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Zero Hours Contracts – what they mean for your business

Zero Hours contracts, used properly, can be a great way for employers and employees to gain flexibility in the workplace. However, they can just as easily be abused.

Zero Hours Contract

It’s a popular subject in the political arena at the moment – but what exactly do they mean for your business?

What are Zero Hours contracts?

If you don’t know what they are, here’s the basic definition for you; contracts that allow you to give hours to employees when you need them, and they can accept or decline them at their discretion. I.e. you don’t have to give them any set number of hours (hence ‘Zero Hours’), and they don’t have to work the ones you give them either.

Sounds ideal doesn’t it? Well not necessarily. Many companies who operate these contracts have put exclusivity clauses in them, meaning that even though no work is guaranteed the employee can’t work elsewhere. The government has been working on banning these types of clauses.

Some advice on the use of Zero Hours contracts

If you are thinking of employing someone under a Zero Hours contract, you’ll need to bear in mind that the ban on exclusivity could come into effect fully this March following the outcome of a review of the Small Business, Enterprise and Employment Bill – changing how you enforce your contracts completely.

I’d suggest that you do the following to ensure that you are using Zero Hours contracts the right way:

  • Use them on a casual basis for employees who need a flexible contract – such as with seasonal work where you can’t predict the number of hours they should work
  • Don’t use them as an alternative to a permanent contract. Once someone has worked for you for more than 12 weeks they have employment rights and most entitlements. Also, holiday pay and maternity pay will be calculated on their average earnings, so there really is little extra benefit to them anyway – unless you’ll have some weeks were you genuinely won’t be able to offer them work

What other options are there?

A variation on the Zero Hours contract that can also bring more security to an employee is the Annualised hours contract. These contracts deliver to an employee a set number of hours over the course of a year, which can be spread however you or they wish – suiting employers that may require more cover at certain times of year. However, you need to carefully manage these to ensure that the minimum number of hours are in fact worked.

There are also a range of alternatives to Zero Hours contracts as well, if you can’t offer hours, or the employee wants more flexibility then part time contracts or term time only contracts can be used for a fixed term – enabling you to review the contract at an agreed date, and change it if necessary depending on how it works.

There are also times when you may not even need to issue a contract, for example if they work on a freelance or contract basis, and are self-employed. This is obviously preferable to adding them to your workforce as an employee, but you do need to be mindful that someone who works solely for you is likely to be classed as a worker and therefore has certain employment rights. This also applies to agency staff, who are supplied by a third party who will then invoice you.

Essentially, Zero Hours contracts can offer real flexibility for you and your employees. However, with increasing public scrutiny on them, it is essential that you only use them if you really need to.

So when taking on a new member of staff, or someone to help you run your business, make sure that you explore all the options before sticking them on a Zero Hours contract. It could save you a great deal of grief in the future.

Further Information

Kirsty Senior is co-founder of citrusHR – the small business HR experts who offer a fresh new take on people management.

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