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Is it wrong to consider zero-hours contracts for my business? Q&A

Is it wrong to consider zero-hours contracts for my business? Q&A

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Q: My board and I have reluctantly come to the conclusion that our only way forward is to begin offering a bank of staff zero hours contracts. However, there has been so much adverse publicity round this issue, how can we make this a fair deal for the staff who agree to work on these contracts?

A: You don't say which sector you work in but the voluntary sector, tourism, catering, leisure, healthcare, education, retail, haulage, local council, government – even Buckingham Palace – all use zero hours contract workers these days. It is regarded as the most cost-effective way of meeting short-term staffing needs. Zero hour employees are not guaranteed work and are only paid for the hours they do work. In this 'do or die' economic climate, in addition to cutting costs, zero hours contracts help avoid the need for short time working and redundancies.

The controversy arises because, used ruthlessly, zero hours contracts can exploit staff, giving no guarantee of hours or pay – and no comeback. However, for those who don't depend on a full-time wage and are able to be entirely flexible about when they work, zero hours are the perfect answer.

Worker or employee? At its simplest, if you call people on an ad hoc basis, accepting they may not be available, they are more likely to be classed as a worker. However, if you undertake to provide work at specified times on the mutual understanding that they will turn up at these times, they will almost certainly be classed as an employee.

Zero hours doesn't mean zero rights: Both employees and workers on zero hours contracts are entitled to paid holiday and are covered by the National Minimum Wage Regulations and discrimination legislation. Other rights, such as statutory sick pay, redundancy pay and the right to claim unfair dismissal will depend on whether or not they are employees or workers.

Zero in on Minimum Wage: Workers on 'stand-by time', 'on-call time' and 'downtime' must be paid the National Minimum Wage if they are required to be at their place of work. So, it's against the law to ask staff to remain in the building but 'clock off' during quiet periods. Much of the negativity surrounding zero hours contracts could be avoided by simply stating that you will provide a minimum number of guaranteed work hours whenever an employee is asked to come in.

Keep it totally transparent: Ensure how you decide who is offered work is fair, transparent and leaves no room for challenge. Be proactive about clearly communicating your terms and conditions at the outset to ensure staff understand what is expected of them and what their rights are.

Beware the danger of regularity: Avoid zero hours staff establishing a regular pattern of working hours, as any future decision to offer less or even different hours could be legally challenged.

Beware the effect on quality: No reliable income, the inability to plan ahead, and the potential impact on benefits make zero hours unsuitable for many, making it harder to recruit and retain high quality staff. This can have a direct negative effect on the service you offer and on your bottom line. Find reliable staff among such groups as carers, students, musicians, actors and older people looking to supplement their income – i.e. people who are actively seeking this type of flexibility – rather than those who cannot find anything else and really need to work more hours than you can offer or guarantee. Be certain of applicants' motivation at interview on this issue. To keep up quality, keep training and skills up to date.

Beware discriminating against staff who say 'no': A zero hours contract genuinely entitles your staff to turn down work when you offer it. Avoid negativity caused by making staff anxious if they say 'no' when you call. One way to guard against this is to make it clear from the outset that refusing work on more than – [enter your number here] – occasions will mean that you will be taken off the books. Then everyone knows where they stand.

Become clairvoyant: Joking aside, because zero hours staff are under no obligation to accept work when offered, this can result in being unable to meet staffing demands at short notice. Watch and assess staffing needs like a hawk. You can never afford to be relaxed about it.

Constantly assess whether zero hours is still appropriate: As the economy starts to move again, watch for indications you need to rethink your employment terms and move staff to a full-time or regular part-time position.

As this is such a complex area, it is strongly advised you invest in legal advice before beginning. With a well planned and managed system in place to support this type of contract, it can make an important contribution to your organisation's future profitability.