What Are Zero Hour Contracts?

As consumer habits change and the demand for flexible labour increases, the number of employees working on zero-hour contracts is on the up.

After years of controversy around casual employment contracts, zero-hour contracts continue to hit the headlines.

With over 780,000 people relying on casual contracts as their primary form of income, here we will look at their pros and their cons, a handy refresher for some, and new information for others.

Are zero-hour contracts as bad as they seem? Should employers guarantee a steady income for all its employees?

Join us as we explore what zero-hour contracts are, why employers use them, and how they affect employees.

What are Zero-Hour Contracts?

Put simply, zero-hour contracts (or casual contracts) are employment contracts with no guaranteed hours.

Zero-hour contracts help employers cut labour costs when demand is low and get more hands-on-deck when things pick up.

Employees are paid depending on the number of hours they work and are often asked to pick up shifts at very short notice.

How Do Employers Benefit From Zero-Hour Contracts?

With more and more businesses moving away from traditional employment and building the gig economy into their labour force, zero-hour contracts are on the up.

The gig economy involves workers getting paid per assignment or “gig”. Gigs could be anything from takeaway delivery services to one-off legal advice. Zero-hour contracts give employers the freedom to only pay for work when they need it.

So, how can zero-hour contracts benefit employers?

Save money on employee wages. With zero-hour contracts, employers only pay workers when they’re needed, which means employers can cut down on excess employee hours. If a business is quiet and employees are twiddling their thumbs, employers can simply cut their shift short.
Employees are incentivised to work harder. When employers are competing against other staff members for hours, they’re naturally incentivised to work to the best of their abilities. If an employee continues to deliver quality work, the employer is likely to call on them for extra hours over other employees.
Less commitment. While traditional employment contracts mean employers are locked into paying fixed salaries, zero-hour contracts give employers the financial freedom to choose if and when they pay for extra work.
Avoid employee turnover issues. For many business owners, finding replacements when employees leave can be extremely difficult. However, with zero-hour contracts, employers can have more workers on their books than needed. So, the business has plenty of trained employees to call upon if someone leaves.
Seasonal flexibility. As any business owner will know, the demand for labour fluctuates over the course for a year. Zero-hour contracts give businesses the flexibility to shape their labour force around seasonal demand. For example, if a call centre needs more hands-on-deck over Christmas, it can call on a wide team of employees to pick up extra hours.

Benefits of Zero-Hours Contracts for Employees

Flexible zero-hour contracts also offer certain benefits for employees. Whether they’re looking for temporary work or picking up extra shifts to boost their income, casual contracts provide some unique advantages.

Flexible working hours. While zero-hour contracts can’t guarantee a steady income, some employees enjoy the flexibility of working on an ad hoc basis. Interestingly, 55% of employees on zero-hour contracts are female as the flexibility allows mothers to earn while raising young children.
Source of secondary income. 66% of zero-hour contracts are for part-time employment. Many workers sign zero-hour contracts to pick up extra hours as a secondary form of income.
Holiday jobs for students. In the same way as employers use zero-hour contracts to meet seasonal peaks labour demand, students can pick up hours in busy holiday periods. A recent survey found 60% of working students at Warwick University are on zero-hour contracts.
Employee benefits. Employees on zero-hour contracts have the same legal rights to holiday pay, sick pay, and statutory maternity pay as traditional employees. The only exception is if there is a break in an employees' working pattern.

So, What’s the Big Issue with Zero-Hour Contracts?

Although we’ve painted zero-hour contracts in a fairly bright light, there’s another side to casual contracts when it comes to supporting employee rights and building a healthy workplace culture.

Financial Insecurity

Although zero-hour contracts offer employees a level of flexibility, there are serious concerns over the lack of guaranteed financial security. If an employer isn’t obligated to provide a certain number of hours, employees could face weeks with zero income.

Many employees criticise their employees for claiming they will try to offer a certain number of hours per week and consistently falling short.

According to the Office for National Statistics, over 30% of employees on zero-hour contracts want more hours than they receive.

When agreeing to any contract, ask yourself whether you would be happy to receive the minimum number of contracted hours. If the answer is no, it’s probably not a good idea to sign on the dotted line.

Toll on Employees’ Well-Being

While zero-hour contract employees are entitled to sick leave as long as they’ve earned more than £112 per week leading up to becoming ill, zero-hour contracts can still impact their health.

Zero hour contracts can be incredibly taxing on both an individual’s mental and physical health and is thought to be strongly linked with increased anxiety, stress and depression.

A recent study found that alongside financial insecurity, “a lack of sufficient sleep, poor eating habits and relationship problems were all contributing to the mental toll of being on a zero-hours contract.”

Short Notice

One of the most significant issues with zero-hour contracts is that they can fluctuate, week by week.

Employees might not know whether or not they’re needed just a few hours before they’re expected to start their shift.

Zero-hour workers can end up living in limbo as they struggle to strike a healthy balance between keeping their diaries free and arranging additional forms of income to fill gaps in their income from a zero-hour contract.

Unhealthy Management

The Chartered Institute of Personnel and Development (CIPD) argue that certain employers unfairly use zero-hour contracts as a manipulative management tool.

The competitive nature of zero-hour employees trying to get more hours than co-workers by ‘proving their worth’ can put an unhealthy strain on workers.

CIPD explains how zero-hour contracts can fuel favouritism in the workplace and impact safety as employees fear losing hours if they’re seen to be causing unnecessary trouble or inconvenience to their employer.

Zero-hour workers can end up being overworked and pushing through personal struggles to impress their employer.

Think Before You Sign

While employees can benefit from the flexibility of a zero-hour labour force, workers need to find a job that both supports them financially and fits around their individual lifestyles.

Crucially, employees must always know their rights and understand exactly what they’re getting themselves into before signing any contract.

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