Zero Hours Contracts: Their benefits and when it is appropriate to use themPosted in : Back to Basics on 27 March 2018
The Employment & Incentives team at A&L Goodbody, discuss the casualisation of contracts, explaining what a zero hours contract is, their benefits and when it is appropriate to use them.
The gig economy has been in the spotlight in recent months owing to a rise in the number of high profile cases before the courts seeking to determine the employment status of individuals. The eagerly awaited Pimlico Plumbers case was heard by the Supreme Court recently and the Uber case is scheduled to be heard by the Court of Appeal next month. These landmark cases could have huge ramifications for those currently employed on insecure contracts.
In this video, the team comment on the rights and entitlements of zero-hours workers and clarifies the position on the use of exclusivity clauses in Northern Ireland, referring to the latest gig economy cases, including Deliveroo and Uber, highlighting the Court’s approach of looking beyond the contract to the reality of the physical working relationship. They stress to employers the importance of complying with their obligations and the need to ensure that arrangements in place accurately reflect the position between the parties.
What are zero-hours contracts?
Zero-hours contracts is a non-legal term. It's used to describe different types of casual arrangements between an employer and an individual. And generally speaking, a zero-hours contract is one in which an employer doesn't have to guarantee the individual any hours of work. And the employee offers an individual work when it arises, which means the individual can either accept it and take the work or they can decide not to take up the offer of work on that occasion.
And there are appropriate times to use these kind of contracts. For example, it's useful where the work demands are irregular or there's not a constant demand for staff. And also in terms of the employee, it can provide a level of flexibility for the individual. This allows them to work around other commitments so you can look at things like study or child care, for example.
Also, some types of work are driven by external factors, which are outside of the employer's control. You look at things like the hospitality industry, leisure and catering sectors, and zero-hours contracts are particularly prevalent in these areas. But regardless of how many hours are actually offered, the employer must pay at least the national minimum wage.
And then there are times where it's inappropriate to use zero-hour contracts. So, while these offer flexibility for both employers and individuals, they shouldn't be considered as an alternative to proper business planning, and they shouldn't be used as a permanent arrangement if they're not justifiable. So then, it's good to look at best practice in terms of when you should put these in place.
Are they all bad?
Zero-hours contracts, like we said, are not bad contracts. They're perfectly legal, and they provide flexibility. However, you should take care as an employer when approaching them to ensure that you've got good practice which you follow and also your responsibilities to the employees prevail. If you look at health and safety obligations, these must be followed with zero-hours employees, as well as with any other employees. And under a zero-hours contract, employees are still entitled to minimum wage, staff should take pay and rest periods in line with the Working Time Regulations 2016.
And you also need to be aware of the welfare of individuals on zero-hour arrangements. So, for example, if you're asking to have to work at short notice, this could cause them stress, based on the individual circumstances, they may have difficulty getting childcare short notice and, therefore, they feel that they have to turn the work down even though that's not suitable for them. So to avoid confusion, it's advisable that the responsibilities of both the employer and the employee are included within the written contract.
What about exclusivity clauses?
It's also worthwhile touching on exclusivity clauses. So these are clauses which prevent workers from taking up any other form of work. And the "Small Business Enterprise and Employment Act" prohibits the use of exclusivity clauses or terms in zero-hours contracts in the UK. In NI, I know that this isn't currently the case, but it's worth looking at in more detail.
So, an exclusivity clause means that the employer stops the individual from looking for work or accepting work from another employer. Under the Act, this can't be done. So the individual can't be bound by it. The law states the individual can ignore it. An employer also has to allow the employee to take work elsewhere in order to earn an income if they aren't getting sufficient hours from their employer. Also, an employer must not attempt to avoid the exclusivity clause ban by, for example, stipulating that an individual has to come and ask permission to look for work elsewhere or accept it.
Regularly offered work: Uber and Deliveroo
So, employers need to be careful because where work is regularly offered and accepted, there is potential for difficulty regarding the actual employment status of the individual. Cases in the UK have thrown this into the spotlight. The gig economy cases to Uber and Deliveroo, which the UK Tribunals have ruled on. In Uber and Deliveroo, it was argued that the individuals were self-employed contractors. But actually, the Tribunal looks beyond any contract that's in place and looks at the actual physical working arrangement, be that the number of hours that are being worked, whether they have the ability to refuse work or not.
These are important for the Tribunals in Northern Ireland, because, while they're not binding on them, they're persuasive authorities, and it means that employers in NI will also have their arrangements scrutinized and the Tribunal will go beyond what's on paper and actually look at the physical working relationship or what the terms are being offered. So, employers in Northern Ireland need to ensure that they are complying with their obligations and that the arrangements in place accurately reflect what the position is between the parties.
Note: Legal-Island is running a Contracts for the Modern Employment Relationship conference on 17th May 2018 at the Merchant Hotel
After this conference, you will be able to:
- Stress test your current template so you can identify which clauses in your template contract of employment need to be updated
- Use ‘best in class’ clauses which you can incorporate into your template contract
- Identify where standard clauses, including restrictive covenants, need to be brought up to date with the digital world
- Understand how to build flexibility into your contracts to enable the organisation to adapt and react to a fast-changing global economy
The information in this article is provided as part of Legal-Island's Employment Law Hub. We regret we are not able to respond to requests for specific legal or HR queries and recommend that professional advice is obtained before relying on information supplied anywhere within this article.