A zero-hour contract is a type of contract between an employer and a worker, where the employer is not obliged to provide any minimum working hours, while the worker is not obliged to accept any work offered. The employee may sign an agreement to be available for work as and when required, so that no particular number of hours or times of work are specified. Depending on jurisdiction and conditions of employment, a zero-hour contract may differ from casual work. They are often used in agriculture, hotels and catering, education, and healthcare sectors. They are used to enable on-call scheduling. This term is used to refer to on-call shift scheduling practices, even though it is just a contract which enables it.
While the term 'zero-hour contract' is primarily used in the United Kingdom, casual and part-time workers are employed under similar terms in many countries.
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In the United Kingdom, under the National Minimum Wage Act 1998, workers operating under a zero-hour contract on stand-by time, on-call time, and downtime must be paid the national minimum wage for hours worked. Prior to the introduction of the Working Time Regulations 1998 and the National Minimum Wage Regulations 1999 zero-hour contracts were sometimes used to "clock-off" staff during quiet periods while retaining them on site so they could be returned to paid work should the need arise. The National Minimum Wage Regulations require that employers pay the national minimum wage for the time workers are required to be at the workplace even if there is no "work" to do. In the past, some employees working on a zero-hour contract have been told that they are required to obtain permission of their employer before accepting other work but this practice has now been banned under UK legislation enacted in May 2015. In Autoclenz Ltd v Belcher  UKSC 41, the UK Supreme Court delivered a groundbreaking judgment on workers who were on a zero-hour contract. Lord Clarke held, at paragraph 35, that in employment relations which are characterised by inequality of bargaining power, the written terms of a contract may not in truth represent what was the contract in law. In 2013, the reasoning in Autoclenz was applied by Supperstone J in the Employment Appeal Tribunal to hold that a security guard who was given a zero-hours contract was entitled to a stable working pattern: the contract's written terms were invalid. Together, this indicates that all zero-hours contracts may be unlawful, and workers may be entitled to sue their employers for an unlawful deduction of wages if they are willing and able to work.
In 2011, zero-hours contracts were prevalent in many parts of the UK economy:
- in the hotels and restaurants sector, 19% of all workplaces (up from 4% in 2004)
- in the health sector, 13% (up from 7%)
- in the education sector, 10% (up from 1%)
For domiciliary care workers, the incidence was reported to be as high as 55.7% of all workers during the period 2008–12.
As of September 2017, the Office for National Statistics estimated that there are over 900,000 workers on zero-hours contracts (2.9% of the employed workforce), up from 747,000 the previous year, with over 1.8m such contracts (as some people may have more than one contract), with a further 1.3m where no hours were worked. Some commentators have observed that the number of such contracts may be under-reported, as many people may be confusing them with casual employment, and may not be reporting them as temporary. The Chartered Institute of Personnel and Development (CIPD), based on a poll of 1,000 workers, reported in August 2013 that as many as 1 million workers in the United Kingdom, 3–4% of the workforce, work under the terms of a zero-hour contract. Based on a survey of 5,000 of its members Unite, Britain's largest labour union, estimates that as many as 5.5 million workers are subject to zero-hour contracts, 22% of those employed privately. The survey, conducted by Mass 1, showed that zero-hour contracts were more prevalent in northwest England, among young workers, and in agricultural work. Often workers said that holiday pay was denied (which is illegal) and in most cases sick pay. The National Farmers Union, which represents farmers, supports zero-hour contracts as offering needed flexibility for tasks such as harvesting.
According to the CIPD research about 38% of those employed under zero-hours contracts considered themselves to be employed full-time, working 30 hours or more a week. While 66% of those on zero-hours contracts were happy with the hours they worked, 16% felt they did not have an opportunity to work enough hours. About 17% of private employers used zero-hours contracts while they were used by 34% of non-profits organisations and 24% of public employers. Zero-hours contracts were frequently used in hotels, catering and leisure (48%), education (35%) and healthcare (27%).
Under UK law a distinction is drawn between a mere "worker" and an "employee," an employee having more legal rights than a worker. Whether a person working under a zero-hour contract is an employee or a worker can be uncertain; however, even in cases where the plain text of the zero-hour contract designates the person as a "worker" courts have inferred an employment relationship based on the mutuality of obligation between employer and employee.
Thus, when deciding whether a zero-hours contract constitutes a contract of employment, conferring employee status, the wording of the contract will not be determinative of whether there is, in practice, a mutuality of obligation. The tribunal will look closely at the reality of the agreement. If the reality is that there is a pattern of regular work which is regularly accepted, the tribunal may deem the contract to be one of employment.
In March 2015, the Small Business, Enterprise and Employment Act 2015 received Royal Assent. On a date to be appointed, s. 153 of the Act will amend the Employment Rights Act 1996, so that exclusivity terms in zero-hours contracts will no longer be enforceable, and regulations may specify other circumstances under which employers may not restrict what other work zero-hours workers can do.
Zero-hours contracts provide basic social security benefits;
- Maternity/Paternity pay
- Health insurance
If a zero-hour contract employee earns less than £5,772 a year they will not receive any credits for the state pension.
Employers in the United Kingdom
Zero-hour contracts were being used in an increasing number of jobs after the global financial crisis in the private, non-profit, and public sectors in the United Kingdom:
- Sports Direct, a retailer, has 90% of its workers on zero-hour contracts
- In August 2013, The Guardian reported that J D Wetherspoon, one of the UK's largest pub chains, has 24,000 staff, or 80% of its workforce, on contracts with no guarantee of work each week.
- 90% of McDonald's workforce in the UK – 82,000 staff members – are employed on a zero-hour contract. According to a McDonald's spokesperson all work is scheduled in advance with no employees being "on call" and meets the needs of workers who desire or need a flexible schedule. In 2016, the store trialled offering the chance to move off zero-hour contracts but over 80% of staff chose to remain on them.
- A major franchise of Subway also uses the contracts, which state, "The company has no duty to provide you with work. Your hours of work are not predetermined and will be notified to you on a weekly basis as soon as is reasonably practicable in advance by your store manager. The company has the right to require you to work varied or extended hours from time to time." Subway workers are also required, as a condition of employment, to waive their rights to limit their workweek to 48 hours.
- Burger King franchisees and Domino's Pizza operations in the UK extensively use zero-hour contracts.
- The Spirit Pub Company has 16,000 staff on zero-hour contracts.
- Boots UK has 4,000.
- Buckingham Palace, which employs 350 seasonal summer workers, also uses them.
- The National Trust, a nonprofit organisation which manages extensive historic sites and nature preserves in England, Wales, and Northern Ireland, which must deal with variable weather, uses zero-hour contracts but at the same benefits and pay as permanent employees. The Tate Galleries also use zero-hour contracts.
- All non-management staff at Curzon and Everyman cinema chains.
- Cineworld, a leading cinema chain, uses zero-hour contracts for 3,600 people, about 80% of its workforce, and Stephen Wiener, the founder, stated in August 2013 that he will continue using them.
The Workplace Employment Relations Survey conducted by the government of the UK in 2004 and 2011 shows that the proportion of workplaces that have some employees on zero-hours contracts has increased from 4% in 2004 to 8% in 2011. The survey found that larger companies are more likely to use zero-hours contracts. 23% of workplaces that have 100 or more employees used zero-hours contracts in 2011, compared to 11% of those with 50–99 employees and 6% of those with fewer than 50 employees.
In the UK, zero-hour contracts are controversial. British business leaders have supported them, stating that they provide a flexible labour market. They may suit some people such as retirees and students who want occasional earnings and are able to be entirely flexible about when they work. It has been reported that 60% of people on zero-hour contracts are happy with the hours they work. Trade union groups and others have raised concerns about the possibility of exploitation and the use of such contracts by management as a tool to reward or reprimand employees for any reason, meaningful or trivial. They also raise concerns about how workers can adequately assert their employment rights or maintain decent employment relations.
Workers subject to zero-hour contracts are vulnerable to exploitation as they may be denied work at any time for any reason, including declining to respond to a demand to work. A refusal to work in any one instance for any reason can result in a prolonged period of lack of work. Due to the uncertainty of the workers' schedules, zero-hour contracts present problems for workers with children due to the difficulty of arranging child care. The rapidly growing use of zero-hour contracts was the subject of a series of articles in late July 2013 by The Guardian and as of 2013 was of concern to Parliament. Vince Cable, business secretary of the government, is considering closer regulation of the contracts but has ruled out a ban. Labour MPs Alison McGovern and Andy Sawford have campaigned to ban or better regulate the practice.
In 2016, several UK chains which had widely been using zero-hour contracts announced that they would phase these out during 2017. These include Sports Direct and cinema chains Curzon and Everyman. However, Cineworld, another leading cinema chain which also owns Picturehouse, has come under scrutiny for continuing to use the contract format, with the Ritzy living wage protests at London's Ritzy Cinema especially prominent.
The Institute of Directors, a chartered organisation of British business leaders, has defended the contracts as providing a flexible labour market, citing the lack of flexibility in Italy and Spain. Jacob Rees-Mogg MP has also argued that they benefit employees, including students, by providing flexibility, and could provide a route into more permanent employment. Maite Baron in Entrepreneur wrote:
The tried and tested 'Hollywood model' is spreading to other industries. While zero-hours contracts are particularly common in fast food and retail, other sectors where workflow is unpredictable, such as the creative industries (advertising, PR, film and design), have long employed 'per project contract' freelance talent to deal with the ups and downs, and the specific skill requirements of individual projects. Think of a Hollywood film. The script writer, director, actors, extras, make-up artists, in fact everyone, is contracted on a temporary basis. When the project is completed, each has to find the next contract. That's a trend that's spreading to other, less 'arty' areas of work.
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Casual labour contracts in Canada can have "no guaranteed minimum hours," place "no obligation on the employer to provide work", and pay can be "pro rated in line with hours worked."[better source needed]
In 2015, the television show Campbell Live revealed that large corporate hospitality companies such as Burger King and McDonald's, KFC, Starbucks, Pizza Hut, Carl's Jr. (all under Restaurant Brands), Sky City and Hoyts, all use zero-hour contracts to reduce costs.[better source needed] On 9 April, Restaurant Brands agreed to do away with zero-hours contracts.
A bill outlawing zero-hour contracts was unanimously passed on 10 March 2016 and went into effect on 1 April.
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