Are zero-hours contracts right for your business?

Google the phrase ‘zero-hours contract’ and you will find countless articles branding them exploitative and unfair. Zero-hours contracts have had a lot of attention in the past few years and it’s fair to say that most of it has not been positive. Surprisingly, despite the large amount of press coverage, zero-hours workers represent a relatively small number of people; around 800,000 people in the UK are currently on a zero-hours working contract, which is roughly just 3% of the working population.

The term actually has no legal definition in the UK, but is generally defined as when “the employer does not guarantee the individual any hours of work. The employer offers the individual work when it arises, and the individual can either accept the work offered, or decide not to take up the offer of work on that occasion” (BIS, 2015). Zero-hours contracts fit into this idea of the gig economy we hear so much about these days, but it’s not the same as working freelance. Workers on zero-hours contracts are not self-employed and are actually entitled to many of the same rights as permanent employees, a fact which has not been so widely publicised.

The media coverage has mainly focused on the worst-case scenarios and horror stories, so it is interesting that CIPD research found that job satisfaction for zero-hours workers was largely similar to people on permanent contracts. With the demand for flexible working on the rise, it is not completely crazy to suggest that zero-hours contracts may in fact be ideally suited to some people.

Now we have established that zero-hours contracts are not the devil they’ve been made out to be, let’s move on to the potential benefits and drawbacks and whether they may be the right fit for your organisation:

 

ADVANTAGES

Flexibility for you

The main attraction of zero-hours contracts has to be their flexibility as they enable you to manage your changing requirements. Many industries experience fluctuations in demand, and having a bank of staff that can be deployed as and when needed removes what is a very common staffing headache. Zero-hours contracts can also be used to cover both expected and unexpected absences, allowing business to continue with minimal disruption.

Flexibility for your staff

As mentioned in my previous article, more and more people are calling for flexible working options, and zero-hours contracts can be ideal for students, older workers and people with caring responsibilities who want a say in setting their hours each week. They may also be suitable for someone with a long-term illness with symptoms that can change day-to-day; with flexible working they may find themselves struggling to make up the required number of hours at the end of the month, but with a zero-hours contract they can make a decision daily based on how they feel. Providing your staff with this degree of flexibility can increase job satisfaction, leading to improved productivity.

Lower costs

Not being a permanent employee, someone on a zero-hours contract is not automatically entitled to your entire benefits package. While they still have the right to holiday pay, they are ultimately cheaper than hiring a permanent member of staff who is then paid to sit idly during your quieter periods. It is also a cheaper option than paying the fees for agency staff, however you do have to carry out your own recruitment so these costs should be taken into account.

 

DISADVANTAGES

Negative publicity

To a certain degree zero-hours contracts still have a negative stigma. Given this potential damage to your company reputation, it is important to handle the situation carefully. A clear and transparent written contract firmly establishes the terms of the arrangement and sets out what potential staff can expect from working with you. For example, the CIPD found that less than half of the surveyed companies with zero-hours contracts had a policy in place for cancelling shifts at late notice, something which would go a long way to maintaining staff relations and therefore your reputation as an employer.

Low employee engagement

With no long-term stake in the business you would assume that zero-hours staff would be less motivated at work, resulting in poor job performance. CIPD research, however, found that contract type can make “little difference in how enthusiastic people feel day-to-day and have no significant impact on work effort”. It is therefore safe to assume that if staff are treated fairly motivation will not be an issue.

Compliance issues

The legislation surrounding zero-hours contracts is under review, so it is important to maintain compliance. One particular point of confusion in the past has been the debate over whether someone on a zero-hours contract is categorised an ‘employee’ or a ‘worker’. The distinction is subtle but has caught employers out in the past due to the implications for rights and benefits, so for more information go to Zero-hours contracts: understanding the law.

Introducing zero-hours contracts to your company may seem like a straightforward choice, particularly if you experience major fluctuations in demand, but the drawbacks must also be carefully considered. As with any business decision, it is important to be able to justify to both management and staff why a zero-hours contract would be more appropriate than a part-time one. Maybe the most important thing is to make sure that you have a clear and fair contract in place which is reviewed periodically to ensure that it is kept up-to-date with any organisational changes. Lastly, remember that zero-hours contracts are give and take; to truly succeed, they need to be in everyone’s best interest.

If you would like advice or help with your Human Resources Management, please give Angela Roberts and The HR Consultancy a call today on 01926 853388, email angela.roberts@arhrconsult.com or visit www.arhrconsult.com for more information.