A zero-hours contract is a type of contract used by employers under which a worker or employee has no set hours of work. There is no obligation on the employer to guarantee any hours of work and the employee is paid only for the work that is done.
The House of Commons Briefing Paper (published on 17 August 2018) suggested that 780,000 people were on zero-hours contracts between April and June 2018, representing 2.4% of the workforce. Over recent years, the use of these contracts has resulted in much criticism from employee organisations and the media who have argued that this type of arrangement results in financial insecurity for workers because they lack key employment rights. There is a common confusion that individuals under a zero-hours contract have no statutory rights. This is wrong: zero-hours does not mean zero rights.
Worker or employee?
The statutory rights of an individual under a zero-hours contract can be a difficult question to answer. It involves applying a complex legal test to determine whether they are a worker or an employee. In summary, in order to be an employee, there needs to be mutuality of obligation and control. With zero-hours contracts, mutuality of obligation tends to be the key factor that is required to be deemed an employee and not a worker. If there is genuinely no obligation on the employer to give work and no obligation on the individual to accept it, then the relationship is too casual for the individual to be classed as an employee.
It is important to emphasise that workers do have some statutory rights. These include the right to holiday pay and statutory sick pay, the right to be receive the National Minimum Wage and to be part of pension auto-enrolment. However, only employees have the right not to be unfairly dismissed, the right to receive redundancy pay, the right to statutory notice periods and family-friendly rights such as maternity leave, paternity leave and shared parental leave.
There is often confusion on how to calculate holiday leave and pay for zero-hours workers. Many employers often want to roll-up holiday pay into the individual’s hourly rate. This has been held unlawful for some time. If the engagement will be short and the relationship will end after each engagement, employers can pay accrued holiday pay at the end, identifying it as a separate payment in the final payslip. If the engagement will be long or there are continuing contractual relationships between engagements, holiday leave will accrue as normal and the individual must be allowed to take paid holiday during any engagement.
If a worker has irregular hours, which is common with zero-hours workers, their holiday pay should be calculated by taking their average weekly remuneration in the 12-weeks before the date of their annual leave (or if they did not work in that period for 12 weeks, the last 12-week period they earned remuneration).
The common approach to what can be a difficult calculation for a business to complete, is to use the 12.07% of hours worked accrual rate. This percentage is based on a standard working year of 46.4 weeks (52 weeks less the statutory entitlement to 5.6 weeks annual leave). There is however an ongoing tribunal case called Brazel -v- Harpur Trust  in which the Employment Appeals Tribunal (EAT) held that calculating holiday pay for variable hours, term-time workers based on the 12.07% method was incorrect. The tribunal stated that an employer should calculate holiday pay based on average earnings over a 12 week-period, reflecting the number of hours worked rather than simply capping annual holiday pay to 12.07% of annualised hours. The Court of Appeal is expected to give its judgement on this case in the Autumn, so please look out for our blog updating you on the outcome of this case.
Most employers will not pay their staff any contractual sick pay. However, zero-hours staff, whether workers or employees, are entitled to Statutory Sick Pay (SSP) when they are off sick on a day, they are due to work under their contract provided they have complied with any SSP requirements.
Termination of employment
It is often the case that zero hours staff may remain “on the books” even though they are no longer working for the employer. If the employer wishes to terminate the contract then this should be done after assessment of an individual’s employment status. If the individual is a worker, then the contract can terminated immediately. If the individual is an employee, then a fair dismissal process will need to be completed to avoid any risk of an unfair dismissal claim. The employer is likely to rely on the fair reason of redundancy to terminate the contract.
For further information or advice on complying with your legal obligations on zero-hours contracts or to obtain a FREE Zero-hours Contract call Henry Doswell of Doswell Law Solicitors on 01233 722942. Alternatively, email Henry at firstname.lastname@example.org
Disclaimer: Whilst every reasonable effort is made to make the information and commentary contained in this blog accurate and up to date, Henry Doswell takes no responsibility for its accuracy and correctness, or for any consequences of relying on it. The information and commentary in this blog does not constitute legal advice to any person on a specific case or matter. You are strongly advised to obtain specific, personal advice from a lawyer about your case or matter.