Zero-hour contracts fall under the banner of what is known as ‘atypical contracts, i.e., when the work on offer is not constant and there are no set hours of work. Zero-hour contracts provide flexibility for both the employer and the individual, but they must be used fairly and appropriately.
Zero-hour contracts are often referred to as:
Below are some examples of when zero-hour contracts are used:
- When work levels fluctuate, i.e., seasonal work.
- When set hours cannot be guaranteed, perhaps the business is new and building up its customer base.
- The individual wants to work flexibly; perhaps this is their second job.
- Covering unplanned absences such as sickness.
There is often a lot of confusion surrounding these types of contracts, which is why Avensure recently ran an ‘Ultimate Guide to Zero Hours Contracts’ interactive training webinar for our clients.
In this guide, we answer some of the questions about zero-hour contracts put forward by our clients who attended our interactive live training webinar.
1) Have the rules changed regarding annual leave entitlements and holiday pay for zero-hour workers?
Legislation has never set out a specific way of calculating annual leave entitlement for those with irregular working patterns, such as zero-hour workers.
Previously, a percentage method (12.07%) was used to calculate a zero-hour worker’s annual leave accrual based on the hours worked.
The Supreme Court ruling in Harper Trust v. Brazel in 2022 means that employers should no longer calculate annual leave in this way. Instead, someone on a 0 hour contract will have an annual leave entitlement of 5.6 weeks.
In terms of their holiday pay, if a zero-hours worker asks for a week’s holiday, their holiday pay for that week will be calculated by working out their average pay over the previous 52 weeks, ignoring any weeks where no work has been carried out.
This may mean that the employer has to count back into the previous holiday year to get 52 weeks where the individual has carried out work (subject to a maximum of 104 weeks).
Where an individual has not worked for the employer for 52 weeks, the employer should count back to the start of their employment.
2) When you calculate the holiday pay and go back over 52 worked weeks, if some of these weeks are paid holiday or sickness, do you include this week in the average calculation or go back another week?
Weeks, where holiday pay or sick pay was given, should be excluded when calculating the 52-week average.
3) Our business is seasonal; would we be better off giving people fixed-term contracts?
A fixed-term contract has a start and end date, so if you know there will be work for a set period and only for that set period, a fixed-term contract is ideal. Examples of when fixed-term contracts are used are to cover maternity leave or for a particular time-limited project.
Please note that you are undertaking to guarantee work for the fixed term period, but there is no obligation to offer set or fixed hours under a fixed term contract, so a fixed term contract can also be offered on a zero-hours contract basis.
4) If someone is on a zero-hours contract, could their holiday pay be included in their hourly rate?
This type of arrangement is known as rolled-up holiday pay. Rolled-up holiday systems are no longer lawful as they are seen to discourage workers from taking annual leave as required under the Working Time Regulations. Therefore, it isn’t advisable to include holiday pay in a worker’s hourly rate.
5) I have some staff who are on a bank zero hour contract. They are in school or college full-time but work for me in the evenings, at weekends, and on school or college holidays. How would their holiday entitlement be worked out?
Their annual leave entitlement each year will be 5.6 weeks; this won’t be affected by the fact they are in full-time education.
What they are paid for any holiday they take will depend on their average earnings in the 52 weeks prior to taking leave.
Please be aware that there are specific rules regarding the number of working hours young workers can work; please contact us for more information.
6) Does a worker on a zero-hour contract qualify for SSP?
True ‘workers, i.e., those whose pattern of work is truly ad-hoc and are not working under employment contracts, don’t qualify for SSP. However, if they meet the eligibility requirements for SSP payments (such as their average earnings taking them over and above the lower earnings limit), they may be entitled to them.
It is advisable to contact us if you have a zero-hours worker who calls in sick so that we can check the zero hour contact and their working pattern to see if they may be entitled to SSP.
7) Can an employee have a part-time contract and a bank contract for additional hours?
It is possible for someone to be working under two separate contracts, but it’s not ideal because it can get a bit complex. For example, if they were dismissed from one contract, could they argue they were still employed under the second?
If the employee does occasional overtime, there isn’t a requirement to have a separate contract for this. There can be a clause in the contract that states additional hours may be required as per the needs of the business.
8) Are zero-hours workers entitled to pay if they are suspended from work?
If there is a suspension from work due to misconduct, then someone on a no guaranteed hours contract may qualify for suspension pay; however, this will depend on the contract.
Always seek Avensure’s advice prior to suspending any member of staff.
9) We have someone on a zero-hours contract in the hospitality industry with no set days or hours, but they won’t work weekends as it imposes on their social life. Where do we stand?
If the contract is zero hours, they do not have to work weekends because they will usually be free to turn down an offer of work.
If you require someone to work on specific days without being able to turn work down, a bank zero hour contract is not suitable. Instead, they should be offered a contract for set days; you could also agree on a minimum number of hours, or the contract could state that the exact number of hours is variable and dependent on the needs of the business.
10) Does Avensure provide a draught bank hour contract?
If Avensure drafts your HR documentation, such as your contracts of employment and employee handbook, then a zero-hours contract can be requested. The team will also establish if a bank hour contract is suitable for your business.
11) If a member of staff takes all the bank holidays off work and is paid for them, are they then only entitled to a further 20 days off?
The statutory annual leave entitlement in the UK is 5.6 weeks (or 28 days); this can be inclusive of bank holidays. This also applies to zero-hour workers.
The contract of employment will state whether bank holidays are included or not. If they are, as in the example above, this will mean that the employee has a further 20 days of annual leave to take throughout the year.
12) We use zero-hour contract workers because our work levels fluctuate, so we only pay for the hours worked. If we offered contracts with contractually set hours, would this mean we would have to pay the staff when they don’t work?
Yes, it would. If there is a set number of hours specified under a contract of employment, the employer is obligated to provide work during those times. This isn’t always possible, so this is why typical contracts like zero-hour contracts are used.
If zero-hours contracts work for you and your staff, then continue to use them, but you should be aware of the nuances around holiday pay and keep them under review.
13) If someone on a zero hours employment contract hasn’t used their holiday entitlement within the holiday year, do they lose it? Also, when they leave us, they may not have taken their entitlement, so currently, we would “pay up” their annual leave in their final pay; is this correct, or would they lose whatever they have not taken?
Anyone (zero hours or set contracted hours) should take their annual leave within that holiday year. If they don’t, then they lose it all. There are exceptions to this; for example, if someone cannot take their annual leave because they are on maternity leave or long-term sick, their annual leave carries over.
There is a duty on employers to remind employees they have annual leave to book and to remind them that if they don’t, their leave is lost, as is any entitlement to pay for that lost holiday.
However, when someone leaves their employment (or is dismissed), the employer should pay them for any holidays they have accrued but not taken, irrespective of the type of contract they are on.
14) Where zero-hour workers have assigned days and hours each week (at their request), are they still zero-hour workers?
If they have set hours now, they are not likely to fall under a no fixed hours contract arrangement, unless they are able to turn down the offer of work.
It is possible over time that the nature of the working arrangement can change, so it is important to regularly assess if a zero-hours contract is still appropriate.
You should contact us for advice on implementing the correct contract for these individuals.
15) We have a bank of casual workers in the care sector. Our payroll company pays holiday pay each month to them, and I assume this is based on the standard percentage method. Do we need to make changes as the staff have not raised anything and seem to be happy with the arrangement?
This sounds like a rolled-up holiday pay system that your payroll company should not be continuing to use.
If the percentage method for calculating annual leave is being used, there is also a possibility that holiday pay is being underpaid, so this requires a review. Please contact us for advice so we can look at this in more detail.
And finally… For details on our upcoming webinars and training events, please contact us at firstname.lastname@example.org.