A Guide to Zero Hour Contracts for Small Businesses
3rd February 2017
Employing on zero hours contracts might benefit your business if you require a lot of flexibility. These kinds of contracts aren’t always suitable, but are popular in industries where customer numbers can vary a lot from week to week
The benefits of zero hour contracts for employers
Putting staff on a zero hours contract means that you don’t have to provide them with a certain amount of work.
You might offer 3 hours one week and 20 the next.
You can provide plenty of shifts through a busy week, then fewer the following week if you’re expecting things to be quieter.
You’re under no obligation to offer the work if it simply isn’t available.
The benefits of zero hour contracts for workers
Workers have the option of refusing any shifts that they’re not able to do. This means that zero hour contracts can be popular with working parents, whose commitments and responsibilities might vary from week to week.
Just as you’re not required to offer work, your worker isn’t required to accept it.
As an employer, you are not allowed to have an exclusivity clause on your zero hours contracts. This means that people on these contracts can work elsewhere whilst employed by you.
Many workers take a few different jobs with zero hour contracts, to provide the overall hours that they need.
Zero hour contracts employment rights
Workers on zero hour contracts have the same employment rights and entitlements as other contracted workers.
It is also important to note that if there is permanent availability of hours, employers should not use zero hour contracts simply to maintain flexibility. In such cases, a permanent member of staff should be hired.
Zero hour contracts sick pay
With a zero hours contract, sick pay is less tricky to calculate than it sounds. Workers are entitled to Statutory Sick Pay.
But how can you know how much time you should be paying someone for, when they might not be working at all?
With these contracts, Statutory Sick Pay is calculated based on an average of the last 8 weeks.
If an employee has earned at least at least £112 on average, over their last 8 working weeks, then they are entitled to receive SSP.
Zero hour contracts notice periods
Notice periods are a particularly complicated subject, when dealing with zero hours contracts.
As an employer, you should write your notice period into the contract itself. This is the same with a zero hour contract as it is with any other.
Despite this, your workers my not pay much attention to your zero hour contracts leaving notice requirements. Remember that they don’t have to take the hours that they are offered.
If you have a 4 week notice period, workers can simply refuse all work during those final four weeks.
How much your workers pay attention to their notice period will depend on the specific terms of their contracts. If they are hoping for a positive reference, or are paid in arrears, then it’s in their best interests to stick around.
Don’t rely on your notice period as a guarantee of keeping a zero hours worker on board. Often they’ll be gone as soon as they’ve made the decision. In many cases, workers start refusing hours before they’ve handed in their notice.
Zero hour contracts benefits
Workers on zero hours contracts are entitled to the same benefits as your regular employees.
Annual leave and holiday pay:
Calculating holiday pay for a zero hours worker requires some basic maths.
Employees are entitled to 28 days of holiday per year. Full time, this is equivalent to 12.07% of someone’s working hours.
The same is true for zero hours workers. They are entitled to 12.07% of their time as holiday. You will need to calculate a worker’s annual leave entitlement, based on how many hours they actually do.
All workers are entitled to a 20 minute break for every six hour period that is worked. They are also entitled to 11 hours of uninterrupted rest, for every 24 hours.
Workers on a zero hours contract are, like other employees, unable to work more than 48 hours per week.
National Minimum Wage:
Workers on a zero hours contract are entitled to National Minimum Wage.
They are also entitled to be paid for all time that they are on the work premises (unless it’s a voluntary visit), including time when they are called in and are waiting to see what hours they are allocated.
When is a zero hours contract suitable?
Zero hours contracts can be particularly useful for small businesses that don’t have the capacity to provide regular work. This might be the case if paying someone for a specific number of hours each week would cause financial difficulty, but you cannot handle all of the work alone. A zero hours contract would give you flexibility to call for help as and when it’s needed.
These contracts can also work for seasonal demand, instead of hiring temporary employees, or as cover for unexpected illness.
Zero hours contracts also suit businesses with ever-fluctuating requirements. These types of businesses might include restaurants and bars that occasionally host weddings and corporate events.
A zero hours contract will not be suitable if you consistently have the capacity to hire a part-time or full-time employee, or if your zero hours worker ends up doing the same shifts each week.
If you are not sure about recruiting workers on zero hours then you may want to take an alternative approach. You may offer overtime to existing employees, or hire someone on a fixed-term contract. Alternatively, you can use agency staff if you need people at short notice.
As an employer, it is important to consider the type of person that might apply for a zero hours job. Often, these people have other commitments in the form of children, or elderly/disabled relatives.
By giving your workers as much notice as possible, you can help them to plan their time. Try not to offer work at the very last minute, if you’re able to plan in advance.