What is a Zero Hour Contract?

Zero hour contracts, also known as casual contracts, have been the subject of much attention and much criticism in certain areas of the world.

Is the negativity justified? Unfortunately, some employers use zero hours contracts in bad faith, which is what has caused some countries to introduce legislation banning the practice.

Keep reading and we’ll explain all there is to know about zero hour contracts, and whether or not they’re ok to use today.

Key Takeaways:
– Zero hour contracts are a concept that’s more common in countries like the UK and New Zealand (also known in some parts as casual contracts).
– A zero hour contract means an employee is under contract, but has no guaranteed working hours each week.
– These arrangements have been criticized as unfair to the worker, particularly when they are expected to be available if called.

What is a Zero Hour Contract?

A zero hour contract is an employment agreement where the employee is under contract with an employer, but with no guaranteed number of hours.

This usually means the staff member is on call, or may be offered working hours each week, while not being on the company’s regularly scheduled rosters.

This type of employment contact is also known as a casual contract. 

For zero hours workers, this means there is no certainty they will get work, and thus no guarantee of pay each week.

The payoff – for both worker and employer – is the ability to be flexible. It’s important, however, that a zero hours contract is a mutually beneficial solution for all the parties involved.

When is a Zero Hour Contract Typically Used?

First, we should note that zero hour contracts are more common outside the USA. In the United States, most work agreements are considered “at-will”, meaning both the employer and the employee can terminate the contract at any time.

So a zero hour contract is essentially an at-will working agreement, but with no fixed hours attached.

In the UK, however, zero hour contracts are more common, and they are typically used for the following positions/scenarios.

• Service businesses: Somewhere like a supermarket, fast food store, or retail may use these contracts to fill out changing rosters and cover other staff who are sick or on leave.
• Holiday/seasonal work: Retail stores and e-commerce companies need extra hands during the holiday season rush. Temporary workers might fill that temporary need. Other seasonal work may include snow removal in the winter, summer camp jobs, or at an accountant’s office during tax season.
• Weddings, concerts, other events: An event planning business could use zero hour contracts for help during weddings, concerts, conferences, trade shows, etc.
• Temporary or gig workers: Instead of scrolling through Upwork every time there is a need for a gig, a business might maintain employees with casual contracts.
• Specific expertise: Zero hour contracts could work when a business needs a specific skill, but not on an ongoing basis. For example, a business might need a web developer to build a new application. But once the app is built, maybe there is only an occasional need for maintenance and updates. 

Are Zero Hour Contracts Legal?

In the United States, there are no laws regulating zero hour contracts because, as we mentioned before, this concept is rather uncommon.

More often, employers maintain relationships with contractors and there are no obligations on either side. The employer doesn’t owe the contractor any work, and the contractor is not expected to remain available for the employer beyond their specific tasks.

But elsewhere, casual contracts are more regulated.

United Kingdom

The UK has updated their zero hour contract law to the following: 

• You don’t have to give your employees work 
• The worker cannot be obliged to accept work when offered
• You can’t prohibit zero hour workers from seeking and accepting other jobs

Unlike the USA, zero hour workers in the UK are entitled to statutory annual leave, as well as the national minimum wage.

New Zealand

New Zealand has banned the use of zero hour contracts to stop unfair treatment of employees in sectors such as hospitality, service stations, and caregiving roles.

In many cases, workers were required to be available for employers, but without any guarantee of work (and consequently, payment).

Even without compensation, employees were expected to be available when needed under these contracts.

Despite the ban on this type of employment contract, New Zealand employers have some flexibility through the “availability clause” that may require employees to be available outside of regular hours under certain circumstances. 

Worker’s Rights and Zero Hour Contracts

All your employees are entitled to a few basic rights, and it includes those on zero hour contracts. 

• They are protected from discrimination
• You must pay them at least any state or national level minimum wage
• They are entitled to paid annual leave according to local law
• Zero hour workers are also entitled to other benefits as required by law
• They must get paid if they’re required to be on call (because they can’t accept work elsewhere)

Advantages and Disadvantages of Zero Hour Contracts (for Workers)

Despite the negative sentiment around casual contracts, some workers might find them favorable to a regular, permanent schedule. Let’s examine a few pros and cons.

Advantages

• Flexibility: by nature, zero hour contracts give employees flexible working hours. They’re free to decide when they wish to work, which fits well for people with irregular schedules outside of work.

Disadvantages

• No guaranteed hours: there’s no guarantee you’ll get paid on any given week (and no PTO if you want to take time off).
• Potential for bias: workplaces may be (consciously or unconsciously) biased towards permanent employees.
• Fewer opportunities for growth: though sometimes zero hour workers will get elevated to permanent roles, it’s likely that more opportunities will be given to people who are already permanent workers.

Advantages and Disadvantages of Zero Hour Contracts (for Employers)

As an employer, casual contracts/zero hour contracts can provide you with greater flexibility and cost savings. But there are some downsides too. Let’s look at both now.

Advantages

• Low-risk entry point: you can test out new hires with less risk, and elevate them to full contracts if things go well.
• Cover for unexpected absences: when team members get sick, or personal emergencies come up at the last minute, you have more places to call for short-term cover.
• Flexibility: zero hour contracts allow you to be agile and increase working hours for busy weeks or months, while slimming the wage bill during quieter times.

Disadvantages

• Low reliability: you can expect that zero hour workers will not be as committed as permanent or full-time employees.
• Retention: you risk losing your best zero hour workers if they find a better opportunity with regular hours somewhere else.
• Lack of togetherness and consistency: if team members are constantly chopping and changing, it may be hard to maintain a cohesive team environment.

Are Zero Hour Contracts Fair?

As long as your country or state allows zero hour contracts, and the contract is beneficial for both worker and employer, there’s no reason why you can’t make use of zero hours contracts in your company.

However, you have to maintain a fair exchange between employee and employer. You can’t require a worker to drop everything and come into work, unless they are being compensated for being on call. You also can’t require exclusivity (stopping employees from working for other companies), if you do not provide them with regular shifts.

You’ll need to go in with the understanding that they employee is free to decline work, and that they may leave at any time if they find an opportunity for consistent work.

Zero Hour Contract FAQs

Let’s end by answering some of the most frequently asked questions about zero hour contracts.

Can You Dismiss Someone on a Zero Hour Contract? 

Yes, you can dismiss a zero hour worker. But you should follow proper procedure in accordance with any local labor laws, and your agreement with the employee.

What Happens When You Reject Work on a Zero Hour Contract?

Your employee should be able to reject work within reason without the fear of negative consequences, like not being offered work in the future. 

If it is a regular occurrence, then you may want to consider talking to the employee and ending the employment contract.

Do You Get SSP (Statutory Sick Pay) on a Zero Hour Contract?

In the UK, employees on zero hour contracts might be eligible for SSP (statutory sick pay). Please refer to the UK Govt. Website for details.

What is an Example of a Zero Hour Contract?

An example could be a zero hour agreement between a retailer and a cashier. The retail business could ask the cashier to come in to work when needed (holiday season, for example) without having to guarantee them minimum hours regularly.