A lot of column inches have been devoted to the issue of ‘zero-hours’ contracts over the last few weeks. If you have been wondering what all the fuss is about, then read on. What are ‘zero-hours’ contracts? Effectively, they are contracts under which workers have no guarantee of any minimum number of hours of work. Instead, the ‘employer’ can simply call on the workers as and when needed. Some might refer to these sorts of agreements as casual contracts, others as bank worker contracts; they go by many names, but they are all fundamentally the same thing. Why have they suddenly hit the headlines? It’s very hard to say. ‘Zero-hours’ contracts are not a new phenomenon. But a handful of politicians (including Vince Cable and, more recently, Ed Miliband) seem to have become concerned about the potential for abuse, when employers habitually use such contracts. The scale of the problem – if indeed there is a problem - is very difficult to quantify. Figures produced by the Office for National Statistics suggest that there could be around 250,00 people working under ‘zero-hours’ contracts. However, other organisations have suggested that the figure could be much higher; one offered an estimate of 1 million such contracts, another has suggested that the figure could be as high as 5.5 million. In my experience, I think it highly unlikely that these latter estimates as particularly accurate.

  What is the perceived problem? Those engaged under ‘zero-hours’ contracts are not guaranteed any fixed hours of work. So workers might have lots of work one week and little or nothing the next. You can see the problems that this could cause. By the same token, you might also say that this is the very nature of casual work. Some commentators have wrongly suggested that people on ‘zero-hours’ contracts are not entitled to paid holiday. This is likely to be incorrect in almost all cases. Many casual workers will still enjoy much (if not all) of the protection afforded to other types of workers. That said, those people working under genuine ‘zero-hours’ contracts may not be covered by unfair dismissal laws. Thought may need to be given to the extent to which this leaves some workers rather ‘exposed’. Should businesses be using ‘zero-hours’ contracts?There are certain industry sectors where ‘zero-hours’ contracts are very popular. The care sector is a good example. Having a bank of casual workers who can fill in if a carer falls ill or goes on holiday makes a lot of sense. Furthermore, there will be times when these sorts of arrangements work equally well for the workers concerned. They may value the fact that they can take work if it suits them or potentially turn it down if it doesn’t. That said, ‘zero-hours’ contracts have to be used wisely. 

It would be wrong to give them to all staff, in an attempt to water down their employment rights. Indeed, if a person on a ‘zero-hours’ contract was habitually working fixed hours, there would be a real chance that the ‘zero-hours’ contract would be found to be a sham. However, if used to manage genuine casual worker arrangements, there is nothing intrinsically wrong with such contracts. They just need to be properly drafted and managed. So what’s going to happen next? The coalition Government’s plans in relation to the future of ‘zero-hours’ contracts are currently unclear. Ed Miliband has stolen a march on them by proposing an arrangement under which, after 12 weeks’ ‘employment’, workers would be entitled to guaranteed hours equal to the average number of hours worked in that initial 12-week period. But I am unconvinced that this is a particularly credible plan, without further thought being given to the various exceptions and exclusions that would need to apply. Mr Miliband also wants to curtail the extent to which workers under ‘zero-hours’ contracts can be prevented from undertaking work for other ‘employers’. I am not aware of large-scale abuse in this area. As a result, I wonder whether this, in truth, is a solution to a problem that doesn’t really exist. 

To the extent that this debate progresses beyond posturing and results in more concrete policy proposals, those business using or thinking of using ‘zero-hours’ contracts will need to pay close attention. For now, employers might be well advised to conduct a review of their employment arrangements, to consider whether they feel that they have their house in order. James Willis, Head of Employment, stevensdrakeThis article is provided for general information only. Please do not make any decision on the basis of this article alone without taking specific advice from us. stevensdrake will only be responsible for the advice we give which is specific to you.