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Frequently asked questions: Casual staff and zero hours contracts

Are all casual workers engaged on zero hours contracts?

No. Casual workers can work under a number of different types of contracts, including zero hours contracts.

What is a zero hours contract?

A zero hours contract is an agreement between an individual and an employer where the employer sets out the terms under which the individual will be engaged but provides no guarantee that it will offer any work. The agreement may require the worker to accept any work that is offered, specify that s/he can turn down a certain number of offers for work, or allow him/her to turn down any work offered.

They are frequently used by organisations that require casual staff to assist them during busy periods.

What employment rights do individuals working under zero hours contracts have?

That depends on whether the individual is a worker or an employee. Many employers assume that casual staff will be workers rather than employees. However, this will depend on the actual relationship between the parties. Even if the contract states that the individual is a worker, a court or tribunal can overrule this if the contract does not reflect the reality. For example, if you engage an individual on a zero hours contract, but regularly provide work which s/he undertakes and there is an expectation that this will continue, they may be deemed to be an employee.

For more information on this, please see our Myth buster: Employers can engage staff on a self-employed basis if they have a written agreement in place.

Regardless of status, all individuals on zero hours contracts are entitled to the National Minimum Wage, paid annual leave, rest breaks and protection from discrimination.

In addition, those individuals who have employee status will be entitled to statutory employment rights such as the right to minimum notice pay, and to claim unfair dismissal and the right to receive a redundancy payment if they have at least 2 years’ continuous service.

Can we insist that our zero hours’ workers don’t work for anyone else?

No and any clause in a zero hours contract which seeks to impose an “exclusivity clause” is unenforceable. If your contracts include exclusivity clauses and you take action against an individual because s/he turns down your offer of work in favour of working for another organisation, this will constitute a detriment and the individual may be able to bring a claim against you in the employment tribunal and obtain compensation.

If your zero hours worker is, in fact, an employee, s/he has the right not to be unfairly dismissed. Their dismissal will be unfair if the reason for their dismissal is that s/he has worked for another employer in breach of an exclusivity clause contained in their contract of employment. They do not need two years’ service to bring a claim.

Workers also have the right not to be subjected to any detriment (such as being denied work) because s/he has breached the terms of their exclusivity clause or has refused to agree to such a term.

Are zero hours workers entitled to holiday pay?

Yes. All workers are entitled to the equivalent of 5.6 weeks holiday per year, pro-rated for part-time or casual staff. Please note: you cannot lawfully pay the worker an additional sum to represent their holiday pay as a top up to their hourly rate (a practice known as “rolling up” holiday pay). They could therefore seek holiday payment in addition to the hourly rate.

As it is not known in advance how long a casual worker will be engaged for and they do not have regular working hours, it can be difficult to work out the amount of holiday to which a casual worker is entitled. It is usually easiest to calculate their holiday entitlement on the basis of the number of hours (or days) worked. Workers accrue holiday at the rate of 12.07% of the hours worked, which is calculated as follows: 5.6 weeks divided by 46.4 weeks (which is 52 weeks less 5.6 weeks).

Casual staff are entitled to request to take holiday in the same way as your permanent staff. However, in reality, unless you are offering regular work to someone engaged on a zero hours contract, it is more likely that they will not have taken any holiday during their assignment. In these circumstances, you can pay them an amount representing their accrued holiday. This is because the Working Time Regulations 1998 (which regulate holiday and holiday pay) permit employers to make a payment in lieu of untaken holiday where the working relationship is terminated (but not otherwise).

How do we calculate holiday pay for zero hours workers?

Holiday pay should be calculated on the basis of the worker’s previous 12 weeks’ pay. This will include all pay received including any enhancements paid for working particular shifts and any “overtime” worked. Weeks in which the worker did not receive any pay should not be included.

What is the best way to engage casual workers?

The political parties have been very critical of the widespread use of zero hours contracts. The government issued guidance in 2015 which suggested that “zero hours contracts are useful where work demands are irregular or where there is not a constant demand for staff. Zero hours contracts can also provide a level of flexibility for the individual, which allows them to work around other commitments such as study or childcare.” It suggested that it is appropriate to use zero hours contract to cover seasonal fluctuations in demand for services, to cover sickness, for new businesses to “test a service” or to assist with special events but not “as an alternative to proper business planning” or “as a permanent arrangement”.

There is no doubt that engaging a number of individuals on zero hours contracts provides maximum flexibility for employers. However, most people need to know how much money they are likely to receive each month in order to meet normal costs of living and are likely to look for more reliable work. This can mean that employers have to train lots of new people and that can lead to inefficiencies.

If you know that you require workers to for a specific period of time, it is sensible to contract with them on that fixed-term basis rather than entering into a zero hours contract.

Published: 3 April 2017


Employment Law Update - April 2017

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Melanie Stancliffe