Over the summer, zero hours contracts have come into sharp focus with their use being debated by trades unions, government departments and business leaders. So what are they, and are they a good or bad thing?

A zero hours contract can usually be described as some sort of ‘as and when’ or ad hoc agreement between an employer and a worker. The person looking for work is offered a contract by the business, but with no guaranteed hours whatsoever. Instead, if the employer has work it will be offered. If it does not, no work is offered and the worker will not be paid. Under some of these arrangements, if work is offered the worker must accept it. However in many cases the arrangement might be a lot looser and the worker would be free to turn work down.

There are pros and cons for this type of arrangement for both employee and employer.

For the employee, zero hours contracts can offer great flexibility. Work can be done around other commitments such as studying, so they can be popular with students.

The downside is that the worker has no guaranteed income whatsoever, earnings can fluctuate and, if there is a dispute, the employer could simply decide not to offer any more work, leaving the employee stranded.

Zero hours contracts are in widespread use in certain sectors such as catering and hospitality, and this has led to a debate about the casualisation of labour.

For the employer, zero hours contracts can have great benefits, leading to the creation of a flexible workforce and an ability to reduce costs easily if there is not enough work to go round. As well as being used in the catering and leisure industry they may also be found within local authorities, education and certain other sectors.

However employers who use this type of contract need to be aware that they do carry legal obligations with them. Work done under a zero hours contract (including time spent on call at the place of work) is subject to the national minimum wage. Rules on working time would also apply. Workers under zero hours contracts are entitled to holiday pay, and if the arrangement lasts for more than two years (or one in some cases) the employee could be building up entitlement to redundancy payments or to claim unfair dismissal if the arrangement has ended. Maternity rights, discrimination laws and whistle-blowing provisions would also affect this type of contract.

Estimates as to the numbers of people working under this type of arrangement vary, with the Office for National Statistics estimating 250,000 but the Chartered Institute of Personnel and Development suggesting that the figure could be closer to one million.

Trade Unions have called for zero hours contracts to be outlawed and the Business Secretary, Vince Cable, has ordered his department to carry out a review into their use. However, other organisations such as the Work Foundation, have urged caution. They point out that zero hours contracts do suit people who want to work flexibly, and suggest that their abolition would be misguided. Instead, they recommend that the department looks carefully at what constitutes best employment practice in this area, and at how vulnerable workers can be protected from abuse.

In practice, making such contracts illegal could be difficult without introducing some form of minimum guaranteed hours alongside the national minimum wage. However this issue might be seen as part of a wider debate about employment opportunities, minimum wage versus living wage, business regulation versus flexibility and the whole question of casualisation. There may be no easy answers, but getting a clear picture of how widespread this practice is, and its effects on the UK working population, would be a valuable first step.

Published in…

Updates: For employers: Contracts and incentives |

Share this update on