Zero-Hours Contracts: Employer's Guide

Zero-hours contracts offer flexibility but come with legal requirements. Understanding these helps you use them appropriately and avoid tribunal claims.

What Is a Zero-Hours Contract?

A zero-hours contract is an employment arrangement where:

• The employer doesn't guarantee any minimum hours
• The worker isn't obliged to accept work offered
• Hours vary based on demand
• Pay is only for hours worked

Also known as: Casual contracts, bank contracts, as-and-when contracts.

When to Use Zero-Hours Contracts

Appropriate Uses

• Genuine irregular demand
• Seasonal work
• Event staffing
• Relief or bank staff
• On-call cover
• Genuine casual arrangements

Inappropriate Uses

• Regular, predictable work (use part-time or full-time)
• Avoiding employment rights
• Core staffing needs
• When you always offer similar hours
• Skilled roles requiring commitment

Red Flags

If your zero-hours workers:

• Work regular patterns
• Are always offered similar hours
• Are expected to be available
• Can't easily refuse work
• Are treated like permanent staff

...consider whether zero-hours is appropriate.

Legal Status: Worker vs Employee

Worker Status

Most zero-hours workers are "workers" with rights to:

• National Minimum/Living Wage
• Paid annual leave
• Rest breaks
• Protection from discrimination
• Whistleblowing protection
• Pension auto-enrolment (if eligible)

Employee Status

Some zero-hours workers may actually be "employees" with additional rights to:

• Unfair dismissal protection (after 2 years)
• Statutory redundancy pay
• Maternity/paternity leave and pay
• Flexible working requests

What Determines Status?

Key factors:

• Mutuality of obligation - Must you offer work? Must they accept?
• Control - How much do you direct their work?
• Personal service - Must they do the work personally?
• Integration - Are they part of the organisation?

The contract label doesn't determine status - the reality does.

Exclusivity Clauses

The Ban

Since May 2015, exclusivity clauses in zero-hours contracts are:

• Prohibited
• Unenforceable
• Cannot be used against the worker

What's Banned

You cannot:

• Require exclusive service
• Prevent working for others
• Require permission to work elsewhere
• Punish workers for other work

Consequences

If you try to enforce exclusivity:

• Worker can complain to tribunal
• Any dismissal is automatically unfair
• Clause is void

What You Can Do

• Require confidentiality (protect business information)
• Prevent working for direct competitors (limited, must be reasonable)
• Require them not to work elsewhere during your shifts

Holiday Pay for Zero-Hours Workers

Entitlement

Zero-hours workers get 5.6 weeks' paid annual leave pro-rata.

Calculation Method 1: Rolled-Up Holiday Pay

Add 12.07% to the hourly rate to cover holiday.

Example:

• Hourly rate: £12
• With rolled-up holiday pay: £12 × 1.1207 = £13.45

Requirements:

• Make it clear in the contract
• Show separately on payslips
• Worker can still take actual time off (unpaid at that point)

Calculation Method 2: Accrual

Calculate based on hours worked:

Formula:

Hours worked × 12.07% = Holiday hours accrued

Example:

• 100 hours worked
• 100 × 12.07% = 12.07 hours holiday accrued

Pay holiday when taken or on termination.

Which Method Is Better?

Rolled-Up	Accrual
Simpler administration	Legally "correct"
Clear to worker	Encourages actual leave
Higher regular pay	Holiday paid when taken
Less cash flow variation	Better leave records

Employment Rights

Minimum Wage

Zero-hours workers must receive at least National Minimum/Living Wage for all hours worked.

Watch out for:

• Unpaid training
• Unpaid travel time
• Unpaid waiting time
• Deductions reducing pay below minimum

Pension Auto-Enrolment

Zero-hours workers must be assessed for pension auto-enrolment if they:

• Are aged 22 to state pension age
• Earn over £10,000 per year
• Work in the UK

Because earnings vary, you must assess regularly.

Sick Pay

Zero-hours workers may qualify for SSP if they:

• Earn at least £123 per week on average
• Have been off sick for 4+ consecutive days
• Meet the other SSP criteria

Use average earnings over the relevant period.

Maternity/Paternity

Zero-hours workers may qualify for:

• Statutory Maternity Pay (need 26 weeks' service and earnings threshold)
• Statutory Paternity Pay (similar requirements)
• Maternity/paternity leave (if employee status)

Continuous service counts even with gaps between work.

Contract Requirements

What to Include

A zero-hours contract should state:

1. No guaranteed hours

   "The Company does not guarantee to provide you with any minimum number of hours of work."

2. No obligation to accept

   "You are not obliged to accept any work offered."

3. Worker status (if appropriate)

   "You are engaged as a worker and not as an employee."

4. Pay arrangements

   "You will be paid [rate] per hour worked."

5. Holiday arrangements

   "Holiday pay is included in your hourly rate at 12.07% / accrues at 12.07% of hours worked."

6. No exclusivity

   "You are free to work for other employers."

Written Statement

Since April 2020, zero-hours workers have day-one right to a written statement including:

• Pay rate
• Holiday entitlement
• Sick pay arrangements
• Other terms

Managing Zero-Hours Workers

Offering Work

• Be clear about hours/shifts available
• Give reasonable notice
• Don't penalise for declining
• Keep records of offers and responses

Treating Fairly

Zero-hours workers should:

• Access same facilities as other staff
• Not be treated less favourably without justification
• Be considered for vacancies
• Receive training if appropriate

Avoiding Disputes

• Don't create expectation of regular work
• Be clear about the arrangement
• Vary who gets offered work
• Keep good records
• Review regularly if arrangements change

Common Problems

Worker Claims Employee Status

If challenged:

• Look at the reality of the relationship
• Consider mutuality of obligation
• Review control and integration
• The contract wording isn't determinitive

If they're right:

• They may have unfair dismissal rights
• Backdated claims possible
• Consider regularising their status

Refusing Work = Less Offers

This can be problematic:

• May constitute detriment
• Could undermine casual nature of arrangement
• Ensure business reasons for allocation
• Don't punish refusals

Holiday Pay Claims

Underpayment is common. Check:

• Are you including all elements in holiday pay?
• Using correct calculation method?
• Paying when leave taken (if not rolled-up)?

Recent Developments

Workers (Predictable Terms and Conditions) Act 2023

Gives workers the right to request predictable working patterns if:

• They've worked for 26 weeks
• Their hours are uncertain or variable

You must consider requests and can only refuse on specified grounds.

Employment Rights Act 2025

Watch for further changes affecting zero-hours workers as regulations develop.

Alternatives to Zero-Hours

Annualised Hours

Guaranteed annual hours, flexible when worked.

Minimum Hours

Guarantee minimum (e.g., 8 hours/week) with flexibility above.

Bank Staff

Genuine casual bank for occasional work, regular staff for core needs.

Part-Time Contracts

For workers who regularly work similar hours.

Best Practice Checklist

• Use zero-hours only for genuinely casual work
• Written contract/statement provided
• No exclusivity clause
• Holiday pay calculated correctly
• Minimum wage compliance
• Pension assessment process
• Fair allocation of work
• Regular review of arrangements
• No penalty for refusing work
• Consider regularising long-term casuals