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Zero hours contracts - banned from 26th May

Zero hours contracts banned.

More than a year ago the then Business Secretary Vince Cable announced in his speech to the Liberal Democrat conference that he was launching a consultation on how to tackle abuses in zero hours contracts.

Finally last week legislation was passed to ban the use of zero hours contracts. Contrary to some reports this does not ban their use altogether but does ban a particular type of zero hours contract (or rather a term within them) which require employees to commit to a number of hours per week, but doesn’t commit the employer to offering those hours. This ‘exclusivity clause’ meant that workers had to set aside time for the employer and could not undertake any other work during that time. This was perceived (rightly in our view) to be rather unfair to the workers, who may have turned away work despite receiving lesser or no hours or pay from their employer.

myHRdept predicted last year that these particular types of zero hours contracts were likely to be banned. Finally on 26th May in the Small Business, Enterprise and Employment Act 2015 a commencement order outlawed exclusivity clauses in zero hours contracts.

Less draconian (voluntary on both sides) zero hours contracts are still fine and may still be appropriate, particularly for businesses with variable labour demand. Where employees though are already on zero hours contracts but are in practice working routinely similar hours from week to week, consideration should be given to offering them permanent contracts, or an alternative more appropriate arrangement. If regular hours continue for a long period of time, it is likely that those hours will become contractual through ‘custom and practice’, the legal doctrine in which long established practices become contractually binding even if they weren’t intended to be.

To discuss your own employment contracts and to review the options with myHRdept, please call us on 01628 820515 to discuss your requirements or email us here and we’ll call you back.

There are several types of commonly used ‘employment’ contracts. We list the main variations below.

 

Type

Description

Casual

Casual workers are not guaranteed hours in any week and don’t have to accept them if offered. As they are not employees they don’t have access to a range of employment rights, including the right to claim unfair dismissal and the right to redundancy pay. However, if the person is in fact working regular hours each week, it may be that the contract is not casual at all. Even casual workers should be given a contract for services, as a breach of rules or procedure by a casual can have the same damaging impact as a breach committed by a permanent employee.

Employee Shareholder

Recently rammed through the legislative system employee shareholders waive their rights to certain key employment laws in exchange for £2,000 - £50,000 of shares in the business. It applies to limited liability companies only and isn’t expected to be widely taken up.

Fixed term

Usually covers a specific project or covers for an absent employee and has an end date with no further notice necessary. Legislation requires fixed term employees to be treated broadly the same as their permanent counterparts and mistakes can sometimes be made, for example, by paying maternity cover staff less than the person they were covering. Fixed term employees may be entitled to redundancy pay for assignments of more than 2 years (unless the work they were recruited to do is still continuing) and employees employed under a fixed term contract (or a succession of fixed term contracts) for 4 years or more are automatically entitled to a permanent contract of employment.

Permanent

Permanent employees may still be dismissed relatively easily in their first 2 years (if they started after April 2012, otherwise 1 year) providing the reason for dismissal is not unlawful or is not unlawful discrimination e.g. the employee is dismissed because she is pregnant.

LLP partner contract

In a Limited Liability Partnership paid up partners are entitled to draw earnings from the LLP profits but conversely may be called upon to fund the losses of the LLP. Partners are sometimes responsible for their own tax affairs and NI. This type of arrangement is often used to veil employee status however (for tax purposes) and it is often far from straightforward to judge whether an LLP ‘partner’ is an ‘employee’ or not. HMRC has announced a review into this area reflecting their belief that many ‘partners’ should in fact be classed as ‘employees’ for the purposes of tax and NI.

Self employed

Not a contract of employment, but a contract for services. Self-employed contracts are sometimes used to avoid paying employers national insurance contributions and legislation has been written to counter such measures – see our section on employment status for more.

Temporary

A temporary ‘worker’ does not have the same employment rights as an employee. These are usually agency workers, employed and paid by an agency and supplied by them to the end employer. A directly engaged temporary employee however will have more employment rights, including the right to redundancy pay and to bring an employment tribunal claim (if they have sufficient service or if the case concerns unlawful discrimination)

Zero hours

Under a zero hours contract workers are not guaranteed any weekly hours at all, but if they are asked to work them they will do so under the terms of the contract. Holidays are calculated normally against hours actually worked. Exclusivity clauses (whereby workers were required to hold hours but employers were not obliged to provide work (and pay) for those hours) were banned from 26th May 2015.

   

 

If you're thinking of outsourcing your HR why not contact myhrdept.co.uk. With full service Premium Plus packages for medium sized companies typically from only a few hundred per month (and from only £100 per month for smaller companies and start-ups) and fixed price HR support options available for one-off issues, we believe we offer the best combination of quality and price available in the UK. Call us on 01628 820515 to discuss your requirements or email us here and we’ll call you back.

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