The Pros and Cons of a Zero-Hour Contract

Updated 25 September 2023

In the 21st century, the U.K. labour market has experienced significant changes, among them the rise of flexible work contracts. For instance, the zero-hour work contract has become a very popular form of work in certain sectors, as it provides employers with a flexible workforce adapted to their needs. This type of contract also suits employees who enjoy the freedom of choosing when they'd like to work. In this article, we provide some useful information regarding zero-hour contracts and list a few pros and cons that accompany this type of contract.

What is a zero-hour work contract?

A zero-hour contract (ZHC) is a type of contract between an employer and an employee under which the employer is not obligated to provide a set number of hours to the employee or, in some cases, guarantee hours at all. Due to the limited statutory definition of this type of contract, there's also no clear legislation regarding whether an employee must accept work when an employer offers it to them. Consequently, the obligations of an employee under a ZHC depend on individual agreements between parties. Depending on the agreement, employees may have the following conditions:

They must accept work.
They are under no obligation to accept work.
Their employer expects they will mostly be available for work, but they are not obliged to accept work.

Sectors that typically use zero-hour contracts include those with staffing requirements that vary during the year or those that occasionally need more staff at short notice. The catering, construction, retail, hospitality, education and healthcare sectors, for instance, often employ individuals under ZHCs. The benefit of ZHCs for employers is that they only need to pay ZHC employees when they work. This allows employers to save money that they otherwise would have spent on full-time wages and other overheads.

What's the difference between zero-hour and casual workers?

Although the terms "casual-worker contract" and "zero-hour contract" are often used interchangeably, they are not the same. The main difference between these two types of employment contracts is in the expectations of the worker. In casual work contracts, employees have no obligation to accept work when an employer offers it to them. Under zero-hour contracts, on the other hand, a worker may be required to accept the work, depending on the terms of the agreement they have with their employer.

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What are the employment rights of zero-hour contract workers?

A zero-hour contract doesn't equate to zero rights, however. The statutory rights of a ZHC employee depend on their employment status, which can either be that of an employee, a worker or a self-employed person. Most people employed under a ZHC have worker status, which entitles them to certain basic employment rights, such as paid annual leave and the national minimum wage (NMW). In addition, ZHC "workers" also enjoy the following rights:

Protection from discrimination
The right to take rest breaks
Pension auto-enrolment contingent on qualifying conditions

Individuals who work under a ZHC and have an employee status have more employment rights than those with worker status. These include:

The right to claim unfair dismissal
The right to take maternity/paternity leave
The right to receive redundancy pay

Individuals who have employee status are normally obliged to accept work, whereas workers can accept work as and when it suits them.

Until 2015, zero-hour contracts could contain a clause that stipulated that the employee or worker was not allowed to work for any company other than that business once signed. After the introduction of the exclusivity ban in May 2015, any person who works under this type of contract is allowed to work for other companies as well. This ban aims to ensure that individuals working under ZHCs can make a living by giving them the freedom to earn an income from additional jobs, especially if they receive no work from the company where they have signed a ZHC.

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Advantages of zero-hour contracts for employees

The advantages of a zero-hour contract for an employee vary depending on the specific agreement settled on with their employer. For instance, those who have worker status, enjoy a more flexible schedule, whereas employees have more rights. Depending on their agreement, an individual who works under a ZHC may enjoy a combination of these advantages:

A flexible schedule

The ability to accept or turn down work as it suits can be appealing to those who prefer a more flexible routine or have other commitments, such as taking care of young children. Some may also choose to work under a zero-hour contract if they already have a full-time position and wish to supplement their income with a part-time job that offers a flexible schedule. Working under a ZHC may also be suitable for working students, as a flexible schedule allows them to accept or decline based on the amount of available time they have.

An increased chance of permanent employment

If an employer is not currently able to offer you a full-time position, they may be willing to take you on as a ZHC employee. Starting at a company as a zero-hour contract employee can provide you with an opportunity to get acquainted with other staff and the company's culture, policies and procedures. Working as a ZHC employee also gives you a chance to prove your worth to the company by delivering quality work and being available at short notice and unsocial hours. An impressive work ethic and job performance may result in the company offering you a permanent position.

The freedom to have multiple jobs

One of the perks of a zero-hour contract is that you're now legally allowed to apply for other jobs while you work under this type of contract. This means that you can potentially earn an income from another job, which can be especially important at times when you're not receiving enough work from your ZHC employer. Having multiple jobs also gives you the freedom to work as many hours as you would like and earn extra money at times when you need to pad your income. Additionally, you may find that varying duties and different work environments can be stimulating and interesting.

A temporary income

During periods when you're searching for permanent employment, working under a zero-hour contract until you find a job can be a much-needed source of temporary income. Due to budgetary limitations, companies may have more ZHC positions available than permanent ones.

This can result in the availability of a wide variety of ZHC roles in the job market. Your chances of gaining employment under a zero-hour contract may also be much better than if you applied for full-time positions. Additionally, adding a ZHC position on your CV can be beneficial between jobs, as continuous work experience is preferable to having long gaps between employment.

Work experience

Working under a zero-hour contract can be a valuable way to gain work experience. A flexible work schedule can provide you with just enough work experience to decide whether you want to pursue a job as a full-time career or perhaps qualify yourself to apply for other positions in the field. As you're also allowed to have other jobs apart from your ZHC position, you can gain work experience in multiple positions and different work environments. This can be useful if you're not sure what career to pursue or if you're thinking about changing your career path.

Disadvantages of zero-hour contracts for employees

If you're considering working under a ZHC, you should be aware of the potential disadvantages that accompany this type of contract. These include:

Unpredictable work hours

Although a flexible work schedule may provide you with the freedom to choose when you want to work, it can also limit your ability to plan your life. Even if you don't have to accept work under your zero-hour contract, if the work is infrequent, you may find you need to take it when it comes. Not knowing when work will come in or receiving work when you've made plans can hamper your social life and your ability to make arrangements in advance.

Unpredictable income

Apart from not being able to plan your schedule, the irregular and fluctuating work hours that accompany a zero-hour contract also make it challenging to plan a budget. ZHC workers tend to receive less money per hour than employees who work under other types of contracts. What's more, a common complaint among ZHC workers is that they are not receiving enough shifts.

Since ZHC workers cost an employer little in overheads and they only need to pay them for work completed, they lose nothing by employing more workers than they need. This can result in zero-hour contract workers receiving fewer shifts than they need to sustain themselves.