What is a zero hour contract? (Including free template)
Zero hour contracts get a bad rap, but in some industries they’re the best solution for the employer. But how do you know if 1) zero hour contracts are right for you, and 2) that the zero hour contract you’re using protects your employees as well as your small business?
Well, that’s where I can help.
As one of Charlie’s CIPD-qualified advisors, I spend my days guiding new businesses to ensure they comply with HR law requirements. I care about protecting them from getting into legal difficulties, while also making sure their employees are treated fairly.
And it’s possible to do both with zero hour contracts. I understand that you might be worried you don’t understand the HR legal requirements well enough, and could inadvertently make a mistake with a zero hour contract that might cause trouble for your company.
So in this article, we’ll look at what a zero hour contract is, and when and how to use one. Plus, we’ve included a zero hour contract example in our free zero hour contract template, which you can download at any time — this template is applicable to any casual workers on zero-hour contracts.
What is a zero hour contract?
According to GOV.UK, “zero-hours contracts are also known as casual contracts” and are typically used “for ‘piece work’ or ‘on call’ work”.
Under a zero hour contract, an employer doesn’t have to guarantee a minimum number of hours, and the employee doesn’t have to accept the hours offered. For these reasons, zero hour contracts are more typical in industries where demand can vary dramatically — like hospitality or retail.
With a zero hour contract, extra team members are effectively on call when you need them, but as their employer you are not obligated to give them any work.
Of course, any employees on zero hour contracts may have accepted work from elsewhere in between times, so they may not want or be able to accept the hours when you offer them.
Are zero hour contracts legal?
Zero hour contracts are legal in the UK, as long as the employees’ statutory rights are upheld.
Just like the rest of your team, anyone on a zero hour contract is entitled to statutory annual leave and the National Minimum Wage, and you, as their employer, are responsible for their health and safety at work.
Concern around the legality of zero hour contracts is common for new businesses. This is because there’s often little to no HR experience within the team, and enlisting the support of a lawyer costs too much money. That’s why many startups and small businesses use experts like CharlieHR’s for affordable and trusted HR advice.
Benefits of zero hour contracts
Flexibility is the main benefit of zero hour contracts, as they allow you to bring in more employees whenever demand increases. This is a big advantage for an employer, as you can meet the need without overcommitting on unnecessary staffing costs.
And that flexibility works both ways. According to CIPD, people on zero hour contracts have, on average, “better work-life balance, are under less stress at work than other workers, and are less likely to report workloads are excessive”.
Find out more about employees who ask for a flexible working request.
Disadvantages of zero hour contracts
The flipside to flexibility is uncertainty, and that’s definitely a disadvantage of zero hour contracts.
Yes, you can call on your contracted employees, but if they have no idea when they’re working they may have already accepted another job or made other commitments — so they’re not actually available when you need them.
And then there’s always the possibility of having to cut back their hours if demand drops unexpectedly — which is stressful for everyone.
Zero hour contract holiday pay
Anyone on a zero hour contract is legally entitled to paid holiday, but it’s not as simple to calculate as it is for other employees.
According to GOV.UK, statutory entitlement is 5.6 weeks holiday, but there are “no regulations on how to convert the entitlement into days or hours for workers with irregular hours”.
Because of this, the Government allows employers to calculate holiday pay for anyone on a zero hour contract by multiplying the total hours worked by 12.07%. (which is the equivalent to 5.6 as a percentage).
- So if someone had worked 12 hours in one week, you’d multiply 12 by 12.07% to work out how much holiday they’d accrued (1.56 hours, in this instance).
To find out more about zero hour contracts and holiday pay, you can speak with our HR Advice team.
Zero hour contract notice period
There is no statutory requirement for a notice period on zero hour contracts, but as a responsible employer it is a good idea to have one. It will give your contracted team members the closure and clarification they need to move on and seek other work.
And as with any other employee, their notice period should be put in writing at the start of the contract.
Examples of roles and industries where zero hour contracts are common
Defined by the CIPD as 'an agreement between two parties that one may be asked to perform work for another but there is no minimum set contracted hours', zero hour contracts are more frequently used in sectors where demand fluctuates, or is seasonal or unpredictable.
Therefore they’re frequently seen in industries like:
- Care
- Retail
- Hospitality
- Leisure
- Catering
- Tourism
Zero hour contracts are a good way of managing changing workloads that are outside of your control. If you’re in hospitality, events like weddings are a good example of this.
And zero hour contracts can be useful for new businesses where demand is as yet unknown — they provide the flexibility to grow or shrink in response.
The sort of roles that might be employed on a zero hour contract include:
- Care assistants
- Delivery drivers
- Hospitality or catering staff for events
- Warehouse workers
- Seasonal retail assistants
- Casual hours work (students during the holidays, for example)
- Gig economy work (takeaway food delivery, for example)
What to include in a zero hour contract
Just like any other employment contract, a zero hour contract needs to set out the employee’s status and rights. And vitally, it must clearly state that it’s for a zero hours role. For example:
[Insert business name] is pleased to welcome you as a zero hours employee.
The employer should include any terms relating to:
- The employee’s hours or days of work and how these could vary
- The place of work
- Who they report to
- How they’ll be notified of any upcoming shifts
- How they accept or reject any offers of work
And as we’ve stated above, as a responsible employer you should also include information about the notice period and the termination process.
Zero hour contract example and template
To make things easier for you, we’ve put together a zero hour contract template, which includes a zero hour contract example. And it’s free to download.
Read and review the zero hour contract example and then fill in the blanks on the zero hour contract template for your own employees.
You can also use the contract template as a guide and adapt it to better reflect the needs of your business or the zero hours role in question.
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