What are they?

In a typical employment relationship the employer is obliged to provide work which the employee must carry out. This is known as mutuality of obligation.  A zero hours contract differs from an employment contract because the employer has no obligation to offer work, although the worker is expected to be available for work if called upon by the employer.  The worker will only be paid for the hours actually worked.

Such contracts may contain a clause along the following lines:

“It is entirely at the company’s discretion whether to offer you work and it is under no obligation to provide you with work at any time.”

Despite the existence of such a clause, there is a risk that an employment relationship might arise on the facts.  Whether an individual is an employee or a worker is important because each is entitled to different sets of rights by law.  Persons with employee status are entitled to a number of important legal rights which workers are not, such as the right not to be unfairly dismissed and rights under TUPE.

Why are they in the news?

In June 2013 the Department for Business, Innovation and Skills (BIS) announced that it would be launching an investigation into zero hours contracts and their misuse by some employers.

Following on from the investigation, the Business Secretary Vince Cable subsequently announced (in September 2013) that he will launch a consultation on zero hours contracts in order to tackle any abuses the Government may find.

Vince Cable noted that such contracts are much more widely used than the Government had previously thought.  Research by the Office of National Statistics has shown that 0.8% of the national workforce was on a zero hours contract in 2012.  However, the Government believes that these figures understate the true position, and as many as 4% of the workforce may be on such contracts.

The BIS investigation highlighted four areas of concern:

1. Exclusivity – the worker is not guaranteed a minimum number of hours’ work, but may be prevented from working for another company.
2. Transparency – many workers are unaware of the restrictions that their zero hours contracts place on their working situation.
3. Uncertainty of earnings – earnings are irregular, therefore workers find it hard to plan their finances because they cannot anticipate how much they will earn during a particular period.
4. Balance of power in the employment relationship – workers may be penalised by not being offered work in the future if they do not accept an offer of work even if there was short notice and the hours were not suitable.