EP Business in Hospitality Issue 48 - January 2014

ADAM TAYLOR OPINION
Zero-hours contracts
What are the issues for the hospitality industry?
In the last few months zero-hours contracts
have become a major political issue, with
politicians lining up to criticise allegedly
unscrupulous employers. But stepping
back from all the political hot air, what
are the real issues?
On one hand, zero-hours contracts have many
positives: they can be used by businesses to deal with
high demand during busy periods, but ensure that
employers aren’t left with excess staff in the quieter
times. They can also provide helpful flexibility for
students, retirees and other workers who wish to
work from time to time, without the commitment
of a full-time job.
On the other hand, due to the economic downturn
many workers are being employed under zero-hours
contracts because they are unable to find permanent
work. Estimates vary, but there
may now be more than a million
workers on zero-hours contracts
in the UK, and a significant
number of these are engaged
in the hospitality sector.
The government’s view
One of the key issues that has
stirred up political debate is that
employers often require workers on zero-hours contracts
to be available for work at all times, but not take
employment elsewhere while simultaneously retaining
the flexibility to reduce those workers’ hours. The use of
such exclusivity clauses is one of the key reasons behind
Business Secretary, Vince Cable, recently announcing a
consultation on zero-hours contracts by the Department
for Business, Innovation & Skills (BIS).
What is a zero-hours contract?
Despite all the debate, there is actually no formal legal
definition of what amounts to a zero-hours contract
and no specific regulation that applies to their use.
Usually, a zero-hours contract means a contract of
employment under which an employee has no defined
hours and receives payment only for the hours they
work. Such contracts don’t oblige the employer to
provide any work to the individual. In industries such as
hospitality and retail, this flexibility is a huge advantage
where the requirement for staff can be unpredictable
and vary significantly throughout the year.
“Such contracts don’t
oblige the employer
to provide any work
to the individual”
Key issues for employers
Given the intense focus on zero-hours contracts by
politicians and the media it is important that employers
take care that they are not tripped up by legislation that
applies to zero-hours workers.
Every contract will be different and should be carefully
checked to ensure that it is appropriate. However, the
following issues are some of those most frequently
encountered by employers in the hospitality sector:
• Employees or workers? Employers should consider
the employment status of zero-hours workers from the
beginning. Employees benefit from more employment
rights than workers (e.g. unfair dismissal rights and
statutory redundancy payments). If an individual is not
obliged to accept work, this may mean that there isn’t
the necessary “mutuality of obligation” between the
parties. However, if the
employer retains a strong
element of control over the
individual then they are
more likely to be an employee.
It is important to remember
that courts and tribunals
will look at both the written
contract and how it has been
performed in practice.
• Holiday. It can be an administrative challenge for
employers to calculate the statutory holiday pay for
zero-hours workers due to their unpredictable hours.
For irregular workers, holiday pay is calculated by
taking an average of all the amounts paid over the
previous 12 working weeks (any weeks when the worker
received no pay cannot be used in this calculation).
• Pensions/auto-enrolment. Employers now have
to automatically enrol workers whose earnings reach
a certain level into a company pension scheme. This
can be difficult in regards to zero-hours workers where
their earnings may fluctuate above and below this
threshold. Employers will need to monitor their
workers’ earnings carefully and ensure they have
contractual permission to make deductions if they
continue to do so after earnings drop beneath
the threshold.
• Discrimination There is no special discrimination
protection for zero-hours workers, but they might be
covered by legislation protecting part-time workers. •
Adam Taylor is a solicitor specialising in Employment Law at Joelson Wilson LLP
18 | January 14 | EP