Zero Hours Contracts have had a lot of press over the past couple of years. Although officially a type of employment contract, they represent probably the least commitment an employer can give to an employee. This has both advantages and disadvantages. However you feel about Zero Hours Contracts there is no doubt that they are becoming increasingly widely used. So, what exactly are they and what advantages and disadvantages do they have?
What is a Zero Hours Contract?
At its most basic, a Zero Hours Contract is an offer of employment with no guarantee of work. So, it’s a contract that allows staff to be hired by an employer but doesn’t create any obligation on the employer to offer a minimum number of hours per week or month. According to the Office for National Statistics more than 700,000 people are currently on Zero Hours Contracts in the UK. So, despite the fact that they don’t always receive the most complimentary press they must have some benefit.
Who uses Zero Hours Contracts?
These types of contracts are very common. Everyone from Sports Direct to cinema operator Cineworld and pub chain JD Wetherspoon have been named as using them. Employers tend to use Zero Hours Contracts in industries where there is likely to be a fluctuating demand for staff. So, for example in the hospitality industry or tourism, it suits an employer to be able to ask staff to work only when they are needed. That way, when there is no work staff are not being paid for what is essentially ‘down time,’ kept on as a cover just in case. Although employers have been accused of using Zero Hours Contracts to avoid giving employees rights, they would make the case that it’s actually to introduce flexibility and reduce the need to pay fixed overheads.
Advantages of Zero Hours Contracts
If you’re considering a Zero Hours Contract then there are a number of benefits that might make it worth your while:
You don’t have to work if it’s not convenient. Although it depends on the employer, most Zero Hours Contracts commitments go both ways. So, just as the employer isn’t guaranteeing a minimum number of hours, so the employee isn’t committing to working a minimum number of hours.
The work is flexible. Zero Hours Contracts can be incredibly useful if you’re a student or parent looking for flexible working that you can fit around other life commitments.
Zero Hours Contract enable staff to move part time. If you have been full time with an employer but need to reduce your hours, a Zero Hours Contract can be an easy way to facilitate this.
Opening the door to a target employer. If you really want to work for a particular company, Zero Hours Contracts can be a great opportunity to make a mark. It’s not unheard of for Zero Hours workers to become full time employees.
You still have basic rights. Zero Hours workers still have the right to annual leave and protection from discrimination, for example.
Disadvantages of Zero Hours Contracts
These contracts aren’t the same as normal employment agreements and there are some important disadvantages to note:
No financial stability. There is no guarantee of work so income is not predictable. 16% of workers who took part in a Chartered Institute of Personnel and Development survey said that their employers failed to provide them with sufficient work under a Zero Hours Contract.
Not enough hours. An Office for National Statistics survey found that the average Zero Hours Contract worker gets just 25 hours a week, that’s compared to a UK average of 40 hours a week (according to the TUC).
No sick pay. If you have to take time off work as a result of illness, Zero Hours Contracts won’t entitle you to any sick pay, not even statutory sick pay.
Fewer rights. Zero Hours Contracts don’t provide much in the way of standard employee rights, other than the most basic as mentioned above. Much of the criticism levelled at these contracts is that employers are using them as a way to avoid giving employees the rights they are entitled to.
A management tool. Some employers use Zero Hours Contracts as a type of management tool, ensuring that those employees they prefer get more hours and others get fewer. This can create an unfair and unstable working environment.
The pressure to work. Although Zero Hours Contracts should be flexible, some employers put a lot of pressure on staff to accept shifts at the last minute. This can lead to a rather chaotic schedule, never knowing when you will have to work and constantly having to cancel plans at the last minute.
Alex Hartley is a keen advocate of improving personal finance skills. She's worked at Solution Loans since 2014 and written hundreds of articles about how people can manage their money better. Her interest in personal finance goes way back to...Read more about Alex Hartley