Defining Zero Hours

“Zero-hours contracts” is not a legal term.

The exact nature of zero-hours contracts may differ from organisation to organisation. For example, individuals on zero-hours contracts may be engaged as employees or workers. In some zero-hours contracts, the individual will be obliged to accept work if offered, but in others they will not. 

Because “zero-hours contract” does not currently have a specific meaning in law, it is important for employers to ensure that written contracts contain provisions setting out the status, rights and obligations of their zero-hours staff. 

Section 27A of the Employment Rights Act 1996 defines a zero-hours contract as a contract of employment, or other worker’s contract, under which: 

• the undertaking to do/perform work/services is conditional on the business making work or services available to the worker, and

• there is no certainty that any such work or services will be made available to the worker.

Employers using zero-hours contracts should also be conscious of the active nature of case law in this area.

Employees or workers?

It is important for the employer to determine the employment status of zero-hours staff based on how the relationship will work in practice and whether that satisfies the statutory tests of self-employed, worker or employee. The reason for this is that, if the contract with the individual does not match the reality of the situation (for example the contract says the individual is a worker but in reality, they are working as an employee), the law will treat the individual as having a different employment status regardless of what the contract says.

Regarding zero-hours contracts, the individual is likely to be an employee, not a worker, if (for example) the employer wants:

• the zero-hours individual to provide personal service,  

• the zero hours individual to be integrated into its business and to receive a range of benefits, and 

• to control the way in which work is done and provide work to the individual for a prolonged period. 

Managers should receive training on the different types of status, so that they understand:

• that an individual will either be an employee, a worker or self-employed 

• how the rights of employees, workers and the self-employed differ

• that the way they treat an individual could change that individual’s status. 

  
  

Note: An employer should make sure that a zero-hours contract contains a number of basic terms. We recommend you get in touch as not all terms that are mandatory in an employment contract are necessary to include in a zero-hours agreement.

Zero-hours contracts and exclusivity clauses

It is not permissible for there to be a provision in a zero-hours contract that requires the individual to work exclusively for the employer.

This ban of 'exclusivity clauses' was made law in 2015 to ensure that the earning ability of individuals working under zero-hours contracts with no guarantee of work is not restricted by preventing them from working elsewhere.

Zero-hours workers and employees now have the right to protection against suffering a detriment or being dismissed for working for another employer or not asking for permission to work for another employer (depending on whether they are a worker or employee).

Some zero-hours contracts require the individual to be available for work when it is offered. It is not clear whether this could amount to a prohibition on working for others, as, by keeping themselves available, they could be deterred from accepting work from other businesses.

Businesses should seriously consider giving zero-hours individuals a choice as to whether they accept work or not. 

This may be a general right to refuse an assignment or a limited right to refuse a certain number of times within a specified period.

Although not guaranteed, this could avoid the implication that exclusivity is required. The exclusivity ban was extended further in November 2022, to contracts under which the employee or worker does not earn more than the lower earnings limit.

When Statutory Sick Pay (SSP) applies:

Only 'qualifying employees' are entitled to SSP. 

Anyone paying Class 1 National Insurance contributions will satisfy this criteria, regardless of whether they are an employee or worker. 

To receive SSP, in addition to being a 'qualifying employee', an individual must also be absent because of incapacity for work for four or more days in a row and have had average weekly earnings of not less than the lower earnings limit within the previous 8 weeks.

Individuals on zero-hours contracts may find it difficult to satisfy these criteria.

In between assignments individuals may not be a 'qualifying employee' or may not have sufficient average earnings to qualify for SSP.

Note: The current UK Government are looking at reforming the right to SSP. Proposing for SSP to be payable from day one of sickness and to remove the lower earnings limit threshold. 

When National Minimum Wage is paid

Individuals engaged on zero-hours contracts are entitled to be paid the National Minimum Wage or National Living Wage for the time spent working.

Terminating zero-hours contracts

The contract could state that the contract comes to an end automatically at the end of each engagement, or by notice given by either party.

Any notice provisions will, in the case of employees only, be subject to the following statutory minimum notice periods:

• If an employee has been continuously employed for more than one month – a minimum notice period of one week.

• If an employee has been continuously employed for more than two years – one week’s notice for each year of continuous employment.

• If an employee has been continuously employed for more than 12 years – 12weeks’ notice.

These statutory minimum notice periods will be particularly important if an umbrella contract has been implied and an employment relationship continues to exist between assignments.