Zero hours contracts – why so controversial?

You may have seen various news items over the past few months on zero-hours contracts. The Chartered Institute of Personnel and Development (CIPD) estimates there are more than one million zero-hours contracts in place across the UK, with one in five employers having at least one employee on zero-hours.

Zero-hours contracts can be beneficial for both employers and employees, as they create flexibility for meeting business demand, and allow workers more flexibility over their time. However, they can also create uncertainty for workers over earnings and employment rights, hence the on-going debate and controversy.


Key points

The government are now saying that jobseekers risk losing their benefits if they turn down certain zero-hours contracts without good reason, so it looks like they are here to stay for the meantime. Key points to note about zero-hours contracts are:

  • There are three main types of employment status: employee, self-employed and worker. Individuals on zero-hours contracts will usually be employees or workers.
  • The individual’s employment status will depend on what the contract says and how the arrangement operates in practice.The tests to establish the correct status of employee, worker and self-employed are established by case law.
  • Zero hours contracts normally mean there is no obligation for employers to offer work, or for individuals to accept it.
  • If there is an employment relationship, an employee on a zero hours contract will acquire the same comparative rights as other employees e.g. rights of unfair dismissal, redundancy payments and maternity/paternity pay. Entitlement to some dimensions of employment rights, pay and benefits may be linked to the average number of hours worked or years of service (if applicable) and worked out on a pro rata basis in comparison to full time employees.
  • Zero hours workers have the same employment rights as regular workers, although they may have breaks in their contracts, which affect rights that accrue over time. Zero hours workers are entitled to annual leave, the National Minimum Wage and pay for work-related travel in the same way as regular workers.



In businesses where you have fluctuating peaks in demand, zero-hours contracts may be a good option for helping you to supplement staffing levels whilst controlling costs. Benefits to the business include an easily accessed pool of staff to assist when demand arises and it can be a cheaper alternative to agency fees. Zero-hours contracts may also help you to attract applicants who welcome the flexibility and perhaps have other work or caring commitments they are juggling.


Effect on motivation?

However, it’s worth considering what impact the introduction of zero-hours contracts may have on the degree of control that you have over the work being done, and the motivation and productivity of the individual. As ‘zero-hours’ suggests, you are not committed to providing a specific number of hours of work.  Depending on circumstances, this lack of commitment on your part may be reflected back to you in low levels of commitment and motivation on their part. This could have far-reaching consequences on productivity, your employer brand and external customer perception, which could far outweigh the more visible benefit to your bottom-line that the introduction of zero-hours contracts might bring.

If you’d like to discuss zero-hours contracts further, or other alternatives and options, please call Claire on 07929 021850.

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