The new Labour government has declared that ‘work will pay’ under their leadership. This involves increasing the living wage, eliminating ‘fire and rehire’ and, importantly, banning ‘exploitative’ zero-hour contracts. So what are zero-hour contracts, and what changes should employers expect?
Zero-hour contracts are a flexible employment arrangement for employers and employees/workers. They are generally used for inconsistent or ‘on-off’ pieces of work. They differ from most contract types since:
Therefore this kind of work is popular in sectors such as casual hours, delivery work, and the gig economy.
Nonetheless, workers and employees of this type of contract still retain many of the same rights as normal workers. For example, zero-hour contract workers are still entitled to:
Under the Employment Rights Act 1996, workers and employees on zero-hour contracts can seek other work too. In fact, it is illegal for the employer to try to stop workers seeking other work, and any exclusivity clauses in contracts are invalid.
Such workers and employees also may not be treated unfavourably or dismissed for doing so. Depending on the role, zero-hour contract workers can be legally classified as either workers or employees, impacting their statutory rights.
The primary advantage of zero-hour contracts is their flexibility. Employers can quickly adjust the workforce size according to business needs, making it easier to respond to fluctuating or unexpected demand.
For workers, the ability to choose shifts that fit their schedules can be advantageous, particularly for students or those with variable availability.
However, zero-hour contracts, which have experienced a boom in popularity in the last 10 years, have proven decisive, with many unions calling for their abolition.
The biggest criticism of zero-hour contracts is the income instability they create for workers. With varying weekly hours, workers can struggle to cover their bills consistently and may need multiple jobs.
Additionally, workers on zero-hour contracts often miss the earnings thresholds for benefits, such as maternity leave and sick pay. Lastly, working multiple zero-hour contract jobs with varying shift times can negatively impact the personal lives of workers.
The unpredictability of zero-hour contracts can also pose challenges for businesses. Poor communication and lack of clarity about shift responsibilities can lead to chaotic handovers and reduced operational efficiency.
Furthermore, workers on zero-hour contracts may be less likely to develop loyalty to their employers, leading to higher staff turnover and training costs.
The government has pledged to tackle what they see as the abuse of this type of contract by some employers. In particular, the ‘one-sided flexibility’ in some working environments.
Nonetheless, Labour has acknowledged that this contract type is beneficial for some individuals, so is unlikely to ban it completely, leading to steep criticism from trade unions.
The current proposal is to introduce a right to a permanent contract after 12 weeks of work. This will be based on the average hours worked in the previous 12 weeks and should provide more predictability to those needing it.
Nonetheless, it will be left in workers’ hands to decide if this works for them or to continue with their current arrangement.
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