Zero hours contracts are making headlines once again after the Labour Leader, Ed Milliband, attacked the sports retailer, Sports Direct, in a speech in the West Midlands over the weekend. Mr Milliband didn’t pull any punches, describing the retailer as a “terrible employer” for most of its 20,000 staff. He said that the company has, “predictable turnover, big profits but for too many of its employees Sports Direct is a terrible place to work”.
Describing zero hours contracts as an epidemic and having no place in the 21st century, he condemned their use by British businesses as a “Victorian practice”.
He proclaimed, “We are going to change what I call the zero-zero economy of zero hours contracts and zero tax for those at the top.” Quite what he meant by this remark is unclear as businesses will, of course, still pay tax on earnings paid to those on zero hours contracts based on the hours worked.
There is currently no regulation of zero hours contracts and no restriction on employer’s agreeing to a zero hours arrangement with its employees. The term, “zero hours contract” usually refers to a contract of employment under which an employee has no set hours and is paid only in relation to actual hours worked. The contract does not oblige the employer to provide any work at all to the individual. This gives businesses the advantage of a flexible workforce which can be invaluable in certain industry sectors such as retail and hospitality where there can be seasonal fluctuations in staffing requirements. Indeed, often this flexibility will also suit workers who may not be in a position to take on permanent or regular work.
If you are already using zero hours contracts or are contemplating doing so you do need to bear in mind the following points:
- ensure that any difference in treatment between those on zero hours contracts and other workers can be justified
- assess the employment status of zero hours workers and decide whether they will be obliged to accept work when it is offered. If there is no obligation to accept work employment status and all the benefits that confers may be avoided
- be mindful of how zero hours contracts are implemented in practice. If the reality is that the individuals work regularly and over a long period then they may be regarded as full time, permanent employees regardless of what the written contract states
- calculating the holiday pay entitlements of those on zero hours contracts can be complex
- consider whether or not to auto-enrol those on zero hours contracts into the company pension scheme
- be mindful of giving different perks to those on zero hours to the rest of the workforce
- there is a risk of discrimination claims where the majority of those employed on zero hours contracts share a common protected characteristic, such as age or sex.
Mr Milliband’s comments can be seen by clicking here
For further guidance on zero hours contracts please contact one of our team.