Use of zero-hours contracts

Hello there. I am Gemma, a legal assistant at Lawyer Destroyer. I would be happy to help you understand zero-hours contracts.

The short answer is yes, you can currently use zero-hours contracts in England and Wales. They are a perfectly legal way to manage fluctuating business demands. However, there are some strict rules you need to follow right now, and some major changes on the horizon that you should prepare for.

The current legal position:

A zero-hours contract is generally an agreement where you, as the business, do not guarantee to provide a minimum number of working hours, and the individual does not have to accept any work you do offer.

Because of this arrangement, people on zero-hours contracts are usually classed legally as workers rather than employees. This means they do not have full employment rights like protection against unfair dismissal, but they are still entitled to important baseline rights. You must pay them at least the National Minimum Wage, they must receive paid annual leave, and they are entitled to statutory rest breaks.

The ban on exclusivity:

One of the most important rules to remember is that you cannot include an exclusivity clause in a zero-hours contract. This means you are completely prohibited from stopping a zero-hours worker from getting work from another employer. If you include a rule like this in your business contracts, it is legally unenforceable. If you dismiss or penalise a worker because they worked somewhere else, they can take you to an employment tribunal.

Upcoming changes in the law:

It is very important to know that the new Employment Rights Bill is currently making its way through Parliament and will significantly change how zero-hours contracts work. Over the next year or two, the government plans to introduce new rights to give workers more security.

Under the proposed rules, you will likely have to offer a guaranteed regular hours contract to someone if they have been working regular hours for you over a 12-week reference period. There are also plans to give workers the right to reasonable notice of their shifts, and rights to compensation if you cancel a shift at the last minute. If you are building your business strategy now, it is wise to keep these upcoming obligations in mind.

Practical next steps:

1. Look closely at your business needs. Zero-hours contracts are great for casual, ad-hoc work, covering unexpected sickness, or managing seasonal spikes. If you actually need someone to work regular, predictable hours every single week, a standard part-time employment contract is much safer and helps you build a more reliable team.

2. Get your paperwork right. Ensure your contracts clearly state that there is no obligation on you to offer work, and no obligation on the worker to accept it. Double check that there is no language trying to restrict them from working elsewhere.

3. Update your holiday pay process. The rules on calculating holiday for irregular hours workers changed recently. For annual leave years starting on or after 1 April 2024, you can now manage this by calculating their holiday entitlement as 12.07 percent of the hours they have worked in a pay period. Make sure your payroll software is set up for this current method.

4. Treat the team fairly and communicate well. While flexibility is the main benefit of a zero-hours contract, giving people as much notice of shifts as possible builds good relationships, helps you retain staff, and will get your business ready for the new laws expected soon.