Vince Cable’s consultation on the use of zero hours contracts is ongoing. The key areas of concern are transparency and the lack of a clear legal definition of zero-hours contracts, the uncertainty of earnings, the unpredictable hours and the balance of power in the employment relationship.
With the consultation still open, employers who require seasonal workers in the run up to Christmas need to consider the risk zero hours arrangements pose. Argos and Amazon alone are intending to recruit over 25,000 seasonal workers. Clearly, with such large numbers of workers being engaged over the Christmas period, employers should be aware of the difficulties of zero hours contracts.
Zero hours arrangements have become the most contentious of contingent working arrangements, increasingly criticised by the media for allowing large organisations to short-circuit employment legislation. With no set hours, the employer is under no obligation to provide work to the individual. Employers must, however, find the balance between flexibility and the administrative costs of complying with so called ‘red tape’. Any difference in treatment between zero-hours workers and their full time colleagues should be justified.
Where workers are under no obligation to accept work, it is unlikely that they will be considered to be employees and enjoy the right to complain of unfair dismissal or qualify for statutory redundancy payments. Employers should therefore assess the employment status of their workers at the beginning of the relationship. Employers must, however, be mindful that Tribunals will consider the reality of the situation; a long standing relationship and regular supply of work may mean that a contractual obligation to provide work is implied.
As the nature of zero hours arrangements involve irregular and unpredictable hours, this poses problems for employers seeking to calculate statutory holiday pay. For seasonal workers ‘a week’s pay’ is calculated by taking an average of all the amounts paid over the previous 12 working weeks. Unlike workers with normal working hours, this includes overtime payments and bonuses. Sophisticated administrative systems are therefore required to track this accrual; this is often difficult to manage. For these reasons alone, some employers prefer to utilise staff with low normal hours of work.
For employers who use seasonal workers it may be easier to use agency workers, traditional fixed term contracts or increasing overtime to maintain flexibility. It will be interesting to see how the government intends to strike the balance in preserving flexibility if it proposes to regulate zero hours arrangements.