It won’t surprise you that in today’s gig economy, companies around the world are capitalizing on casual contracts to build or augment their workforce with temporary, flexible employees. In the UK, about 225 thousand people had zero hour contracts in 2000, a number which nearly quadrupled to 896 thousand by 2019. Many of these workers are in the retail and hospitality industries. However, you can find zero hour contracts in far-flung fields such as academia, education and banking.
As they’ve become more popular, these contracts have also become more controversial. Here, we’ll sort through zero hour contract, what they can do —and what they cannot do for your business.
A 0 hour contract is a type of work contract that does not guarantee employees any minimum number of hours. This means that employees have no guarantee of work (or thus of payment) from their employers.
Exact circumstances will differ by contract. Zero hour employees may be considered “on-call” and employers often offer them work on very short notice. In some instances, zero hour contract employees may be able to accept or turn down assignments according to their own discretion, while some contracts oblige workers to accept any work that an employer offers.
This type of contract is much more common in the UK than in US, where most contracts are considered to be “at-will” agreements. Around 2.3% of the workforce in the UK has a zero hour employment contract although because this contract is for seasonal staff also, this number increases in mid-Summer and around Christmas.
A well-written contract will respect zero hour workers rights while also giving businesses the flexibility they desire. We’ve included a zero hour contract example below.
0hr contracts are suitable for when businesses need extra hands on deck to cover temporary shortfalls in staffing.
This might mean supplementary staff to help with the holiday rush at a retail store, or workers to help out sporadically at events as servers or clean up crew. Substitute teachers or gig workers are other examples of workers who do not have a guarantee of hours. Zero hour contract positions tend to be part-time by nature.
Businesses looking for flexibility and economy may consider alternatives to zero hour contracts such as:
- Compensating permanent staff with overtime to pay to deal with temporary fluctuations in demand.
- Recruiting a part-time or fixed-term contract employee if the business has new or changing needs.
- Offering annual hours contracts to cover seasonal peaks in demand.
- Hiring through an agency if you need temporary staff or for last minute jobs.
It is important that employers using these contracts understand zero hour contract rights. A zero hour contract offers employees no guaranteed hours, sick pay, pensions, parental leave, redundancy entitlements or notice periods.
Although their jobs may be nontraditional, employees with 0 hour contracts are entitled to:
- The state or national minimum wage
- Annual leave or time off (in the US, requirements for paid time off will vary by state).
- Pay for being on call
- Pay for work travel
- Protection from discrimination
Employees can also work more than one job. In the US, many states have ruled that non-compete clauses are unenforceable. In the UK, there is a ban by the Small Business, Enterprise and Employment Act, on exclusivity clauses which bar an employee from working for other companies.
Employers are responsible for protecting o hour contract rights and for providing safe work environments for these employees. When terminating zero hour contract, employers do not, under zero hour contract law, need to provide notice.
Employers should be wary of any implied contracts they may be creating with 0 contract employees. If employers treat staff as permanent employees, they may assume the rights attendant to that employment status, regardless of what their contract says.
0 Hour Contract: Advantages & Disadvantages
Employers enjoy 0 hour contracts for their versatility. While zero hour contracts may not be ideal for workers looking for continuous employment, they may be suitable for others. This may include workers hoping to pick up hours as a hobby or to boost their existing wages. Women with young children to care for, the elderly, or students may all prefer a 0 hrs contract over a permanent position because of the flexibility.
Advantages of Zero Hour Contracts
- Flexibility: Zero hour contracts allow businesses to meet increased demand during high seasons or specific events while remaining agile. The flexibility of these contracts is also appealing to certain demographics of employees who may not be interested in full time working contract.
- Growth: New businesses may be unsure of where to focus talent to yield the best results. Zero hour contracts mitigate the risk of hiring too many workers whose skills may eventually end up being unnecessary.
- Simplicity: Because zero hour contracts are not usually supplemented with benefits, the exchange is refreshingly straight forward for employers who don’t have to organize benefits packages.
- Foot in the door: These contracts may give inexperienced workers the opportunity to work in a new industry. Such a relationship may eventually lead to a permanent contract.
Disadvantages of Zero Hour Contracts
- Unpredictability for the employer: Because zero hours employees are often not obliged to accept assignments, businesses that rely on these workers risk not being able to get work done in time. They might incentivize quick turnaround work with a bonus, and make sure to keep workers in the know about upcoming projects.
- Precarity for the worker: The employer is not obligated to provide 0 hour employees with a minimum number of hours. This condition makes it difficult for these employees to manage their finances. Many employees prefer more stable incomes and the certainty of future work.
- Reduced employee engagement and retention: Employees with zero hour contracts may feel that they are not receiving the same treatment as permanent employees. This could be due to the lack of job stability and perks received. They will probably be on the lookout for permanent positions, which means employers may have a quick turnover rate for zero hour contract workers. They may result in newcomers and inexperienced workers to complete important projects.
Some say 0 hour contracts are the future of work, while others say that zero hour contracts are antiquated and out of step with the current needs of the workforce. Businesses moving forward with zero hour contracts will have to keep an eye on evolving regulations and best practices.
Written by Valerie Slaughter