Employment Contract - Casual or Zero-Hour Employment

Published:

Oct 24, 2022

An employment contract is an agreement between an employer and employee that sets out the terms that apply to the employment, including their rights, their duties, their responsibilities and potential liabilities.

A Casual or Zero Hour Employee employment contract is an agreement between an employer and employee that sets out the terms that apply to the employment, including their rights, their duties, their responsibilities and potential liabilities. 

According to Acas, these flexible working contracts can be "Zero-hours contracts can be a flexible option for both employers and workers". This is because they offer many benefits to both employers and employees. 

This guide will help you learn more about them and how your organisation can benefit from a legally vetted Casual and Zero-hour template.

Top Features of a Casual or Zero-Hour Employee Employment Contract 

☑ These contracts offer both you and your employees flexibility, allowing for adjustments in working hours to accommodate changing business needs or personal schedules.

☑ Employers can manage their labour costs more effectively by only paying for hours worked, reducing expenses during slow periods or fluctuations in demand.

☑ Casual or zero-hour contracts attract individuals seeking flexible work arrangements, providing you with access to a diverse pool of talent with varied skills and experiences.

☑ Businesses can quickly scale their workforce up or down in response to workload fluctuations or seasonal demands without the constraints of fixed-term contracts.

☑ Casual, or zero-hour, contracts allow businesses to retain access to specialised skills or knowledge on an as-needed basis without the long-term commitment of hiring full-time employees.


Table of Contents

  • Casual and Zero-Hour Contracts, What Are They and How Are They Defined?

  • Why do Employers Use Zero-hour Contracts?

  • Understanding Casual and Zero-Hour Contracts - How Do They Differ?

  • What are Some Key Elements of a Casual or Zero-Hour Employee Employment Contract Template?

  • Why is an Employment Contract Important, and Why Should You Use it?

  • Complying with Employment Laws

  • How Often Should a Casual or Zero Hour Contract be Reviewed and Updated?

  • Seeking Legal Advice

  • What are the Common Disadvantages or Pitfalls of a Casual or Zero-Hour Employment Contract?

  • How Do Zero-hour Contracts and Sick Pay Work?

  • How Do Zero-Hour Contracts and Redundancy Work?

  • How Are Pensions Affected by Zero-hour Contracts?

  • Can Zero-Hour Contracts be Terminated?

  • Why Were Zero-Hour Contracts Introduced?

  • Are Zero-Hour Contracts Illegal?

  • Are Zero-Hour Contracts Entitled to Holiday Pay?

  • Casual and Zero-hour Contract Final Thoughts

  • Ready to Get Started?

Casual and Zero-Hour Contracts, What Are They and How Are They Defined?

A Casual or Zero-hour employment contract is an agreement between an employer and an employee in which the employer is not obligated to provide a minimum number of hours of work. The employee is not obliged to accept any work offered.

This means that the employee has no fixed or guaranteed hours of work, and their work schedule may vary from week to week or month to month, depending on the employer's needs and availability.

Why do Employers Use Zero-hour Contracts?

Aero hour contracts can benefit employers in a large number of ways, with some of the most common for an employer being based around:

  • Flexibility in workforce management

  • Lower staffing costs

  • Minimal employee benefits expenses

  • Adaptability to demand fluctuations

  • Reduced administrative burden

  • Ease of terminating employment

  • Increased productivity through motivation

  • Access to a diverse skill pool

  • Enhanced operational agility

  • Lower training and onboarding costs

  • Mitigated risk of long-term commitments

  • Enables staffing for short-term projects

  • Supports seasonal business fluctuations and requirements easily



Understanding Casual and Zero-Hour Contracts - How Do They Differ?

Casual and Zero-hour contracts are not actually the same thing; they differ in a number of ways. These can be for instance:

Casual Contracts

Casual contracts offer employers - and employees - flexibility in scheduling and workload. 

Employees, for instance, are engaged on an irregular or occasional basis, typically for short-term projects or to cover temporary staffing shortages. 

Business Can Respond Quickly

This arrangement allows your business to respond quickly to fluctuations in market demand without the constraints of fixed-term commitments, which can be a big benefit for some organisations. 

Experience and Learning

For employees, casual contracts also provide opportunities for supplemental income or to gain experience in various industries or roles.

While there is no guarantee of specific hours of work, those individuals can appreciate the freedom to accept jobs based on their availability and preferences. 

Challenges

However, the lack of guaranteed hours can also present challenges, such as uncertainty about income and job security. 

Consequently, as an employer, you must communicate clearly with casual employees about expectations and maintain fairness in the distribution of work opportunities. This helps ensure a positive and mutually beneficial working agreement and keeps staff retention high.

Zero-Hour Contracts

Zero-hour contracts offer you, as an employer, maximum flexibility in managing your workforce, as they are not obligated to provide any minimum number of hours of work to employees. 

Employees are on Standby for Fluctuating Workloads

Employees under Zero-hour contracts are more on standby and can be called in to work as and when required by the employer. 

This arrangement benefits businesses with fluctuating workloads or seasonal demands, especially because it allows you to adjust your staffing levels according to immediate needs without incurring unnecessary costs.

For Employees

For employees, zero-hour contracts offer more flexibility in balancing work with personal commitments - or pursuing other interests.

Unpredictable Nature of the Work Available

However, the unpredictable nature of work under these contracts can be challenging for individuals reliant on a consistent income, and this can result in a higher staff turnover and a lack of consistent members of staff.

Ensure Transparency

As an employer under Zero-hour contracts, you must ensure transparent communication and fair treatment of your Zero-hour employees - providing both clarity on work scheduling practices and offering opportunities for additional hours where possible to help keep your workforce engaged and more skilled and professional staff turnover as low as possible.


What are Some Key Elements of a Casual or Zero-Hour Employee Employment Contract Template?

Some key components to include in your template can consist of but are not exhausted to, for instance:

Employee Details

This section should include, for instance, the employee's name, address, and any other relevant personal information.   

Employer Details

The name and address of the employer or the company are also listed.   

Job Title and Description

This should clearly outline the role the employee will be performing.   

Hours of Work

This section should specify that the employee is on a Casual or Zero-hour contract and that the employer is not obligated to provide regular hours of work.   

Payment Details

Outline how the employee will be paid, including the rate of pay and when payments will be made.   

Holiday Entitlement

Clarify how holiday entitlement is calculated for casual or zero-hour employees.

Notice Period

Detail the notice period required by both the employer and the employee to terminate the contract.

Sick Pay

Explain the policy regarding sick pay for casual or zero-hour employees.

Other Terms and Conditions

Include any other relevant terms and conditions, such as confidentiality agreements or non-compete clauses.

Signature

Include a place for both the employee and employer to sign.

Please note: This should always be checked over by a legal professional to make sure it is compliant with the law in your jurisdiction.


When Should You Use This Type of Contract?

As explained above, you should use this employment contract for an employee who is employed on a semi-permanent (i.e., indefinite rather than fixed-term) basis, where there are no guaranteed minimum hours of work. 

In essence, these employees can be effectively on call when you need them, but you do not have to give them work. 

Why is an Employment Contract Important, and Why Should You Use it?

Having a written employment contract is essential for several reasons such as for instance:

Legal Obligation

As an employer, you have complied with your legal obligation to provide a Written Statement of Particulars of Employment.

Reduced Uncertainties or Dispute From Arising

These contracts help you to reduce the uncertainty or chances of a dispute about what terms have been agreed from occurring.

Without a written employment contract in place, it is far more likely that there will be a dispute between the employer and employee, either during the employment or after the employment ends, about what the employee and you, as the employer, agreed to, i.e. what terms and conditions applied, particularly where verbal discussions have taken place over a period of time. 

No Written Employment Contract In Place Doesn’t Mean There is No Employment Contract

Just because there is no written employment contract in place does not mean there is no active employment contract. Employment law means that a contract will still exist; it is just not written down. 

Therefore, a written agreement that clearly explains the parties’ rights, obligations, and responsibilities reduces confusion, avoids ambiguity or uncertainty, and gives everyone clarity and peace of mind.

Protects you, the employer.

The employer is adequately protected when a good, legally vetted employment contract is in place.

For example, the contract will then contain obligations on the employee to keep information that they obtain during their employment confidential (which goes beyond the common law duties on an employee), and it enables the employer to terminate the employment by making a payment in Lieu of Notice rather than having the employee work their notice period.

Encouraged Good Relationships

It encourages good relationships between you and your employees. For instance, it puts a new employee at ease and gives them confidence and clarification in their employment. 

This is especially important in early-stage startups, where there may already be some uncertainty and where the structures and processes seen in larger companies may still need to be present.

Signed

The employer and employee should sign the employment contract before the employment begins. 

This could be in the form of a traditional signature, but it could also be in a legally confidential and vetted eSign or eSignature platform, which automatically keeps a backup of the contract in a secure contract repository system.

Delay in Receiving their Contract

If the employee does not receive the written employment contract on or before their first day of employment, an employment tribunal could award up to two weeks' pay.

Complying with Employment Laws

Casual and Zero-hour Employment contracts are heavily regulated. Consequently, you need to ensure that they comply with the local laws where the work will take place.

For instance, this could include:

National Minimum Wage Compliance

You will need to ensure that the contract still complies with National Minimum Wage regulations, which is essential, especially for employers using casual or zero-hour contracts.

The Pay Rate Should Meets or Exceeds the Minimum Wage

As a result, you need to ensure that the pay rate meets or exceeds the minimum wage set by the government in the regions you are operating.

Failing to comply with minimum wage requirements can result in a lot of legal consequences, including fines and reputational damage, to name only a couple.

As a result, by paying your employees at least the minimum wage, you will be keeping to your obligation to provide a basic standard of living and promoting a more equitable work environment. This can, in turn, help attract more people looking for Zero-hour contracts.

Sticking to Working Time Regulations

As an employer, you must also stick to working time regulations when managing casual or zero-hour employees. 

These regulations govern various aspects of working hours, including rest breaks, maximum working hours, and other provisions outlined in the Working Time Directive in the UK, Work Hours set out by the US Department of Labor in the US and the Working Time Directive in the EU depending on where your employees are based.

Complying with these Regulations

By complying with these regulations, as an employer, you help safeguard the health, safety, and well-being of your workforce while being compliant.

Furthermore, by also providing adequate rest periods and limiting excessive working hours helps you to create a healthier work-life balance for your employees and reduces the risk of fatigue-related accidents or injuries that could be costly for you.

Additionally, adherence to working time regulations promotes fairness and consistency in employment practices, enhancing employee happiness and helping to keep staff retention high and turnover in reliable employees low.

Protection of Employment Rights

While casual and zero-hour contracts offer you flexibility, your employees still retain certain employment rights that your organisation must respect.

These rights, for instance, can include protection against discrimination based on characteristics such as age, gender, race, or disability.

Right to be Represented

Additionally, casual and zero-hour employees have the right to join a trade union and participate in collective representation processes, but this does not make them immune to using these, for instance.

As an employer, you must also uphold these rights and provide a supportive work environment free from harassment or unfair treatment.


How Often Should a Casual or Zero Hour Contract be Reviewed and Updated?

Ideally, this should be done annually or when any change in the law occurs, if it does before your following review.

It is crucial for you as an employer to ensure they remain fair and relevant. 

For instance, over time, business needs, employee circumstances, and legal requirements may change, meaning adjustments to the contract terms need to be made to identify any outdated or problematic clauses and make necessary revisions to better align with your current practices, your employees' expectations, and the legal government frameworks.

Seeking Legal Advice

When in doubt about any aspect of Casual or Zero-Hour contracts, as an employer, you should always seek legal advice to ensure you are compliant with all relevant laws and regulations regarding where you operate as a company.

Employment law is very complex and subject to interpretation, so it is essential to obtain professional guidance when examining and implementing any contractual matters.

Additionally, legal experts can provide valuable insights and recommendations for optimising contractual arrangements to achieve desired business outcomes while ensuring compliance with legal requirements.

What are the Common Disadvantages or Pitfalls of a Casual or Zero-Hour Employment Contract?

There can be many pitfalls to this type of contract, with some of these just being based around:

Ambiguity in Hours of Work

One common pitfall is the ambiguity surrounding the hours of work regularly available. 

As an employer, you may need to clearly outline the arrangement, which can lead to misunderstandings and disputes over the number of hours your employees are expected to work.

This lack of clarity can result in a lot of frustration and dissatisfaction among your employees, as they may feel uncertain about their income and work schedule, leading to a higher staff turnover.

Inconsistent Application of Terms

Another pitfall is the inconsistent application of contract terms if not done correctly.

You may inadvertently treat your Casual or Zero-hour employees differently from their full-time counterparts in terms of benefits, training opportunities, or access to overtime. 

Such inconsistencies can breed resentment and negatively impact your employees' morale and loyalty to you and your brand. In some cases, they can also breach legal regulations.

Failure to Provide Adequate Notice Periods

You may fall into the trap of not providing sufficient notice periods when offering shifts or cancelling them.

This lack of communication can then disrupt your employees' plans and lead to financial uncertainty.

Therefore, it is essential for you to establish clear communication channels with your employees and adhere to agreed-upon notice periods to maintain trust and reliability in the future.

Unclear Holiday Entitlement

Holidays, vacation time, or annual leave entitlements can be a grey area in casual or zero-hour contracts, leading to confusion for both you as an employer and your employees simultaneously.

Consequently, failing to clearly define how holiday or vacation pay is calculated and accrued to your employees can result in disputes and potential legal issues. 

Therefore, employers should ensure that holiday entitlements are clearly outlined in the contract and comply with all legal requirements.

Inadequate Record-Keeping

Poor record-keeping practices often pose a significant pitfall when utilising Casual or Zero-hour contract employees.

For instance, failure to accurately document hours worked, shifts offered and accepted, and any changes to the employment arrangement can easily lead to disputes over pay and working conditions.

As an employer, you must maintain thorough and up-to-date records to ensure compliance with employment laws and regulations.

Misclassification of Employment Status

Employers may mistakenly classify workers as Casual or Zero-hour employees when they should be considered full-time or part-time employees. 

Misclassification can then result in legal consequences, including claims for employment rights and benefits to which the workers may be entitled. 

Consequently, it is crucial for you to accurately determine the employment status of your workers and classify them accordingly to avoid legal disputes and regulatory fines in the future.

Ignoring Employment Rights

Just because an employee is on a Casual or Zero-hour contract does not mean that they fall outside of employment rights.

As a result, failing to recognise and uphold the employment rights of these workers is a common pitfall.

Employers may, for instance, then overlook obligations such as providing minimum wage, holiday pay, and rest breaks where required, leading to legal liabilities and reputational damage. 

As a result, it is essential that you stay informed about relevant employment laws and ensure compliance to avoid costly consequences as the legal landscape changes.

Lack of Flexibility and Adaptability

While casual or zero-hour contracts offer your employees flexibility, you may find yourself unable to adapt to changing circumstances quickly enough. 

For instance, rigid scheduling practices or failure to accommodate your employees' availability can result in dissatisfaction and high turnover rates among your more reliable staff.

Consequently, you should embrace the flexibility inherent in these types of contracts and strive to meet the needs of both your business and your workforce simultaneously.

High Dependency on Casual Labour

Overreliance on Casual or Zero-hour contracts to meet staffing needs can become a big pitfall for employers.

For instance, depending too heavily on a transient workforce can lead to instability and inefficiencies in your company's output and productivity if your Casual workforce is not available when you need them. 

This overreliance can also lead to a lack of investment in employee training and development, which means that employees may need more skill sets to continue to improve and grow past a certain point.

Consequently, as an employer, you should assess your staffing requirements carefully and review them regularly to ensure the right balance between a flexible but more stable workforce.

How Do Zero-Hour Contracts and Sick Pay Work?

This can differ from jurisdiction to jurisdiction; however, in the UK, for instance, casual and zero-hour employees are entitled to sick pay for the same rules as regular employees - provided they meet the qualifying conditions. At the time of writing, this consists around:

  • Employees must meet a minimum earnings threshold over a certain period to qualify for statutory sick pay

  • Employees must inform their employer of their illness and inability to work within a specified timeframe

  • Employers may request a sick note (fit note) from a doctor if the illness lasts longer than seven days

  • The employer pays statutory sick pay for up to 28 weeks at a set weekly rate

  • If additional sick pay beyond the statutory requirements is part of the employment contract

How Do Zero-Hour Contracts and Redundancy Work?

In the UK, for instance, redundancy for Casual or Zero-hour contract workers is handled similarly to other types of employees. It can also depend on the conditions set out in their employment contract. 

However, the process may vary depending on factors such as length of service and regularity of work.

How Are Pensions Affected by Zero-hour Contracts?

In the UK, individuals on Zero-hour contracts are still entitled to participate in their workplace pension schemes - if they meet specific criteria. 

For instance:

Auto-Enrolment

Many employers in the UK are required by law to enrol eligible workers into a workplace pension scheme automatically. 

This includes individuals on Zero-hour contracts if they meet the criteria, such as being aged between 22 and the State Pension age, earning over a certain amount (typically £10,000 per year as of 2022/23 tax year), and working in the UK.

Voluntary Participation

Even if they are not automatically enrolled, individuals on zero-hour contracts may still have the option to join the pension scheme voluntarily if they meet the eligibility criteria set by their employer's scheme.

Contributions

Both the employee and you, as an employer, typically contribute to the pension scheme. 

The government sets the minimum contribution rates, which are subject to change. 

Flexibility

The flexibility of zero-hour contracts means that pension contributions may also vary depending on the individual's earnings and hours worked. 

How do Zero-hour Contracts affect Universal Credit?

Universal Credit in the UK is designed to support people on low incomes - or who are out of work, including those on zero-hour contracts. 

Consequently, these can still work hand-in-hand; however, some things to bear in mind around his can include, for instance:

Income Reporting

Individuals on zero-hour contracts are required to report their earnings to the Department for Work and Pensions (DWP). This includes reporting any income earned during assessment periods as well.

Assessment Periods

Universal Credit is calculated and paid monthly based on your employee earnings during a set assessment period, which usually runs for a calendar month. 

Varying Income

Since Zero-hour contracts often lead to varying income from month to month, Universal Credit will adjust accordingly.

If an individual earns more in a particular month, their Universal Credit payment for that month may also be reduced. Conversely, if their earnings decrease, their Universal Credit payment may also increase accordingly as well.

Minimum Income Floor

For those on Zero-hour contracts who are also classed as self-employed, there's a concept called the Minimum Income Floor (MIF)

This is used to calculate the Universal Credit entitlement for self-employed individuals. 

If the actual income is below the MIF, then Universal Credit is calculated based on the MIF itself, for instance. 

Can Zero-Hour Contracts be Terminated?

In the UK, Zero-hour contracts can indeed be terminated, both by you, the employer, and your workers.

Zero-hour contracts offer flexibility to both parties. You can offer work only when it's needed, and your employees can accept or decline work as they wish. 

However, termination of such contracts should still adhere to employment laws and contractual agreements.

Why Were Zero-Hour Contracts Introduced?

Zero-hour contracts were introduced to provide flexibility for both employers and workers.

They allow, for instance, employers to hire staff with no guarantee of a minimum number of hours worked while also enabling those workers to have more control over their own work schedules and work-life balance as they wish, which can be a reason why they are seen to be good as it allows both parties to benefit mutually based on their situations.

Are Zero-Hour Contracts Illegal?

No, they are not illegal in many countries, including the UK, the US, and the EU, as long as they are filed correctly and in accordance with employment rules in those countries.

Are Zero-Hour Contracts Entitled to Holiday Pay?

Yes, workers / employees on Zero-hour contracts in places such as the UK are entitled to holiday pay, just like any other employee.

Depending on the jurisdiction you are in, holiday pay for Zero-hour contract workers should be calculated based on the hours they have worked and should include a proportion of the hours they have worked over a specified reference period.

The reference period for calculating holiday pay can also vary depending on the individual circumstances and employment agreement. Still, it typically includes the previous 12 weeks of work. 

Casual and Zero-hour Contract Final Thoughts

As an employer, Casual or Zero-hour employment contracts can give you a workforce that allows you to grow and operate profitably. However, with them comes many pitfalls. If not done well, they can cause you some ethical issues around brand recognition in your market, ensuring you are compliant with relevant employment laws and regulations, not having fully trained staff, and underinvestment in what you need to grow, to all the way of having an unstable workforce when you need them the most.

As a result, you should always check if you need a more casually available workforce or if more full-time employees will benefit you more in the long run.

But always remember, if you are wondering if your Zero-hour contract is legally compliant, get it checked over by a legal professional.


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Disclaimer:
Please note: Pocketlaw is not a substitute for an attorney or law firm. So, should you have any legal questions on the content of this page, please get in touch with a qualified legal professional.

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