1. Zero hour contracts have been gaining popularity across certain sectors due to the flexibility they offer to both employers and employees. They allow employers to hire employees as required with no obligation to guarantee them minimum working hours. Employees, similarly, are under no obligation to accept work offered to them.
2. An employee under a zero hour contract is entitled to many of the rights of an employee under a traditional employment contract.
3. A zero hour employment contract has several advantages for both parties, however, controversy remains as many feel they are weighted in favor of employers and can lead to employee exploitation.
4. Zero hour contracts are commonly used in industries that experience fluctuations in demand such as those in need of seasonal workers or that require extra staff on short notice.
The zero hour contract has gained popularity over the last several years with such contracts now being commonplace across many sectors. Despite the flexibility they offer to both employers and employees, zero-hour contracts are not without their controversy, with some countries having introduced bans on them. In this article, we’ll explore some of the main advantages and disadvantages of zero-hour contracts from the perspective of both parties.
What does a ‘zero hour contract’ mean?
Zero-hour contracts, also known as ‘casual contracts’, are a type of employment contract where an employer is under no obligation to provide minimum working hours or the guarantee of work to the employee, and where the employee is under no obligation to accept work that is offered to them.
This type of employment contract is common in certain countries with employment law in Australia as well as the UK making this form of working style permissible. In 2021, there were around 917,000 workers on zero-hour contracts in the UK. However, in countries such as New Zealand zero hour contracts are no longer permitted as employment laws have been introduced to make employment practices fairer.
A zero hour contract can be characterized by the following elements:
- Employees are on call to work when required
- Employers are not obligated to give them work
- Employees are not obligated to accept work when asked.
What are an employee’s key zero hour contract rights?
Individuals on a zero hours contract will either have the employment rights of a ’worker’ or an ‘employee’, with the latter being more beneficial.
Below are some of the key employment rights employees on zero hour contracts are entitled to:
- Statutory sick pay
- Statutory maternity or paternity leave
- Protection against discrimination
- National Minimum wage
- Protection against unlawful wage deductions
- Statutory length rest breaks
- Working fewer than 48 hours a week (this can be opted out of)
- Protection from unfair dismissal
- Statutory minimum paid holiday
Zero hour contract advantages and disadvantages
There are many reasons an employer would choose to use zero hour contracts for its employees, however, there are pros and cons to doing so. To make an informed decision for your business needs, we have outlined the main advantages and disadvantages of zero hour contracts for both an employer and an employee.
Zero hour contract advantages
Below are some of the advantages for an employer and an employee of engaging in a zero hour contract.
Advantages for Employers
Advantages for Employees
Disadvantages for Employers
Disadvantages for Employees
Video explainer: Zero hour contracts
Horizons drafts compliant employment contracts — anywhere in the world
In recent years there have been a number of changes to employment/labor laws in the UK relating to matters such as Brexit, changes to IR35 tax as well as national insurance. This increasing complexity can make it challenging for employers to stay compliant with the required employment laws.
If you are looking to hire employees in the UK, Horizons can assist your organization with its compliance responsibilities by helping you hire employees with compliant employment contracts, allowing your business to focus on core business matters instead. Contact us today to find out more.
Frequently asked questions
Zero hour contracts can offer both employers and employees the advantage of a flexible working option. Engaging people in this way can allow employers to respond effectively to fluctuations in their business while giving employees the ability to accept or reject work as it suits them. However, such contracts are not without controversy and the debate continues as to whether they exploit workers due to factors such as the lack of security and stability which are offered by more traditional employment contracts.
Zero hour contracts are commonly used in industries where there is irregular or inconsistent demand for staff. Examples include areas that experience fluctuations in demand such as those in need of seasonal workers or that require extra staff on short notice. These industries typically include retail, hospitality, education and gig economy work.