The Death of Zero Hour Contracts?

In one of its first moves the new Government has declared that exclusivity clauses in zero hour contracts are unenforceable. Could this be the death knell for zero hour contracts?

Zero-hour contracts are contracts of employment where the employees are effectively ‘on call’ but offer no guaranteed working hours. During the recession these contracts became increasingly common and can be very beneficial to employers for many reasons. They give employers a great deal of flexibility. Employers are able to take on more staff because they are not restricted by having to fit in with employees’ contracted hours. The employees are required to be available to work whenever the employer requires their services. There are no guaranteed hours of work and therefore there are significant cost savings for employers whose requirement for staff can vary daily or seasonally.
 
Employers employed via zero-hour contracts are entitled to statutory annual leave. However, the amount of holiday they get depends on the number of hours you work. So the less the employee works, the less paid leave accrues. They have the same rights to the National Minimum Wage and other statutory entitlements as workers do. 

Until the recent change announced by the Government, employers could prevent their zero hour employees working elsewhere. Opponents argued that this was unfair as employees could be restricted from taking up work elsewhere but may have had no work given to them under their zero hour contract.
 
With no guarantee of work and therefore no guarantee of income, this can mean considerable unpredictability in respect of their earnings for many zero hour employees. Despite this the Office for National Statistics (ONS) has estimated that there were 697,000 people (2% of the population) on zero hour contracts, working an average of 25 hours a week.

A 2013 study by the CIPD found that 47% of workers on zero hour contracts were "very satisfied" or "satisfied" with their arrangements and 72% believed they had some choice over the hours they worked. So it seems that despite the constraints and downsides that apply many employees are happy to work in this way. 

Ian Duncan Smith the newly appointed Work and Pensions Secretary recently stated “The people who actually use that contract are for the most part people with caring responsibilities, students, people who can’t guarantee fixed hours over a series of weeks and who are able therefore to flex their work and take their work as necessary”.

Will employer’s views on these contracts shift though following the change in the Small Business, Enterprise and Employment Act 2015 on 26 May 2015 making “exclusivity clauses” in zero hours contracts unenforceable?

It does appear that these flexible arrangements suit many employers. If employees do decide to take advantage of the removal of the exclusivity and work elsewhere, then the employers they decline to work for, having opted to work elsewhere, may start taking a different approach. We may see the popularity of zero hour contracts start to diminish. Time will no doubt tell though.

Blog written by Pam Loch, Managing Director of niche employment law practice, Loch Employment Law and Managing Director of HR Advise Me Limited.   

For more information contact Pam Loch at pam.loch@lochlaw.co.uk.

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