In the UK, the zero-hour contract is an employment contract in which an employer does not guarantee the individual any work and the individual is not obliged to accept any work offered. In the past few decades, zero hour contracts have become commonplace in most industrialized nations. This trend is part of a wider increase in nonstandard working agreements often referred to as the ‘gig economy’. 

The gig economy consists of digital marketplaces connecting workers to employers. It offers a flexible alternative to provide goods and services in an economy. This work is often self-directed and relies on contingent pieces of work, freelancing, casual labor, zero hour and short-term contracts. It was thought these digital marketplaces would have low barriers to entry and compensation is directly proportional to the amount of effort. 

How Does Zero-Hour Contract Work?

On-Demand Work Framework: Zero-hour contracts function as a specific form of on-demand work. In these contracts, there's a continuous employment relationship, but the employer doesn't provide consistent work. Instead, employees are called in as and when needed, without a guarantee of minimum working hours. This contrasts with other contracts where some minimum hours might be guaranteed.

Legal Structure and Variability: The legal status of zero-hour contracts varies between countries. In some, like the Netherlands, they are formally recognized, while in others, they fall under general employment law. The arrangement can be set up as an employment contract with no minimum hours or as a series of short-term contracts triggered by the employer's need.

Impact on HR Practices: For HR managers, understanding and managing zero-hour contracts involve navigating these variable work patterns while ensuring compliance with employment laws. This includes considering potential issues related to term contracts, unfair dismissal, and the rights of employees to regular work benefits.

Advantages and Disadvantages of Zero-hour Contracts 

Proponents for contract zero hours as part of gig-work argue that this type of work provides individuals with greater flexibility and autonomy. However, individuals do not have minimum guarantees for work, and typically have little say about how much work they perform. 

A distinctive and controversial feature of ZHCs is that employees can be called on at short notice if and when required by their employer. Employees in turn have no obligation to accept the work. Proponents praise the flexibility this type of employment relationship affords to organizations and workers alike. Critics, on the other hand, refer to ZHCs as an extremely low quality employment relationship characterized by labor market vulnerability in terms of both pay and hours insecurity.

Furthermore, disadvantages of zero hour contracts include unpredictable hours and pay and a lack of entitlement to rights under existing protective legislation.

Examples: Benefits of Zero-Hour Contracts

The seasonal nature of tourism for example requires flexibility especially with business peaking during the summer. Changes in consumer patterns in the retail sector require longer opening hours and more evening and weekend work. 

In sectors characterized by predominantly female employment, for example health, flexibility is often necessary to accommodate workers' caring responsibilities. 

Certain groups in the labor market such as women, students and older people may not want or have the opportunity for full-time employment. Flexible work arrangements such as overtime, part-time work, flexi-time, and atypical employment contracts have long been used by these groups. Workers and trade unions have sought and embraced many flexible work options that can improve work-life balance and give greater scope for atypical workers to participate in the labor market.

Drawbacks of Zero-Hour Contracts

For HR professionals, it's important to be aware of the growing concerns regarding the spread of zero-hour contracts. These contracts are extending beyond typical part-time roles like student work or casual Saturday jobs, increasingly replacing full-time, secure permanent positions in key sectors like health, education, and academia. 

The changing landscape of work, influenced by factors–like the expanding global economy and the shift towards more liberal market economies–is pushing employers towards more flexible employment practices, like zero-hour contracts. This transition is challenging traditional models of employee protection, such as collective bargaining, and is increasing the prevalence of precarious work conditions.

The implications of this shift for employers and employees are significant. Zero-hour contracts can lead to reduced employment terms and conditions, challenges in retaining skilled staff, heightened industrial conflict, and a general deterioration in employment relationships. For HR teams, navigating these changes is crucial in maintaining a balanced and fair workplace environment.

Zero-Hour Contract vs Other Employment Contracts

How does a zero-hour contract differ from other types of employment contracts? For HR teams, understanding the distinction between zero-hour contracts and traditional employment contracts is crucial. Characterized by their flexible work nature, ZHCs differ primarily in offering no guaranteed number of working hours. They are part of non-standard employment, often including part-time and temporary roles. 

Unlike permanent staff who have a defined, close connection with the organization, zero-hour workers have a looser relationship, often fitting into roles like fixed-term, freelance, or remote work.

These contracts provide HR with numerical flexibility to manage workforce needs, particularly useful for short-term requirements or for outsourcing specific tasks. However, zero-hour contracts typically do not offer the regular hours, notice period, holiday pay, and sick pay benefits associated with full-time employment.

In which Industries are Zero-Hour Contracts more prevalent?

Zero-hour contracts (ZHCs) are prevalent among a relatively small proportion of the labor force and are closely tied to other nonstandard employment aspects such as part-time and temporary work. 

In the UK, a significant proportion of ZHCs is found in just 10 out of 354 occupations according to the SOC 2000 classification. These contracts are more prevalent in job tasks where they are most suitable, typically in semi-routine and routine classes, indicating a connection between the nature of the work and the use of ZHCs. About two-thirds of all ZHCs exist in these specific occupations, with care assistants and home carers alone accounting for one in six ZHC workers. This concentration is not only in the least skilled classes but also within a limited number of occupations in these classes.

Further analysis shows a significant presence of ZHCs in labor-intensive service sectors like the food and beverage industry, care, and social work. Interestingly, many of these occupations are female-dominated. This observation suggests that occupational feminisation might play a role in the prevalence of ZHCs, alongside the type of job tasks.

Zero-Hour Contract in a Nutshell

• Zero-hour contract (ZHC) jobs are jobs that lack a guaranteed minimum number of hours. 
• In the UK, zero hours contracts have become synonymous with precarious work but the term is often used to describe a range of different forms of work such as part-time work, casual work, low hours and on-call work.
• Playroll offers specialized support for managing Zero-Hour Contracts (ZHCs), providing companies with the tools and expertise needed for compliant and efficient handling of these flexible work arrangements. Their swift onboarding and fee-free payroll features make it easy to integrate and pay ZHC workers, ensuring global HR simplification and compliance confidence for your distributed workforce.

Zero-Hour Contract FAQ

What is a zero-hour contract?

ZHCs are generally accepted to occur when a contract of employment between an employee and an employer lacks a guaranteed minimum number of hours.

What are employer obligations under zero-hour contracts?

While employers are not obligated to provide a set number of working hours, depending on the jurisdiction, there may still be obligations regarding notice period, holiday pay, and sick pay. Note that this can impact the stability of 'time employees' and the calculation of 'hours worked'. 

Does the national minimum wage also apply to zero-hour contracts?

Yes, ZHCs fall under laws that ensure that workers are paid at least the minimum for the hours they do work.