Contracts of Employment: Carrot or Stick – You Decide?

In seasonally reliant retail businesses with tight margins the zero hours contract is often viewed as a Godsend, the all singing all dancing document that gave the company the flexibility it needed. But now some political bodies view them as a way that employers can avoid their responsibility towards their employees.

It can be said that if used properly the zero hours contract is a brilliant tool, providing flexibility for both employers and employees. But wrongly used, they can be unethical and exploitative.

After the CIPD carried out a study of 1,000 employers is estimated that around one million employees were on this type of contract. Vince Cable, The Business Secretary, announced this week that he is to review the use of the zero hours’ contract due to concerns that it is being abused by some employers.

In the current climate employers may not be able to offer full time, or set hours of employees but may need to increase their resource as and when required quickly and effectively, especially if their business is seasonally adjusted. For employees such as, parents of young children, carers or students, the flexibility enables them to organise their working life around their home commitments. It can also be used by people in full time employment elsewhere to bump up their income when required. Employees also benefit from certain employment rights, such as paid holiday and redundancy rights, which they wouldn’t have if they were only employed as a casual worker. But employers need to be aware of this to ensure they are not vulnerable to discrimination claims!

The downside - there is no guarantee of work being offered for one week to the next, not good if you are reliant on regular income to keep a roof over your head! Favouritism may become a factor; if your face fits you are more likely to be given work as opposed to somebody the manager doesn’t like. Employers may discourage the employee to work for other company whilst waiting for work to be offered which puts the employee in a compromising position; feeling they are duty bound to just wait in the hope that hours will come their way.

It’s clear to me that while workforce flexibility is highly desirable, indeed necessary, the use of zero hours contracts for employees is an unethical way to achieve it. It may not be illegal yet, but in my view it is wholly wrong. Any employer who asks an employee to make himself available and retaining all the rights to discipline while making no equivalent commitment to provide work or pay that employee is simply not behaving in an ethical fashion. It’s tempting to say that they are the Victorian mill owners of 2013, but that’s maybe a little harsh. You have to remember how tough it is for employers these days. Still, there are better ways to achieve flexibility. At least two methods suggest themselves. You could use PAYE employees and commit to an annualised hours scheme where there’s a minimum number of hours agreed and these are worked flexibly throughout the year to reflect and meet the need of the business. Then there’s casual working. This means there’s no mutuality of obligation either side so the employee can agree to work if he wants to and is available but doesn’t have to. At least one of my clients work very successfully on this basis. They run a highly successful event organisation and recruit and train casual workers on an on-going basis. Once trained the workers can access their events lists and book themselves to work on particular events.

With the review of these contracts pending, it’s wise for businesses currently using them to ensure that bad practice is not being followed. Ensure that the terms and conditions of these contracts have been communicated properly to staff, ensuring they are fully aware of their rights and what is expected of them.

If your employment contracts are more than three years old, they’re out of date. Contact us and we’ll make them easy-to-read, compliant and fit for purpose.

Russell HR Consulting provides expert knowledge in HR solutions, employment law training and HR tools and resources to businesses across the UK.

Subscribe to our free monthly HR newsletter. Russell HR Consulting employment law newsletters are emailed automatically to our ever-growing number of subscribers every month.