Zero-hours contract is not a legal term but one of a number of types of ‘atypical’ working. In the absence of a legal definition, the CIPD defines a zero-hours contract as ‘an agreement between two parties that one may be asked to perform work for another but there is no minimum set contracted hours'. The contract will state what pay the individual will get if they do work, and what will happen when they turn down work offered.

The exact nature of zero-hours contracts may differ from organisation to organisation. For example:

• Individuals on zero-hours contracts may be employees or workers – see more on employment status below.
• In some zero-hours contracts the individual will have to accept work if offered, but in others they will not.
• The pay arrangements and benefits provided may differ from those provided to people doing the same job with a contract offering guaranteed hours.

Because ‘zero-hours contract’ does not have a specific meaning in law, organisations should make sure that their zero-hours contracts set out the employment status, rights and obligations of their zero-hours staff.

Find out about more traditional employment contracts in our Contracts of employment factsheet.

Organisations considering using zero-hours contracts should think carefully about why they need them and whether other types of working arrangement would deliver similar benefits.

In practice, these working arrangements are most suited to situations where work fluctuates unexpectedly and where consequently the employer cannot always guarantee work.

According to our latest research Zero-hours contracts: evolution and current status, the most common reason employers use zero-hours contracts is to provide them with the flexibility to manage fluctuations in demand, with nearly two-thirds of organisations citing this. Employers also see zero-hours contracts as providing flexibility for individuals, with nearly half of employers saying they use them for this reason.

Employment status is a key issue that employers need to consider when using zero-hours contracts and undoubtedly one of the many challenging aspects of managing such contracts. The three main types are employee, worker and self-employed. The correct status category depends to an extent on the content of the actual or implied employment contract, but ultimately a legal decision would be based on how working arrangements operate in practice.

Individuals engaged on zero-hours contracts may be employees or workers in terms of their legal rights. Which they are depends on what their contract says and how the relationship between them and their employer works in practice (in other words, whether the legal tests for employment are met). 

Employers need to be clear about which category zero-hour workers belong to and consider the rights and conditions they are entitled to.

The employment relationship can change so employers should carry out a regular review to ensure that individuals are being managed in line with the status specified in their contract. Ideally, line managers should also receive training, so they understand fully the different types, their advantages and disadvantages.

In May 2015, the government banned exclusivity clauses for zero-hours contracts. It’s now against the law for an employer to prevent an individual who is employed under a zero-hours contract from working elsewhere. Further regulations came into force in January 2016 giving zero hours workers the right not to be unfairly dismissed or subjected to a detriment for failing to comply with an exclusivity clause, and to claim compensation.

The government has also passed legislation that gives workers the right to a written record of their core terms of employment from day one of employment.

Our research reports Zero-hours contracts: myth and reality and Zero-hours and short-hours contracts in the UK: employer and employee perspectives and Zero-hours contracts: evolution and current status identified areas where some employers need to improve their working practices. 

Recommendations include:

• Employers should only use zero-hours contracts where the flexibility inherent in these types of arrangement suits both the organisation and the individual.

• Employers should consider whether zero-hours working is appropriate for their business and whether there are alternative means of providing flexibility for the organisation, for example, through the use of annualised hours or other flexible working options. Zero-hours working lends itself to situations where the workload is irregular, there is not a constant need for staff or staff needs are driven by external factors outside the employer’s control (such as the weather).

• Employers should set out the notice required by either organisations or individuals if they’re unable to meet their contracted commitments.

• Employers should set out in the contract the employment status of those engaged on zero-hours contracts and conduct regular reviews (at least once a year) of how these contracts are operating in practice. Reviews should include conversations with line managers and staff on zero-hours contracts. If the reality of the employment relationship no longer matches the contract of employment, one or the other should be adjusted to bring them into line.

• Employers need to provide training and guidance for line managers to ensure they are managing zero-hours workers in line with their employment status. Training must ensure that line managers are aware that zero-hours workers have a legal right to work for other employers when there is no work available from their primary employer.

• Employers and line managers need to ensure that those on zero-hours contracts are eligible for their organisation’s training and development activities. Performance management processes should be set up to give them regular feedback.

• Employers should provide zero-hours workers with reasonable compensation if pre-arranged work is cancelled with little or no notice. We believe a reasonable minimum would be to reimburse any travel expenses incurred and provide at least an hour’s pay as compensation. Some employers appear to go further than this, for example by paying employees in full for shifts cancelled at short notice. This seems a reasonable position if organisations also prevent or penalise employees from cancelling pre-arranged work at short notice.

• Employers should ensure there are comparable rates of pay for people doing the same job regardless of differences in their employment status. This could be written into employment policies and terms and conditions with practice reviewed periodically.

Acas – zero hours contracts

GOV.UK - zero hour contracts

OFFICE FOR NATIONAL STATISTICS EMP17: People in employment on zero hours contracts (dataset is updated quarterly).

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