The new government is taking steps to limit the use of zero-hours contracts and has promised to introduce legislation for this within its first 100 days of power.
Although the government had originally planned to outlaw all zero-hour contracts, that position has been reined back somewhat over the last seven years. Going forward, zero-hour contracts will remain an option for some employers and employees but only under certain circumstances.
Nonetheless, if the government’s legislation goes through as planned, many will have to adapt.
So what is the new government promising to do? Here's what businesses need to know.
Rather than an outright ban, the government is expected to require standard contracts to be offered to workers who have regular hours for 12 weeks or more.
However, those who are already on zero-hour contracts are likely to be given the option of staying on them, and companies will still be able to employ seasonal workers on zero-hour contracts.
It’s expected that the first step will be for workers to be given the right to request a predictable work pattern after a minimum service of 26 weeks, with further changes expected in the future.
Despite the controversy, zero-hour contracts can be beneficial for both employers and employees because of the flexibility they offer.
When they’re used fairly and amicably, they enable workers to work as often or as little as they want while employers can adjust their workforce according to their present needs without the commitment of employing people for a specified number of hours.
This can have significant cost savings for employers and gives them the flexibility to respond to unpredictable demand by increasing or decreasing the number of people working at any one time. As a result, zero-hour contracts are particularly common in retail, hospitality, care work, logistics and the gig economy where demand can fluctuate.
Another benefit is that it gives employers a low-cost route toward recruiting permanent staff, by rewarding the best zero-hour workers with the offer of a fixed-hour or permanent contract.
For employees, the contracts can enable them to work around their personal commitments such as their family lives or education, or even other jobs, with many students working zero-hour contracts which enable them to work around their studies.
By their nature, zero-hour contracts do not offer predictability or reliability for either party. It means that employees do not know how many hours they will be working in future nor when their shifts are likely to be. This means their income levels can be uncertain and subject to change from one week to the next. Some zero-hour workers can also be ineligible for some benefits reserved for permanent employees, such as pension and redundancy rights, because they may be classed as workers rather than employees.
Employers too can experience problems from this as workers are not obliged to work every shift they are offered. Even if a company has a large number of zero-hour workers, there may still be times when they’re unable to get the people they need at a specific time. There have been many cases when employers have tried to overcome this by pressuring employees to accept certain shifts. This mainly occurs because employers are under no obligation to offer a worker other shifts in future if they turn down previous offers which can make employees feel obliged to accept every shift that’s offered to guarantee an income.
Indeed, it’s been reported that 36% of zero-hour workers feel they have no choice when selecting a job and 72% said they would not be on a zero-hours contract if they had a choice.
This adds to the perception that zero-hour contracts are better for the employer than the employee but there have also been some high-profile examples of exploitative practices, with reports of companies putting their whole workforce on zero-hour contracts to reduce costs, keeping people on zero-hour contracts permanently, pressuring people to work even when sick or bereaved, or cancelling shifts at no notice.
Employers should take care not to use zero-hour contracts on a permanent basis or for regular hours over a continuous period, and they should instead only use zero-hour workers to manage peaks in demand. They are also obliged not to try to stop workers on zero-hour contracts from working other jobs through exclusivity clauses, treating them less favourably or dismissing them for doing so.
Despite their drawbacks, the benefits of zero-hour contracts, many sectors rely on them: 3.1% of all workers are on zero-hour contracts, including 27% of people working in accommodation and food, 18.1% in health and social work and 8.5% of people working in wholesale and retail.
For these sectors, there is a risk that action that prevents or curtails their ability to use zero-hour contracts would increase their costs and potentially make them less capable of responding to fluctuations in demand, limiting productivity.
However, because the government has struck a more moderate course of action than an outright ban, the impact will be limited as zero-hours will remain an option for many, even if such contracts are limited to 12 weeks of working regular hours.
While there are still some areas that require fleshing out between now and when legislation is put forward, employers should prepare for these changes in advance by reviewing their employment contracts and the impact this may have on the future of their business.
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