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Zero Hour Contracts - Indispensable or Ineffective?

8th August 2013

Zero hour contracts have long been a mainstay in industries such as retail, hotels, catering, leisure, education and healthcare. They provide flexibility for these employers and enable busy times such as Christmas and the summer to be staffed by an experienced workforce, with the employer able to easily cut back on the number of workers during quieter periods.

However, new research from the Chartered Institute of Personnel and Development (CIPD) suggests that one in five employers has at least one person on a zero hour contract and that there could be approximately one million zero hours workers in the UK - four times higher than official statistics had previously suggested. This news, coupled with the planned protests outside Sports Direct stores after it was revealed that 20,000 of their 23,000 workers are employed on zero hour contracts, means this employment practice is facing greater scrutiny than ever before. Unions have consistently been asking for them to be banned and the Government is currently reviewing them and it will decide in September whether to hold a formal consultation on specific proposals.

Those employers who use zero hour contracts contend that getting rid of them entirely would not only be rash, it would be unviable. Flexibility is important they argue, not only for themselves but for casual staff unwilling to make a long-term commitment to work – such as students, older people and parents.

However, there are a few legal issues employers must be aware of when taking on staff on a zero hour basis. For instance, generally a member of staff on this type of contract would be classed as a ‘worker’, meaning they would not be entitled to the same levels of protection as an employee. However, the CIPD found that 38 per cent of the people they surveyed on zero hour contracts actually described themselves as working full-time – 30 hours plus in a week. If this is the case, it potentially creates an unintentional employee relationship which could provide the staff member with more legal rights if there was a dispute.

While a staff member on a zero hour contract is generally not entitled to sick pay, they are eligible to 28 days pro-rata holiday – the employer must be aware of this and track carefully who is entitled to how many days off – a flexible workforce can make this difficult to monitor.

From a non-legal perspective, a large bank of zero hour workers can create an insecure and disaffected workforce. When customer service and brand loyalty is essential, for example, in the retail sector, savvy managers may well question the benefits of having a large majority of staff on such temporary contracts.

The recent headlines over Sports Direct and the concern about the number of people working under zero hour contracts has prompted calls for the Government to take action on the use of these contracts. Time will tell what the future holds for zero hour contracts but undoubtedly – when used responsibly – they can be indispensable for certain industries.

The contents of this update are intended as guidance for readers. It can be no substitute for specific advice. Consequently we cannot accept responsibility for this information, errors or matters affected by subsequent changes in the law, or the content of any website referred to in this update. © Mundays LLP 2013.

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