Not all employment contracts are born equal. Some are fixed-term contracts, and others are permanent. Some are full-time, and some are casual.
One common type of employment contract is a zero-hour contract. But what exactly does that mean, and how does it work? Let’s find out.
What is a zero-hour contract?
Also known as casual contracts, zero-hour contracts are a type of employment contract under which an employer doesn’t have to provide an employee with a minimum number of working hours.
As the name suggests, a zero-hour employment contract means that the employer is under no obligation to give the employee any working hours at all. And when they do, these hours don’t have to be fixed.
However, this also means that employees on a zero-hour contract are entitled to reject work, and they aren’t expected to work for a minimum amount of hours, either. This makes zero-hour contracts more suitable for those seeking a flexible work schedule, and those that don’t rely on regular or guaranteed income.
When are zero-hour contracts used?
Zero-hour contracts are extremely popular, particularly as employers and employees are adjusting to a more flexible way of working. In fact, according to Statista, there were 917,000 employees on zero-hour contracts in the UK in 2021.
But when are zero-hour contracts actually used? Let’s run through a few scenarios now.
1. To meet irregular demand
Like fixed-term contracts, businesses often use zero-hour contracts to meet irregular demand. For example, certain periods are often busier than others in the hospitality industry, and this demand can vary based on the events happening and seasonal trends.
If this demand fluctuates regularly, it doesn’t make sense to always have the same amount of staff on shift every week. Instead, it’s much more efficient for businesses to allocate hours to employees based on demand, and zero-hour contracts are a useful tool for doing this.
2. To cover for sick employees
Another instance where zero-hour employment contracts are useful is in the context of providing cover. Since it’s impossible to predict when employees will fall unwell, it can be challenging to schedule cover for them on a regular basis.
Zero-hour contracts enable businesses to offer work to casual employees on flexible terms and at the last minute. This can be done without needing to offer more regular hours to the casual employee.
3. For on-call work
Zero-hour contracts are also used in the context of on-call work. This is an arrangement whereby an employee is available to work outside of typical business hours, and at short notice.
The most common examples of on-call work include emergency services, translators, or carers. These are all important roles, so it’s important for businesses to ensure that they are properly staffed.
However, since there’s also no guarantee that the service will be needed, zero-hour contracts are often used.
Are zero-hour contracts legal?
Zero-hour contracts are legal as long as the employer complies with the relevant laws and respects employees’ rights.
Specifically what these rights are will vary depending on whether they are classed as an ‘employee’ or a ‘worker’ If the zero-hour contract is between an employee and an employer, the employee’s rights include:
- Access to statutory sick pay
- Access to statutory maternity or paternity leave and pay
- Access to statutory redundancy pay
- Protection against unfair dismissal
Meanwhile, both workers and employees have the following rights under zero-hour contracts in the UK:
- Access to national minimum wage
- Access to the statutory holiday entitlement
- Protection from unlawful discrimination
- Access to rest breaks at work, which all employees in the UK are entitled to
The same applies in the US. Zero-hour contracts are legal in the US so long as they comply with the employment laws of the relevant state.
Found out more in this primer: employment law for in-house counsel.
What are the advantages of zero-hour contracts?
🧘 Flexible for employers and employees
Arguably the biggest benefit of zero-hour employment contracts is the flexibility it affords both employers and employees.
Under a zero-hour contract, employees can freely accept and reject work on their own terms, and this enables them to honor their existing commitments. This makes them an attractive option for those in education, with children, or with busy schedules.
Similarly, zero-hour contracts enable businesses to meet demand more flexibly. This helps them to keep unnecessary costs down during less busy periods.
🚫 No restrictions on additional work
Within the UK, employment law says that employers that hire employees on zero-hour contracts can’t prohibit the employee from looking for or accepting work from other employers.
In fact, even if the zero-hour contract expressly prohibits the employee from working elsewhere, the law in the UK tells the employee to ignore the clause, meaning that they won’t be in breach of their contract.
➕ Opportunity to earn extra income
While zero-hour contracts can’t guarantee a steady income, they can be extremely useful for individuals looking to create a second source of income. This is because zero-hour contracts enable individuals to accept as much or as little of the work as they want. This degree of flexibility makes it easier for employees to balance multiple jobs at any given time.
🧑💼Chance to gain experience
Zero-hour contracts are also a great way to gain experience in a certain field without committing to it too quickly. Zero-hour employment contracts don’t require the same level of commitment as other employment contracts, and this gives individuals the opportunity to trial an area before diving in head first.
It’s also common for zero-hour contracts to result in permanent work, so they’re a good opportunity for employees to get their foot in the door.
What are the disadvantages of zero-hour contracts?
However, zero-hour contracts certainly aren’t all sunshine and rainbows. There are also a few notable disadvantages of zero-hour contracts that can discourage people from using them. Let’s explore these together now.
💰 No steady income
One of the most significant disadvantages of zero-hour contracts for employees is that they don’t guarantee a steady income. Since zero-hour employment contracts don’t guarantee a minimum number of working hours each week or month, there’s no guarantee of compensation either.
This can make it difficult to commit to paying large bills on a regular basis, and it can make it difficult to get a mortgage since your income can fluctuate.
Since zero-hour contracts don’t establish a routine for employees, it can be hard for those on casual contracts to settle into the company. This is because they don’t engage with the rest of the team as often as other employees do, which can make it difficult for them to develop strong working relationships with their colleagues.
😨 Pressure to accept hours
Although zero-hour contracts seek to empower employees to accept or reject certain working hours, not all employees feel this way. Many employees fear that by rejecting certain hours, they won’t be offered as many in the future. Unfortunately, this is a common concern among employees on zero-hour contracts, and it can make them less flexible than they first appear.
How can businesses manage zero-hour contracts effectively?
As we just explored, zero-hour contracts can benefit businesses in lots of ways. However,
1. Familiarize yourself with the law
Before deciding to offer a zero-hour contract, it’s important to understand what the rules of doing so are. For example, you’ll need to consider:
- What rights the employee has (sick pay, holiday pay etc)
- What duties you owe to the employee (e.g health and safety etc)
Not only is this information important when deciding whether to offer a zero-hour contract to begin with, but it’s also important to reflect these rights and responsibilities accurately when drafting a contract.
2. Be transparent with candidates
One of the most important things to do as an employer offering a zero-hour contract is to be transparent about this from the offset. Candidates often invest a lot of time and effort into the application process, and you should be respectful of this time by being open and honest with them about the availability of hours.
Not many people are in the position to accept a role that doesn’t provide a stable income, so it’s essential that you’re clear about the casual nature of the contract when advertising the role.
It’s not good enough for candidates to first find out that the contract is a zero-hour one in their employment offer letter. They deserve to know sooner.
3. Track contractual obligations properly
Fulfilling your contractual obligations is just as important in zero-hour contracts as it is in other HR contracts. Therefore, it’s important to track your contracts and monitor your ongoing obligations closely.
This can be difficult for businesses that save signed contracts as PDFs and store them in shared drives, but the process can be simplified using a tool like Juro. Juro users can create, review, negotiate, sign and store contracts securely in one platform. These contracts are also made fully searchable using OCR, meaning you can find and access them with ease.
4. Automate zero-hour contracts at scale
If your business is growing quickly, you’re probably hiring often. But hiring is hard enough, and fast-growing businesses don't have time to move between multiple different tools to manage employment contracts.
Unscalable contract processes find legal and HR teams burdened with paperwork and contract admin. They also deliver a poor candidate experience.
However, automating HR contracts using a tool like Juro can remove this friction and manage contracts at scale:
“The time I spend replying to candidates and negotiating terms has been reduced by 75% thanks to Juro - it makes my life so much easier” Karolina Plaskaty, Curve
“There’s nothing I could recommend for Juro to improve on - whether it’s for training, employee experience, or updating documents” Cameron Russell, Deliveroo
Specifically, Juro enables legal and HR teams to:
- Self-serve on employment contracts: HR teams can self-serve on the creation of contracts with ease using automated contract templates, conditional logic, and Juro’s natural language Q&A workflow.
- Automate HR contracts at scale: Juro’s bulk actions enable HR teams to generate thousands of HR contracts at once, and get them agreed in seconds. Perfect for scaling businesses!
- Pull data directly from HR systems: Juro can be integrated with HR software like Greenhouse and Workday to pull candidate and employee data directly into contracts.
- Manage contract renewals with ease: Juro’s contract renewal reminders make managing upcoming contract renewals easy.
- Create contracts people actually want to sign: HR contracts are a great opportunity to make a lasting impression on an impressive candidate. Luckily, Juro users can create beautifully designed contracts in seconds
- Negotiate HR contracts seamlessly: Juro’s collaborative workspace makes it easy to collaborate on contracts internally, and negotiate them with candidates.
To find out more about how Juro’s all-in-one platform can streamline the creation, execution and management of HR contracts, fill in the form below.