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Zero-Hour Contracts: Necessary or Desirable?

Most companies have their peaks and troughs during the year. Some will be run off their feet at Christmas, whereas others will be very quiet then. It’s dependant on your business type, clients, the environment and often the weather. When I worked for Whitbread years ago, I can remember one of the managers saying that the sun was their best salesperson. No doubt sales of waterproofs and umbrellas will have soared in the last month or so, even though it’s the middle of June. Sales of BBQ equipment and paddling pools are likely to have dropped. One of the difficulties of running a business is being able to plan when you will and won’t be busy.

Given the unpredictability of markets, at peak times many retailers have used a contract which provides workers with a job which is dependent on the ebb and flow of trade. This contract is commonly referred to as a ‘zero-hours contract’. The zero-hour contract requires the individual to be available for work but the employer is under no obligation to provide work. Just recently, there’s been a lot of media interest in the use (and abuse) of this type of contract. While not illegal, I must nail my colours firmly to the mast by saying that I consider them to be unethical and do my best to discourage use.

In May by the Office of National Statistics reported that the number of 16-24 year-olds on zero-hours contracts has more than doubled since the start of the economic downturn. In addition, the number of zero-hours contracts being used in the NHS has risen by a quarter in two years to almost 100,000 (up 24%),with the majority being nurses and healthcare assistants.

I rarely agree with politicians of any flavour, but Lord Oakeshott, the Lib Dems’ former Treasury spokesman, recently comment resonated with me. He said that the use of zero hours contracts is “ ….. a return to the discredited old system of casual labour on the docks. It cocks a snook at the minimum wage if people have to hang about on call unpaid.” A zero hours Britain is a zero-rights Britain in the workplace.” Ironically, the House of Lords was using zero hours for its own staff, though this may now stop.

Zero hours means that the nature of the contract means that employers can change shifts every week and staff members can be given extra hours when it’s busy but see their shifts cut to zero when it’s quiet. There is absolutely no guarantee of a steady income which can be tough for some people; particularly those who have a family to support. Business secretary Vince Cable has said: “There has been anecdotal evidence of abuse by certain employers – including in the public sector…” He went on to add: “While it’s important our workforce remains flexible, it is equally important that it is treated fairly.”

You can achieve flexibility without being using a zero hours contract. There are at least two distinct ways of doing this. One is to use an annualised hours contract. This means that you and the employee agree to a minimum number of hours to be worked by the employee a year. The hours worked per month will vary depending on the needs of the business, but you pay the same wage each month (or week) because the total annual hours are divided by the pay period and paid irrespective of the hours worked.

The other route to flexibility is to use workers, as opposed to employees, for casual type work. These people are not obliged to hang around at the employer’s convenience and can accept work if it is offered or reject it with impunity. They operate on a casual ‘pool’ type basis. One of our clients who regularly uses casuals for short term events offers a self-booking system, so the hard graft of ringing round to get cover is removed.

Zero hours contracts may well be in their final days. The Department for Business, Innovation & Skills has confirmed that Government officials will be speaking to a variety of stakeholders, including trade unions and industry bodies, to better understand the issues surrounding the use of such casual contracts and there is a strong groundswell of opinion that they should be outlawed. Time will tell.

If you need help sorting out flexible working , contracts of employment or any other HR issues, give us a call.

We’re running two Introduction to Employment Law workshops this autumn. Our September date only has one space left. We’ve started taking bookings for new dates (6th and 7th November). See our employment law training page for more information.

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