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Zero Hour Contracts: Definition, Types and How They Work In 2022

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Since the events of 2020, more and more people have been looking for more flexible work terms.

In turn, employers are looking to find ways to ensure employees stay on and get the most benefit from the job.

Enter a zero-hours contract.

The new decade has brought new employment terms and diversified ways to work.

In this article, we will dive deeper into what a zero-hours contract is, who can get one, its pros and cons, and how they work for business owners and employees alike.  

What Are Zero-Hour Contracts?

A zero hours contract is an employment contract for casual workers.

Zero-hour defines a work contract where the employer is not bound to give the employee a certain amount of working hours.

Similarly, the employee is not bound to any work given by the company and can work for multiple employers.

A zero hours contract is very popular in the UK.

While the term is getting its fifteen minutes of fame in the 21st century, zero-hour contracts are not new.

Many industries have worked on a seasonal basis where employees are contracted by job, task, or season.

These include catering, yachts, resorts, data entry, warehouses and storage, and various kinds of temporary workers.

How Does a Zero-Hour Contract Work?

Essentially, zero-hour contracts afford work freedom for workers and businesses.

The business offers a contracted individual work when it arises and pays them for it by the hour or by task.

The company is not obliged to provide minimum working hours to the contracted individual like with a traditional contract.

If a person works under a zero-hour contract, they can choose to take on the work or reject it.

The individual gets paid for work done under the previously agreed payment terms.

A zero-hour contract allows workers to work for multiple companies simultaneously.

Are Zero Hour Contracts Permanent?

According to the UK government, people should not use zero-hour contracts permanently.

If a company can afford a full-time employee, they should hire one.

If a person works for a company for at least 20 hours a month for three months, they are entitled to a permanent contract.

The employee can decline the offer for a permanent contract and stick to working on an on-call basis.

No law forbids a permanent zero-hour contract between a contracted individual and a business.

Are Zero Hour Contracts Legal?

Yes, zero-hour contracts are legal in several countries worldwide, but under different terms.

The UK pioneered the term Zero Hour Contract, which is protected by law.

A business can use zero-hour contracts if it abides by the statutory rights afforded to all workers.

What Rights Do You Have on a Zero-Hour Contract?

According to UK law, any employee with a zero-hour contract is entitled to all rights afforded to employees, including statutory annual leave and the national minimum wage for any hours worked.

In addition, as a zero-hour employee, you can take a business to court for abusing your rights as a worker if they do not abide by the law.

Do I Get Holiday Pay on Zero-Hour Contracts?

Yes, you get paid annual leave and public holidays as a zero-hour contracted employee.

You can also take rest days.

Pros and Cons of Zero-Hour Contracts

Like every other work contract, zero-hour contracts have both advantages and disadvantages for both the employer and employee:

What Are the Pros of a Zero-hour Contract?

There are several benefits to a zero-hour contract.

These include:

  • Flexible shifts as you can decide what work to take and when to take it
  • Paid holidays as you are entitled to by the law
  • A guaranteed national, liveable minimum wage as directed by the law
  • Payment of accrued holiday pay if you quit
  • All-expenses paid work-related travel
  • Mandated breaks between shifts when you work
  • Flexible quitting as you can leave without worrying about penalties

What Are the Cons of a Zero-Hour Contract?

Despite the many advantages offered by zero-hour contracts, there are several disadvantages to consider as a worker:

  • Unreliable income since you are not guaranteed work hours
  • No severance compensation since you can also quit without notice
  • Increased stress and anxiety around planning your work hours as they’re not guaranteed
  • No pension contribution
  • No benefits, which can include company accounts, wide health coverages, and more.

Who Benefits The Most From Zero-Hour Contracts?

Zero-hour contracts are unique work contracts because they can equally benefit the workers and the business.

On the one hand, zero-hour contracts make it possible for workers to choose what work to accept and what companies to work for, making it easier for workers to live and work in the 21st century.

On the other hand, businesses get to employ people as the work decides, allowing them to save on extra costs that come with employment redundancies and worker benefits.

The benefits are mostly felt by whoever has the greater power of choice.

If someone can afford to refuse work or has a career in an industry with plenty of opportunities, zero-hour contracts are the better work contract.

However, businesses in slower industries may benefit more from zero-hour contracts.

Zero Hour Contracts for Business Owners

Using zero-hour contracts will make it possible for business owners to cut costs and reduce redundancies.

They allow the business to run on essential personnel and pay for work as needed.

Do Employees Have to Give an Employer Notice on Zero-Hour Contracts?

Employees do not have to give their employer notice on zero-hour contracts.

According to workers’ rights under zero-hours contracts, employees can resign at a moment’s notice without fear of penalties.

Can You Dismiss Someone On a Zero-Hour Contract?

Yes, you can dismiss a worker on a zero-hour contract.

In fact, zero-hour contracts give employers the power to dismiss workers without notice.

If the time agreed upon for the contract is over, businesses can end the contract.

If you want to terminate the contract, you do have to inform the employee according to the rules of dismissal law.  

Frequently Asked Questions

With zero-hour contracts becoming more widely used, there is a lot of learning for both employees and employers.

As questions arise, it is important to research the zero-hour contract laws in your area.

Who introduced zero-hour contracts?

It is unclear who exactly introduced zero-hour contracts.

However, they came into UK law under the National Minimum Wage Act 1998.

They were previously not governed by any working laws or regulations.

Zero-hour contracts became popular with the introduction of laws to protect employees and the enforcement of workers’ rights.
As of 2017,

almost 3% of the UK workforce was employed under zero-hour contracts.

Conclusion

Zero-hour contracts are not a new invention.

In many countries, businesses have been able to clock-off workers during downtime.

Additionally, many industries had functioned and thrived on zero-hour contracts long before the law recognized them.

Workers in construction, cruise liners, vacation towns, bookkeeping, and many other industries worked on an on-call basis throughout modern history.

Zero-hour contracts have made it possible for workers to afford the same luxuries of choice and flexibility that businesses have.

They also allow businesses to run in economical ways.

However, a zero-hour contract can be stressful for both workers and businesses.

Nonetheless, if implemented well, the benefits outweigh the disadvantages. What are your thoughts on zero-hour contracts?

Share them in the comments.

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