Government issues guidance on use of zero hours contracts

In the last month the government via the Department for Business, Innovation and Skills (BIS) has issued guidance on zero hours contracts and on when they may be and may not be appropriate.

After the election certain types of zero hours with exclusivity clauses were banned, but there are still many variants of lawful zero hours contracts in use and these are still regularly in the headlines, with unions claiming them to be exploitative, many business groups saying that they provide the sort of flexibility that employers need and many workers welcome.

A lawful zero hours contract as we stand today is one where neither employer nor employee are bound to offer (employer) or accept (employee) hours, but once hours are offered and accepted the two parties are usually then bound by a set of contractual terms – see the section below on ‘Zero Hours – Status’ for more details.

BIS has published examples of appropriate use of zero hours contracts and inappropriate use – these are also featured below. In a nutshell however, employers should check whether those workers on zero hours contracts are in reality representative of the ‘appropriate’ description. If in a particular worker’s case they are working relatively predictable hours from week to week over a reasonable period of time then BIS guidance (which isn’t binding but which the employment tribunals will pay heed to) would suggest that they should be moved off zero hours contracts and onto another more appropriate sort of contract (permanent/fixed term etc.)

BIS Guidance – Appropriate use of zero hours contracts:

  • Irregular demand for work
  • Individuals who need flexibility e.g. studies, childcare
  • Peaks of demand in hospitality, leisure, catering
  • Seasonal peaks for short periods Special events e.g. a hotel handling a wedding
  • Unexpected absence of key staff
  • New business start-ups
  • New services being tested on the market

BIS Guidance – Inappropriate use of zero hours contracts:

  • Regular hours over a continuous period of time (BIS give an example of an individual working 9am – 1pm for a year)
  • Running the core business

BIS Guidance – Alternatives to the use of zero hours contracts:

  • Offer overtime to permanent staff
  • Recruit a part time or fixed term employee
  • Use annualised hours contracts
  • Use agency staff

Zero Hours – Key characteristics of a Zero hours arrangement:

  • Employer does not guarantee hours of work
  • Employer offers work but the individual has the choice of whether it accepts or declines work offered
  • NMW regulations apply
  • Entitled to statutory employment rights
  • Individuals on a zero hours contract will either have the employment status of a ’worker’ or an ‘employee’
  • Suitable where work demands are irregular or where there is not a constant demand for staff i.e. setting a new business up or seasonal peaks in demand
  • Exclusivity clauses strictly prohibited
  • When recruiting, employer should clearly state that the job is zero hours

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