What are the Pros and Cons of Zero hour Contracts?

What are the Pros and Cons of Zero hour Contracts?

9 March 2023

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Zero hour contracts have been the focus of plenty of attention in recent years and have in some quarters gained a negative reputation. Some observers believe that they allow employers to treat people poorly because there is little legislation to regulate their use. Despite this, many organisations still choose to offer employees zero hour contracts, and equally, many employees accept.

If your business is thinking about offering zero hour contracts to employees, or you’re about to sign on the dotted line, keep reading as we explore all the pros and cons of zero hour contracts.

What are Zero Hour Contracts?

A zero hour contract is a form of contract under which an employer is under no obligation to provide a prescribed number of working hours, or even to guarantee any working hours at all. Currently, there is no statutory legal definition of a zero hour contract. The Chartered Institute of Personnel and Development (CIPD) though has provided their definition of a zero hours contract as being, “an agreement between two parties that one may be asked to perform work for another but there is no minimum set contracted hours”.

The details contained in zero hour contracts will vary between employers. But they should provide the rate of pay and the individual’s employment status (whether they are a worker or an employee). They should also detail if the individual is obliged to accept all work offered to them or if they have the freedom to decline work and any consequences of that. Details of the name of the employer and the rights and obligations of staff should also be included.

What are the Pros and Cons of Zero Hour Contracts? (Positives)

The primary reason for employers using zero hour contracts is to give them a flexible workforce, which can manage varying demands and which can be increased and decreased at short notice. The retail, hospitality, construction, and healthcare sectors often use this type of contract to ensure they have sufficient staff cover during peak periods. It also enables them to quickly respond to changing operating circumstances.

By using zero hour contracts employers are not committed to staff with fixed hours, which when business is slow can lead to paying staff when they are not needed, as well as additional overhead costs associated with staff. Taking staff on with zero hour contracts is also seen by employers as an opportunity to ‘try before you buy’. Employees can see how staff perform, whether they are competent, and if they get on with other team members. If there is a vacancy the employer already has someone who they know, like, and trust and they can offer them a permanent contract.

What are the Pros and Cons of Zero Hour Contracts? (Negatives)

Employers can be put off using zero hour contracts due to several potential disadvantages. A workforce made up largely of staff on zero hour contracts naturally has a much higher turnover rate than employers who use permanent contracts. Staff on zero hour contracts can be less reliable as they don’t typically have a sense of loyalty or engagement with the employer. If a business has a large pool of zero hour staff to whom they offer work, they will generally find that there are inconsistencies in performance, conduct, and standards of work. This can negatively impact clients and customers alike.

With an ever-changing workforce, employers also need to ensure that they can deliver inductions and basic on-the-job training regularly. However, this can be a poor use of time, money, and resources as some staff on zero hour contracts will only be with a company for a very short period. Employers therefore need to seriously consider the need for zero hour staff, the number they need, and what roles are to be covered.

Can HR software help me manage employees on zero hour contracts?

Using HR software is a great way to manage routine HR administration tasks in general. A frequently changing workforce can be particularly challenging to keep on top of, so using HR software really will benefit a business if they have staff on zero hour contracts. HR software will provide all staff with an electronic record, so there is no need for lots of paperwork which is really time consuming, expensive, and not environmentally sustainable. HR software enables an employer to see their workforce at a glance and they can check that everyone has all the necessary documentation and checks in place, thanks to simple recording and reporting. Some HR software also enables zero hour staff to quickly and easily log their hours which may then also directly link in with payroll software.

Get in touch today

So, if you’re a business that already offers zero hours contracts, or you’re business is thinking about offering zero hour contracts, be sure to contact us today. Our HR software can help you easily manage your staff all in one place. You can even try out our software completely free by signing up for your 30-day free trial.

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