Zero-hours contracts – the road to economic recovery?

Much debate has taken place recently on the use of zero-hours contracts, especially following the discovery, that these contracts are increasingly used by big retailers – Amazon being particularly targeted in the run up to Christmas for its seasonal use of 15,000 elves who will find themselves unemployed in January.

The debate focuses on whether zero-hours contracts are the key to economic recovery or simply an excuse for employers to casualise the employment relationship with a negative impact on the country’s living standards.

The concept of the zero-hours contract
Under a zero-hours contract an individual is given work on a casual basis whenever there is work available. There are no guaranteed hours and at times there may be no work for the individual at all. It is not difficult to see why zero-hours contracts are favoured by some businesses. Surely, it would be most employers’ dream to shift the financial risks as to the variation in the demand for the employer’s products or services from the employer onto its employees by not having to pay its staff when workload is low.

The main argument for the continued use of zero-hours contracts therefore seems to center on flexibility and how this is vital for businesses at this time to anchor themselves in the economic recovery.  Whilst zero-hours contracts may be suitable and even desirable to provide a flexible labour market and provide work to those individuals who just require a bit of casual part-time work on the side, the position is clearly bleaker for those who are trying to build a career and need job security to obtain a mortgage or feed their families. This is especially a problem if the zero-hours contract includes an exclusion clause which also prevents the individual from working elsewhere even when no work is offered to them during certain times. Exclusion clauses only increase the uncertainty of a family’s income and are thus unlikely to generate much spending power for those families so that some call for banning the use of zero-hours contracts on the grounds that their use by some businesses is in fact a short-sighted solution that could adversely impact on other businesses and may thus make no or little difference long-term to the economy as a whole.

From zero to hero …or too good to be true?
The idea behind a zero-hours contract is often that the individual will be a worker, not an employee and therefore will not benefit from employment protection laws, like unfair dismissal for instance. However, businesses should be careful as a zero-hours contract may create an employment relationship giving the employees’ rights that the employer did not plan for.

It is also worth the business considering its HR policy as a whole rather than the short term benefits of using zero-hours contracts. Indeed, the hidden cost of these contracts is in the lack of loyalty and commitment from staff to the business in the long run. Offering zero-hours contracts to individuals who are really looking for permanent employment with fixed or guaranteed minimum hours could mean an increase in turn-over of staff as they will move on as soon as possible, which may in turn add to recruitment costs.

Perhaps it is therefore not so surprising after all that the majority of organisations using zero-hours contracts are not the smaller businesses but the large multi nationals. SMEs business models are reliant on committed and loyal staff for the success of the business and know that looking after the welfare of employees is key to achieve employee engagement in the business.

The employment contract is a window on the type of employment relationship your business wants to build and it is important to get it right. The ebl miller rosenfalck Employment Team can tailor your employment documentation to the needs of your business to create a documentation suite that you can use with confidence to navigate the employment relationship from the recruitment stage to the end of the relationship.

The material contained in this article is provided for general purposes only and does not constitute legal or other professional advice. Appropriate legal advice should be sought for specific circumstances and before action is taken.
© , December 2013

For further information and advice please contact the Employment Team.