Totally HR

HomeBlogZero hours contracts

What is a zero hours contract?

Unlike a traditional contract of employment, a zero-hours contract offers no guarantee of work. Many employers make use of zero hours contracts as means of flexing their staffing levels in line with changing workloads.

A zero hours contract is usually an agreement between two parties under which an individual may be asked to perform work for the company. There is no set minimum number of hours. The contract will state the level of pay for work carried out and should outline the circumstances in which work may be offered and, possibly, turned down.

The exact nature of zero hours contracts may differ between organisations. For example, those who work under zero hours contracts:

may be engaged as employees or workers
may or may not be obliged to accept work if offered.

Employment status

Employment status is a key issue that employers must consider before engaging on a zero hours contract. Employment status can be:

Employee
Worker
self-employed

Each of these categories have different protections under the law so it is important to determine the employment status of any individual assigned a zero hours contract within your company. Usually individuals on zero-hours contracts will be employees or workers but employment status will depend on what the contract says and how the arrangement operates in practice.

In general terms, for someone to be an employee, the three principle tests that must be met are:

personal service – the individual must be required to provide their services personally, rather than being able to send a substitute to carry out the work in their place;
mutuality of obligation – the employer must be obliged to provide the individual with work and the individual must be obliged to do that work in return for an agreed salary or wage, and on terms and conditions laid down by the employer; and
control – the employer must exercise a sufficient degree of control over the manner in which the individual carries out the work, consistent with an employer/employee relationship.

Workers

If an individual is free, without penalty, to accept or reject any offer of work made to them they will be classified as a worker rather than an employee.

The tests to establish the correct status of employee, worker and self-employed are established by case law.

Workers typically have more flexibility than employees. They will have more scope to dictate their own schedule and balance their work commitments around their personal lives. However, there is often more uncertainty about when workers will get work and over what period they will be required to work which can make planning and budgeting more difficult.