What you need to know about zero-hours contracts ahead of Christmas

What are zero-hours contracts?

A zero-hours contract is a non-legal term which refers to an agreement between two parties through which one is expected to carry out work for the other but where there isn't a set minimum number of contractual hours that an individual has to work.

While considered to be ‘atypical', zero-hours contracts, like more traditional contracts, still need to outline the employment status, rights and obligations of those undertaking the work.

They must state what the person will be paid if they undertake work, and what they can expect to happen should they turn down any work that is offered to them (if indeed that is an option, as some will always be obliged to accept).

What rights do people with zero-hours contracts have?

Individuals working with zero-hours contracts have numerous basic entitlements under UK law, which include:

• Those aged over 23 are entitled to the National Living Wage, while those aged under 23 will be eligible for the National Minimum Wage.
• Many of those on a zero-hours contract will be entitled to Statutory Sick Pay (SSP) if they meet particular criteria, including whether they've previously worked for the employer, and if they've earned at least £120 per week for the past eight weeks.
• They are entitled to the same rest breaks/days as other employees with more traditional contracts.
• Most recently, a landmark ruling by the Supreme Court made it clear that any employee or worker in the UK who has a permanent contract but works part of the year, including those on zero-hour contracts, is entitled to 5.6 weeks' of annual leave.
• The amount of leave cannot be pro-rated based on the portion of the year when work is actually done; annual leave must be calculated and paid using the method set out in the Employment Rights Act 1996 (ERA); and the average earnings of those on zero-hours contracts (over the previous 52-week period) must be used to calculate holiday pay.

When calculating pay for these persons, if there are any weeks within the 52-weeks prior to the period of leave in which the individual did not work and therefore did not earn, the employer must discount this and calculate the pay based on a full 52 weeks before leave in which the individual worked.

Employment status

There are three core types of employment status: employee, worker and self-employed. In terms of their legal rights, those on zero-hours contracts could be considered as either employees or workers, but what they actually are will usually depend upon what it states within their contract or how the working relationship works in practice.

It is likely that most individuals on zero-hours contracts will be classed as workers simply due to there being no mutuality of obligation. Employers need to be certain about which category their zero-hour contractors belong to, and then consider the rights that they will subsequently be entitled to.

Although zero-hours contracts have become progressively more popular as business owners look to reduce their costs and improve dexterity in an ever-challenging commercial environment, it's still important to properly consider how working in this way can affect long-term sustainability and stability. After all, they don't adhere themselves well to succession planning, particularly for small businesses.

Tina Chander is head of employment law at Wright Hassall

www.wrighthassall.co.uk