Top 4 questions on Zero-hour contracts answered

In essence, zero-hour contract is between an employer & a worker. Wherein, the employer is not legally bound to provide minimum working hours to the worker.
  • Author: Siva
  • Last updated: June 30, 2022
  • 3 Minutes
questions on zero hour contracts in the UK answered by Papershift

What is a Zero-hour contract?

In essence, it is a contract between an employer and a worker. Wherein, the employer is not legally bound to provide minimum working hours to the worker. Nor, is the worker legally bound or obliged to accept the work offered.

It is important to realize the difference between an employee and a worker here. A point often overlooked and misunderstood. A worker’s role is temporary. They are treated like seasonal staff who are there to meet seasonal demand.

The zero-hour contract was introduced in the UK and continues to be in practice. Various amendments were passed to protect such employees from exploitation. Similar labour contracts also exist in Canada, Australia, and New Zealand. It is referred to as ‘casual employment’.

Certainly, the zero-hour contract gives a flexible and floating labour market to the UK. In fact, over 1 million workers in the UK are on this contract. This is a sharp increase in comparison to 2012 when there were only 250 thousand workers.

Of course, there are several downsides to such contracts. Workers do not have consistent work nor guaranteed income. This can affect their financial security and make them reluctant to spend money.

How is a Zero-hour contract beneficial?

It started as a means to support retirees and students. They preferred it for the occasional income and flexibility of work without any legal binding.

However, after the global financial crisis, several companies offered zero-hour contracts. It helped to continue business operations without increasing the overhead cost of a salary.

Between 2012 and 2013, such contracts saw over 100% increase. Refer to this in detail for a free demo here.

Types of work that make use of zero-hour contracts include.

  • Retail sales. Especially for festive seasons.
  • Special events like weddings and business expos.
  • Backup workers for essential services like health and security.
  • Casual ridesharing or food delivery work.
  • Warehouse work.
  • Hospitality work.
  • Child care and elderly care.

What are the employee’s rights under a Zero-hour contract?

By law, an employee is protected with the following rights –

Employers also have to guarantee health and safety at work. Further, they also have to ensure paying zero-hour worker wages through PAYE.

By the way, if you haven’t decided on a payroll software yet, in the meantime, check our free online HMRC Paye calculator below –

It is important for employers to realize that such workers cannot be stopped from working for other employers.

How to calculate the holiday entitlement of such employees?

In brief, simply multiply the total number of hours worked by the worker by 12.07%.

So in the case of an employee that works 5 days a week, they will receive 5.6 weeks paid holiday per year.

Since workers are not confined to minimum working hours, we need to find their actual working hours before proceeding further. To make things easier, invest in an employee time tracking software to have working hours data accurately.

Let’s take an example. Worker A accrues 15 hours a week. The holiday entitlement will then be –

15 x (12.07/100) = 1.81 Hours. Thus, Worker A is entitled to 1.81 hours of paid holiday.

The holiday pay is paid as per the minimum wage act in the UK.

How can Papershift help you manage this?

We have made this simple.

Calculate holiday entitlement for zero hours contract with Papershift

In Papershift we do this by giving a person a holiday allowance based on assumed target hours, then using their current balance when they leave to adjust the holiday allowance accordingly.

Papershift makes it simple. Over 200,000+ HR managers love our holiday planning software. HR managers rate us 4.9/5.

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Written by Siva

I write & describe the value & benefits delivered by Paperhift's rota planning, staff time tracking, and employee payroll management software. Especially useful for Shift Planners, Rota Managers, Team Admins, and HR Teams :-)