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​Understanding Zero-Hours Contracts: A Concise Guide for Businesses

​Understanding Zero-Hours Contracts: A Concise Guide for Businesses

Posted by Emily on 4th Dec 2023

Zero-hours contracts are frequently discussed, blending flexibility with significant challenges. These contracts, without guaranteed hours, fluctuate in workload and are divided into two categories: employee contracts and worker contracts. The distinction lies in the obligation to provide and accept work.

employee serving takeaway bag to customer

Rights under Zero-Hours Contracts:

  • Workers are entitled to statutory annual leave and the National Minimum Wage and can seek additional employment.
  • Zero-hours employees enjoy broader rights, such as redundancy pay and maternity leave.

Employers' rights also vary, especially regarding the allocation of hours under the UK's Working Time Regulations 1998, which limit work to an average of 48 hours per week.

A crucial aspect is holiday pay and entitlement. Following the Harpur Trust v Brazel decision and subsequent government consultation, changes are underway to simplify holiday accrual calculations for irregular hours workers, impacting those on zero-hours contracts.

Employers should calculate holiday pay based on a 52-week average, ensuring fairness. While there's no obligation to offer additional benefits to workers, doing so can enhance motivation and recruitment.

Creating a Zero-Hours Contract:

A well-crafted contract should include:

  • Agreement Status: Define if the individual is a worker or an employee.
  • Work Offer: Outline procedures for offering and accepting work.
  • Work Type: Specify the nature of work.
  • Work Arrangements: Communicate work requirements clearly.
  • Payment Details: Provide pay rates and payment schedules.
  • Working Hours: Clarify the discretion in allocating hours and break entitlements.
  • Work Location: State the primary and any additional work locations.
  • Holiday Entitlement: Detail the calculation of holiday pay and entitlement.
  • Sickness Policy: Outline procedures and rules for sick pay.
  • Company Rules and Data Protection: Inform about company policies and GDPR implications.
  • Governing Law: State the applicability of English law.

Additional clauses like contract termination, use of company property, confidentiality, and working time opt-outs can be included for clarity.

We welcome your thoughts and experiences with zero-hours contracts. Please share your insights and questions in the comments section below.