Zero hours - zero obligations?

The use of “zero hours” contracts by employers has once again been under the spotlight in the media in recent months – but why? Lee Rogers analyses the issues.

The use of “zero hours” contracts has always traditionally been associated with the retail, catering, cleaning and security sectors where work fluctuates unexpectedly. However, more recently the practice of engaging staff on “zero hours” contracts has been adopted by employers in the education and health sectors and hence the increased focus by the media on their use.

Furthermore, it was recently reported in the media that based on the Government’s own statistics more than 200,000 British workers were engaged on these type of contracts.

The TUC and the unions, who are the biggest critics of the use of “zero hours” contracts, argue that they strip workers of their rights and are exploitative. The unions also complain that employers are increasingly using “zero hours” contracts in order to avoid the Agency Worker Regulations 2010, which entitle agency staff to the same basic terms and conditions as permanent employees after twelve weeks and the additional costs which that may bring.

However, the CBI says that the UK’s flexible labour market, and the use of “zero hours” contracts by employers, is crucial to economic recovery. The use of “zero hours” contracts also allows employers to manage their workloads and their workforce more effectively, particularly in sectors which are subject to peaks and troughs in demand.

So what is a “zero hours” contract?

A “zero hours” contract is not a legal term and is used by different employers to mean different things.

It is sometimes used where the individual is not engaged by the employer to work a set number of hours, but rather they are engaged on an ‘as and when required basis’. The individual is only ever paid for the number of hours that they actually work. Usually, the “zero hours” contract provides that the employer is not under any obligation to offer the individual any work and, once the individual is offered work, they are generally not under any obligation to accept it. This lack of ‘mutuality of obligation’ is crucial because it means that the individual is not regarded for employment law purposes as an ‘employee’. However they might still be regarded as being a ‘worker’ – and this distinction can be crucial.

Alternatively, zero-hours contracts are sometimes used to mean an arrangement where the individual is employed throughout the time they are engaged, but the individual does not have the certainty of any specific number of working hours in any given week.  These employees have the same rights as others, but without the certainty of having any hours or earning any pay each week.

What is the difference between an employee and a worker?

An employee is entitled to the full suite of employment rights whereas a worker is not. For example, a worker is not entitled to protection from unfair dismissal (even with the necessary qualifying service), a written statement, protection in a TUPE transfer situation, the right to a statutory redundancy payment and maternity and paternity rights

However, individuals engaged as workers on “zero hours” contracts are entitled to some limited employment rights including the National Minimum Wage and holiday pay.

What are the main issues in using a “zero hours” contract”?

Ensuring that your contract genuinely means what you intend, is of the utmost importance where you want to use such a contract. If, for example, you adopt a “zero hours” contracts on the basis that the individual is not an employee of the business, it is crucial that the “zero hours contract” is carefully drafted to reflect this fact.

There is also a risk that if you regularly allocate work to an individual and that individual regularly accepts and carries out that work it may come to pass that the individual is an employee and entitled to all of the employment rights associated with being an employee. Therefore, if you are an employer who uses “zero hours” contracts you need to ensure that not only is the contract carefully drafted but you also need to be alive to the possibility that how the arrangement works in practice might alter the rights of the individual, including making them an employee.

Furthermore, and as noted above, “zero hours” contracts are not entirely obligation free and an employer will still need to ensure that systems are in place to ensure that individuals are being paid at least the National Minimum Wage and are entitled to take and be paid for their statutory holiday.

As an alternative to “zero hours” contracts employers may want to consider the use of engaging employees on short fixed term contracts or using agency workers to step in to deal with peaks in demand to supplement their core team of employees.

In summary, employers need to think twice before using “zero hours contracts” as they are not entirely risk free and may result in media criticism.

Lee Rogers is an Associate at Weightmans. He can be contacted by This email address is being protected from spambots. You need JavaScript enabled to view it..