What is a zero-hours contract?

What is a zero-hours contract?

Essentially, they’re contracts that allow you to employ staff without being obligated to offer them a set number of hours. 

They’re most often used for casual jobs, where employers are unable to guarantee work on a more long-term or consistent basis.

What are zero-hours contracts?

You’ve probably come across the term ‘zero-hours contract’ before.

The most important feature of this type of contract is they don’t offer a set number of hours of work each week. 

This means zero-hour contracts are an increasingly popular option for companies that want a flexible workforce, as well as employers who can’t be sure of the amount of work that will be available. 

With more and more companies deciding to use this type of contract, you might be considering them for your organization too. 

How does a zero-hours contract differ from a traditional contract?

When creating an employment contract, you’ll usually include how many hours of work an employee will be paid for each week. Under the terms of these contracts, the employer is obliged to offer work and the employee to carry it out. 

However, a zero-hours contract doesn’t include this provision.

This means the employee can accept or reject work as it’s offered to them; however, it also means there’s no guarantee they’ll be offered any work at all.

What is the legality of zero-hours contracts?

Zero-hours contracts are completely legal.

During contract negotiations, however, you should still make the implications clear to your employee or worker. 

You also have to be sure you comply with all of the relevant regulations. 

Zero-hours contract employee rights

Some unscrupulous employers might see zero-hours contracts as an opportunity to cut corners on employee rights.

However, workers who are on these contracts are still protected by national and state regulations.

These rights include being paid the minimum wage.

Although you’re not guaranteeing a set amount of hours of work, any hours you do offer have to be paid at the minimum wage or above.

Other rights you should be aware of include paid annual leave and protection against workplace discrimination.

These are laws that are set up to protect all workers so they aren’t affected by the use of a zero-hours contract.

Benefits of zero-hours contracts

While zero-hours contracts sometimes have a negative reputation, they continue to be popular because of the benefits they offer to both employers and employees.

Benefits for employers

1. Savings

Using zero-hours contracts allows you to cut your labor costs. S

pending on staff will directly track with the number of hours worked, meaning your expenses will better reflect your organization’s productivity. 

2. Flexibility

Agility is an important element for any successful business, and using a zero-hours contract will ensure you’re not tied to long contracts with fixed hours.

Your workforce will reflect the specific work that needs to be completed without you having to worry about issues such as contract termination.

Benefits for employees

1. More opportunities

A lot of zero-hours contracts are used for younger workers, such as teenagers in their first part-time job.

As zero-hours contracts have less risk for the employer, they make it easier for them to take a punt on less experienced applicants.

2. Flexibility

The flexibility that comes with a zero-hours contract isn’t just useful for employers.

Employees on zero-hours contracts can accept work when it suits them, meaning they can spend more time with family, studying, or working other jobs.

Disadvantages of zero-hours contracts

Although zero-hours contracts have advantages for both employers and employees, they’re not a perfect solution for every situation.

Disadvantages for employers

1. Difficulties planning ahead

Some employers will find it difficult to plan ahead if they aren’t sure which hours their employees will accept each week.

2. Issues with classification

Employees on zero-hours contracts exist somewhere between freelancers and full-time employees.

This can mean HR and accounts teams sometimes have difficulty classifying zero-hours workers for auditing, accounting, and taxing purposes.

Disadvantages for employees

1. Uncertainty over income

If you have a traditional contract, you have a clear idea of how much you’ll be earning each week and when you’ll be up for a contract renewal.

This isn’t the case for those on zero-hours contracts, who are therefore much more uncertain about their income.

2. Lack of clarity

Zero-hours contracts lack the long-term security of traditional contracts, with a lack of clarity over working hours making it difficult for employees to plan their life outside of work.

Examples of when zero-hour contracts are used

Now you know the advantages and disadvantages of zero-hour contracts, when might you want to use them?

1. To find cover

If you keep a couple of people on zero-hour contracts, you’ll always have a pool of workers to call upon if an employee phones in sick.

2. For short notice work

With jobs such as babysitting or care work, workers will often need to be found at short notice. Zero-hours contracts let you use these employees without paying them when they’re not needed.

3. When you have fluctuating demand

Zero-hours contracts are often used in the hospitality industry around busy periods, such as the holiday season, to allow companies to respond to increased demand.

Make the contract management process easier with PandaDoc

Zero-hours contracts can give you solutions that traditional contracts simply can’t, especially if you work in industries such as hospitality.

However, producing and managing large amounts of contracts of differing types can be difficult.

That’s where PandaDoc can help you. With its streamlined document creation tools and contract templates, you can easily stay on top of your organization’s zero-hour contracts.