Zero-Hour Contract Advantages & Disadvantages? (Pros / Cons)

Just the mere mention of a zero-hour contracts brings a shiver to my spine. Zero-hour contracts have become tainted. The only news I have been subjected to on the topic are the large corporates who use it to their advantage, or to the disadvantage of their employees.

It’s regularly highlighted how zero-hour contracts offer advantages to large corporates to the detriment of their employees. But there are always two sides to every story. It is just that some stories do not sell news.

As someone who always likes to understand both sides of a story, I thought I would dive a little deeper into the zero-hour contract advantages and disadvantages story to see if I can put an unbiased point of view to the argument.

For example, are there only benefits of zero-hour contracts to employers, or does it rub both ways with advantages for employees too? 

This is an important subject to understand albeit a little dry. But if you’re scratching your head wondering what are ‘zero-hour contract advantages and disadvantages?’ and how it can benefit you or not, here’s a simple answer: 

The advantage to a zero-hour contract is flexibility for both employee and employer. Work does not have to be offered or accepted which is also the biggest disadvantage for employees as there is no guarantee of income and for employers it can be a full-time job trying to organise a workforce that can pick and choose when they work.

As mentioned above there are two sides to the advantages and disadvantages of zero-hour contracts and it depends on whether you are on the side of the employee or the employer. 

Before we attempt to understand the pros and cons of zero-hour contracts for employers and workers, it’s important to truly understand what the term means.

What is a zero-hours contract?

Zero-hours contracts are also known as casual contracts. Zero-hours contracts are usually for ‘piece work’ or ‘on call’ work, for example for interpreters.

This means if you employee people on these terms, then:

• they are on call to work when you need them
• you do not have to give them work
• they do not have to do work when asked

Zero-hours contracts can be a flexible option for both employers and workers. For example, if the work is not constant or is ‘as and when’.

If you have a zero-hours contract as a worker:

• your employer does not have to give you any minimum working hours
• you do not have to take any work offered

Some zero hours contracts only give ‘worker’ status and employers use these types of contracts to cover busy periods or irregular patterns of work. 

However, many zero hours’ contracts state that you are an ‘employee’ so you should check your written contract, if you have one, or ask your employer.

If you are working for the same employer over a long period of time on regular hours it is more likely that you are an employee, regardless of what it says in your contract, and you should be entitled to the same rights as an employee.

Employees can work full-time or part-time and can include apprenticeships, permanent contracts and short-term or fixed-term contracts.

Types of work that might use zero-hour:

• bank work (for example, for the NHS)
• casual hours (for example, students who only work during holidays)
• care work
• delivery driving
• gig economy work (for example, delivering takeaway food or giving car rides)
• hospitality work
• warehouse work

What are the disadvantages of a zero-hour contract?

The disadvantages of a zero-hour contract will depend on whether you are an employee or employer. There are two sides to this conversation. 

To give a fair and unbiased opinion on the facts we have split the disadvantages into disadvantages of a zero-hour contract for employees and disadvantages of a zero-hour contract for employers.

Disadvantages of a zero-hour contract for employees

• If you’re not provided work for a full calendar week (7 consecutive days from Sunday to the following Saturday), this usually counts as a break in employment – you build up more employment rights the longer you have been in continuous employment
  • for workers, after your first year of continuous employment you might not have to build up holiday before you can take it, but this would reset if there was a break in employment
  • for employees, you have the right to make an unfair dismissal claim after 2 years’ service, but this could reset if there was a break in employment

Disadvantage of a zero-hour contract for employers

• if employees are classed as workers there is no requirement for them to give notice leaving you short staffed during busy periods. If you require a notice period, it must be in the written statement, but workers do not have to take any work offered!
• employees are not obliged to accept work offered making it difficult to manage workloads and peak periods
• you may need a lot more people on the books than would be necessary for salaried employees adding to management workload, training, and software costs
• masks over problems with proper business planning and management issues
• do not allow employers to avoid their responsibilities. All staff regardless of their contract, are entitled to employment rights and should be treated fairly and within the law
• exclusivity clauses are prohibited in zero-hour contracts. This means you cannot stop an individual from looking for work or accepting work from another employer – even a competitor
• less communication with zero-hour contract workers could mean a lack of efficiency in the team as a whole
• potentially less buy in to the business culture and therefore commitment from someone who is not as invested in the business

What are the advantages of a zero-hour contract?

As we have mentioned throughout there are two sides to this conversation. Those of the employer and those of the employee. 

Again, to give a fair and unbiased opinion we have split the advantages of a zero-hour contract into advantages of a zero-hour contract for employers and advantages of a zero-hour contract for employers.

Advantage of a zero-hour contract for employees

• you do not have to take any work offered – this offers much more flexibility if you need to be able to pick and choose when you work, perhaps if childcare is a problem, you look after elderly relatives, you need time to study or you simply want plenty of me time
• the opportunity to earn extra income on a non-specified basis is always welcome, it is a convenient way to make money
• depending on your contract and circumstances, you might be legally classed as an employee and have more employment rights. Often zero-hour contracts are seen as away for employers to avoid their employment responsibilities but that may not be the case. It’s a good idea to check your employment status matches with your contract. For example:
  • for workers, after your first year of continuous employment you might not have to build up holiday before you can take it, but this would reset if there was a break in employment
  • for employees, you have the right to make an unfair dismissal claim after 2 years’ service, but this could reset if there was a break in employment
• If you’re an employee, you also have protection from being dismissed or experiencing any ‘detriment’ if you:
  • reasonably believe being at work or doing certain tasks would put you in serious and imminent danger
  • take reasonable steps over a health and safety issue, for example complaining about unsafe working conditions
  • inform your employer about your health and safety issue in an appropriate way
• If you’re on a zero-hours contract, by law, your employer must not:
  • stop you working for another employer by putting an ‘exclusivity clause’ in your contract
  • treat you unfairly if you do work for another employer
  • dismiss you for it if you’re legally classed as an employee
  • This law still applies even if your employer says you’ve broken your contract by working for another employer.
• employers must follow rules on notice periods, but these could be different depending on whether you are classed as a worker or employee

Advantage of a zero-hour contract for employers

• you do not have to give employees any minimum working hours – if you operate a business with irregular work demands or where there is not a constant demand for staff this gives you flexibility and cost savings that employing salaried staff does not afford you
• if employees are classed as workers there is no requirement to give them notice which could save you money if your circumstances change
• flexibility when you are a new business building up custom but do not require permanent staff
• ability to cover periods of unexpected staff sickness and be able to call upon experienced staff
• option to test out new services and products by using staff on an ad hoc basis before deciding about rolling out the service
• allows full time employees to avoid overtime and not working at optimum capacity as they are working too many hours

It is fair to say that there are ample pros and cons to zero-hour contracts for both employee and employers. What a zero-hours contract offers you in terms of benefits or not is driven largely by your own individual circumstances.

It is key that you understand whether the relationship is one of worker – employer or employee – employer as this could end up with a result that does not work for you or mirror your original decision-making process.

Do your research.

FAQs on the pros and cons of zero-hour contracts

What are zero-hour contract rights?

Zero-hours workers are entitled to statutory annual leave and the National Minimum Wage in the same way as regular workers.

Employers cannot do anything to stop a zero-hours worker from getting work elsewhere. The law says employees can ignore a clause in their contract if it bans them from:

• looking for work
• accepting work from another employer

If you’re on a zero-hours contract you can be classed as an employee or a worker. By law, this means you have employment rights including:

• National Minimum Wage and National Living Wage
• paid holiday
• pay for work-related travel
• pay for being on call

Depending on your contract and circumstances, you might be legally classed as an employee and have more employment rights. It’s a good idea to check your employment status matches with your contract.

If you’re an employee, you also have protection from being dismissed or experiencing any ‘detriment’ if you:

• reasonably believe being at work or doing certain tasks would put you in serious and imminent danger
• take reasonable steps over a health and safety issue, for example complaining about unsafe working conditions
• inform your employer about your health and safety issue in an appropriate way

You could have a case for automatically unfair dismissal if you’re dismissed in these circumstances.

Detriment means treatment that leaves you worse off, for example:

• your employer reduces your hours
• you experience bullying or harassment
• your employer turns down your training requests without good reason

If you’re legally classed as a worker, you also have protection from experiencing any ‘detriment’ if you:

• reasonably believe being at work or doing certain tasks would put you in serious and imminent danger
• take reasonable steps over a health and safety issue
• inform your employer about your health and safety issue in an appropriate way

Do you get sick pay on a zero-hour contract?

All employees, and certain groups of workers, are eligible for Statutory Sick Pay (SSP) if they meet the other qualifying conditions. These groups are classed as employees for the purposes of SSP.

Individuals who are classed as employees for the purposes of SSP and are on casual, short-term or zero-hours contracts are eligible for SSP as long as they meet the other qualifying conditions.

If you’re on a zero-hours contract, you can still get sick pay – you should ask your employer for it. If they say no, ask them to explain why. You can contact your nearest Citizens Advice if you’re not happy with their explanation.

You shouldn’t be made to feel bad about asking for sick pay you’re entitled to.

Are zero-hour contracts entitled to holiday pay?

Yes. Zero-hours contract workers have the same legal rights as employees on other contracts.

Workers are entitled to a week’s pay for each week of statutory leave that they take.

Most workers are entitled to 5.6 weeks’ paid holiday a year. You can use the holiday calculator to work out how much leave someone should get.

A week’s pay is worked out according to the kind of hours someone works and how they’re paid for the hours. This includes full-time, part-time, term-time and casual workers.

If you have a working pattern of no fixed hours, including zero-hours contracts, a worker’s average pay from the previous 52 weeks (only counting weeks in which they were paid) is used to calculate a week’s pay.

The only exception is when there is a break in an employee’s working pattern. If this occurs, it could affect anything that accrues with time – such as the number of days of holiday entitlement.

Do you get maternity pay if you are on a zero-hour contract?

The answer to whether you get maternity pay when you are on a zero-hour contract depends on whether you are an employee or worker. An employee is entitled to maternity pay from their employer whereas a worker is not.

If you have a written contract or a letter that sets out your terms and conditions of employment, it will say whether you are an ‘employee’ or a ‘worker’. If you do not have a written contract, you should ask your employer. You will need to know what your employment status is to work out your maternity and parental rights.

You will probably be a worker if you work under a contract for services and you work on a more casual basis as and when needed and:

• your employer deducts tax and National Insurance from your pay
• your employer provides all the equipment for your work
• your employer does not have to offer you work and you do not have to accept it.

If you are a worker on a zero hours’ contract you are entitled to the following basic legal rights but note that some of these rights have qualifying conditions which can be harder to meet if you have irregular work:

• at least 28 days’ annual leave (pro rata if you work part-time),
• Statutory Sick Pay (if you meet the qualifying conditions),
• National Minimum Wage (under 25/National Living Wage (25 and over),
• Statutory Maternity Pay, Statutory Paternity Pay, Statutory Adoption Pay, Statutory Shared Parental Pay and Statutory Parental Bereavement Pay (if you meet the qualifying conditions),
• basic health and safety protection during pregnancy, and
• protection from discrimination.

It is worth checking your employment status and also double checking whether you can claim Maternity Allowance directly from the Government.

Can I cancel shifts on a zero-hour contract?

As a worker you can cancel shifts on a zero-hours contract. You have no obligation to work any shifts that the employer asks you to do, just as the employer has no obligation to offer you shifts. 

How much notice do I need to give on a zero-hour contract?

Zero-hour contracts do not have statutory rights for notice periods. This means an employer can terminate a contract with no notice, just as workers can also leave without giving any period of notice.

Conclusion

Whether you agree or disagree with zero-hour contracts you will hopefully now be able to see it from both sides. Zero-hour contracts have advantages and disadvantages for both employee and employer – fact.

A contract of employment is there to protect both parties. If you knowingly go into a contract knowing that it is not right for you as an employee, then you need to reconsider your position before getting to involved. 

The director’s job is to protect the assets of the business and to generate wealth for its shareholders. The assets of a business should also include its employees. 

So, if offering zero-hour contracts disproportionally disadvantage employees to the advantage of the business then those businesses need to look at the working practices it employs to put profit before people. The two things do not need to be mutually exclusive.

Whether someone is on a zero-hours contract or not there is plenty of protection afforded to the employee. 

There are a few subtle differences where an employee has more protection than a worker such as notice periods and maternity pay so it is important for anyone taking up a new position to understand the difference and how that may affect them.

Zero-hours contacts offer flexibility to both parties. Sticking to the rules means no one should be at a disadvantage compared to a normal employment contract. 

More small business guides…

• Can you put workers on gardening leave if not in contract?

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