite thresholds.
Workers on zero hour contracts are entitled to receive the national minimum wage and employers should be aware that this entitlement extends to times when they are “on-call” i.e. at their place of work and required to be there. Likewise, such time is likely to be classified as working time and so employers can not require such staff to “clock off” during quiet periods but still remain on the premises.
Employers would be advised to adopt open communication with their work force, keeping them informed about the level of work available and how much they can expect to receive, thus providing staff with realistic expectations which might go some way to improve morale.
Furthermore, employers are cautioned not to be careless when ending the contract of a worker engaged on a zero hour basis. If a worker has been engaged for a long period of time, regularly offered shifts and accepting such shifts, there is a risk that the worker might have acquired employee status which gives them a right to notice pay and to make a claim for unfair dismissal.