Are zero-hour contracts legal in the UK?

Anyone employed on a zero-hour contract is classed as a worker or employee and retains all of their statutory employment rights. These include:

• entitlement to be paid at least the National Minimum Wage/National Living Wage
• statutory minimum level of paid annual leave
• statutory minimum level of paid rest breaks
• protection from discrimination

The rights an individual employed on a zero-hour contract is entitled to depend on whether they are considered to be a worker or employee.

This can be a fine distinction, and so employees are advised to obtain expert legal advice if they have any concerns.

There are a number of advantages that a zero-hour contract can bring to an employer. Whether or not it is the right move for your business is likely to depend upon the sector you are operating in and how well established you are.

Many businesses have unpredictable and fluctuating levels of demand in the early stages of their operation, making it hard to determine how many staff are required.

Zero-hour contracts can provide a solution to this problem, enabling the employer to take on additional workers as and when they are needed.

A business in these circumstances may opt to have a small number of full-time employees to carry out core tasks (e.g. admin, marketing) with a larger number on zero-hour contracts to call upon when required.

Some sectors experience levels of demand that vary greatly.

Common examples include retail and hospitality which are much busier in the build-up to Christmas.

Additional workers will be needed to help businesses meet this extra demand – but may not be able to be kept on when things slacken off in January.

Likewise, a concert venue will require many extra staff on nights that events are taking place, with the exact number required depending on how many tickets have been sold, and a football club may need stewards and catering staff if it receives a home draw in a cup competition.

There are many other areas with variable and unpredictable demand but where it is essential to have experienced and reliable staff to call upon – for example, care homes, warehousing, and delivery work.

Many businesses rely heavily on certain members of staff who have particular skills – such as a data processor experienced in using a particular computer program.

Should that individual be forced to take time off work due to ill health, their absence could have a significant impact on the business’s activities.

Having a zero-hour employee available with the required skills and who is familiar with your way of working could help ensure your business is able to continue operating with minimal disruption.

Even if you are an established business with a stable level of demand, you may find it beneficial to use zero-hour contracts if you are trying out a new product or service – with the unpredictability that can result from this.

Once again, zero-hour contracts could provide a practical solution to your business.

Some businesses prefer to initially hire staff on zero-hour contracts even if they are planning to eventually employ them full time. It enables them to assess first hand whether the employee has the professional and personal qualities required for the role.

An office manager, for example, may be satisfied that a potential admin assistant has the necessary qualifications and experience for the job, but wants to be sure that they are hardworking and reliable before making the arrangement full time.

While many businesses continue to use employment agencies to provide them with the flexible workforce they require, zero-hour contracts have become an increasingly common alternative.

The advantages of using zero-hour contracts rather than agencies include:

• Cost: zero-hour contracts avoid the need to pay agency commissions, which may be particularly high if the worker is subsequently taken on full time by the business.
• Control: the business is able to approach directly the specific workers it wants to carry out a role, rather than being reliant on the agency providing suitable staff.
• Continuity: rather than potentially being supplied with different staff on each occasion, the employer can use the same workers each time – building up a strong relationship and benefiting from the familiarity the staff gain with the business’s procedures and requirements.
• Convenience: with no need to go through an agency, the employer can contact a worker at short notice and outside of normal office hours if required

‘Zero-hour contract’ is a non-legal term – there is no legal definition of what such a contract entails.

Any individual employed with a zero-hour contract, however, is protected by existing employment legislation so it is very important that employers are aware of what their statutory obligations are.

Employers are advised to provide a written contract to zero-hour staff, detailing the terms of their employment, to remove the risk of misunderstanding.

It is important for both employers and employees to be aware of the potential advantages and disadvantages of zero-hour contracts.

Flexibility: Many businesses have fluctuating staff requirements due to variable demand for their products or services. Zero-hour contracts can be an effective way of ensuring that they have sufficient workers to meet times of high demand without running up unnecessary wage bills when demand slackens.
Cost effective: In addition to avoiding the risk of having too many staff at off-peak times, zero-hour contracts can also avoid the expense of obtaining temporary staff from agencies.

Building long-term relationships: When recruiting temporary staff from an agency, a company may have little control over the workers that are supplied. Zero-hour contracts allow employers to hire tried and tested individuals who can hit the ground running and work with the minimum of supervision.

Supporting business start-ups and expansion: Both when a business is initially starting up and if it subsequently diversifies into new ventures, it may face uncertain levels of demand. Zero-hour contracts can provide a practical solution to the problems caused by such uncertainty and so help the business to succeed.

Permanent employment opportunities: Should a business become sufficiently established that it requires more full-time staff, its pool of zero-hour workers could provide it with ready-made candidates for the roles and avoid the need for a lengthy recruitment process.

Lack of staff retention: Some zero-hour workers (such as an individual who has just been made redundant from a full-time role) see such work as a temporary measure while they find something more suited to their needs.  Businesses hiring zero-hour workers, therefore, may find they have a higher turnover of staff than if they had recruited full-time employees.

Increased uncertainty: Unlike a full-time employee, a zero-hour worker is under no obligation to accept an offer of work. This means that the employer may still find themselves with worker shortages at times of high demand.

Lack of quality control: Following on from the above points, if the employer’s preferred workers are not available, they may have to use other workers who do not perform to the same standards – with the resulting impact on customer experience.

Flexibility: For some employees, a zero-hour contract may be preferable to full-time employment as it enables them to fit their work in around other commitments such as family responsibilities, studying or another job.

Breaking the vicious circle: Job hunters can often find themselves in a position of being unable to get a job without experience – and unable to get experience without a job. Zero-hour contracts can be an effective stepping stone to full-time employment by enabling individuals to build up their CV while also earning money.

Icing on the cake: A zero-hour contract could provide someone with a valuable extra income. For example, they may work full time in an office job and also act as a steward at their local football club when required.

Lack of security and certainty: Workers on zero-hour contracts may find it hard to make long-term financial plans as they can’t be sure from one week to the next how much money they will be earning.

Unlike full-time workers who know exactly what their pay is going to be, zero-hour workers may have the constant worry of whether they are going to be able to pay all their household bills.

They may also find it hard on a personal level, for example by being unable to plan child care and social activities due to work opportunities arising at short notice.

Weakened bargaining position: The lack of security mentioned above may make it harder for zero-hour workers to assert themselves. Some may fear, for example, that turning down an offer of work, taking annual leave, or asking for a pay rise could create a bad impression and lead to them not being offered work in the future.

As we have seen from the above section on the pros and cons of zero-hour contracts, both employers and employees can find it beneficial to use zero-hour contracts due to their particular circumstances (for example, where the employer needs flexibility over their staffing levels, and the employee requires flexibility over when they work).

Problems can occur when either the employer or employee has entered into a zero-hour contract when another form of working arrangement (e.g. full-time employment) may have been more suitable for their needs.