Zero Hours Contracts - What are They and Why the Big Fuss?

The issue of zero hours contracts has certainly been one to take the media by storm in the last number of months. Indeed, the issue of zero hours contracts formed a major part of the media coverage of the Dunnes Stores disputes in spring even though, by all accounts, Dunnes do not even have a practise of using zero hour contracts in their business in the first place! As such, now is a very good time to explain what zero hour contracts are, how employers may benefit from same, what the concerns trade unions have in respect of same, and any potential developments in the area. What are Zero Hour Contracts? Zero hours contracts are governed by the Organisation of Working Time Act, 1997, (OWTA) and they essentially refer to a contract between an employer and an employee whereby the employee must make themselves available to the employer for a certain number of hours per week, or as and when required, in circumstances where the employer is not obliged to provide such work. This means the employee is not guaranteed any hours of work (hence the term “zero hours”) but they must nevertheless make themselves available to work if called upon. How Prominent are Zero Hour Contracts in Ireland? It is unclear as to how prominent zero hour contracts are in Ireland. In November 2014, Minister Ged Nash announced that he was commencing “a study into the prevalence of zero hour and low hour contracts.” This study, by the University of Limerick (UL), is expected in late 2015, and will likely be the first report that will give insight into how prevalent such contracts are in this country. The use of zero hour contracts are extremely prominent in the UK, however, and several large retail and catering companies in the UK have come under severe pressure from trade unions due to their policies of only using zero hour contracts. For example, McDonald’s received as lot of negative publicity in the UK due to apparently employing up to 83,000 employees on such contracts. How Do They Work? The Organisation of Working Time Act (OWTA) sets down certain rules for such contracts and states that the following will be deemed a zero hour contract: where an employee in required to make themselves available for (a) a certain number of hours per week, or (b) as and when the employer requires in a week, or (c) a combination of both. As outlined above, the employer is not obliged to provide any hours to the employee during any given week. However, there is protection for employees here in that if the employee is not provided with at least 25% of the contracted hours then the employee will be entitled to payment of either (a) 25% of the contracted hours, or (b) 15 hours pay. Whichever is the smaller sum (i.e. 25% or 15 hours) is what the employee is entitled to. This 25% protection in Ireland does not exist in the UK. This would perhaps help us identify why the issue of zero hour contracts and their prevalence in the UK seems to be far bigger than is the case in Ireland. What are the Benefits? The key benefit of zero hour contracts is flexibility. In terms of employers, as suggested above, it is those industries that require a certain level of flexibility that most utilise zero hour contracts. This flexibility allows the employer to effectively roster employees on an “as needs” basis, particularly in circumstances where the level of business fluctuates week by week, seasonally, etc. As such, it is suggested that zero hour contracts are most commonly used in the following industries: health and social work, hospitality, retail, arts and leisure, education, transport and haulage. In terms of employees, it is not the case that all employees dislike zero hour contracts. A lot of employees also enjoy the flexibility such contracts bring. In general, it is suggested that zero hour contracts predominantly suit employees who only require irregular earnings and who enjoy the flexibility. As such, zero hour contracts most commonly suit employees who are also students, or older works who are either nearing retirement and wish to reduce their hours or who have actually retired from their primary career and still wish to work an odd few hours each week. Potential Developments? Given the strong focus being placed on these contracts by trade unions and the media, it is therefore not surprising that a key aspect of the UL study will be to “focus on how these contracts operate in practice and particularly on how they impact on employees. It will assess the advantages and disadvantages from the perspective of employer and employee and assess the current employment rights legislation as it applies to employees on zero hours contracts.” As such, we can all expect there to be some proposals following on from the UL study. It is extremely doubtful that the study or future reform will result in zero hour contracts becoming unlawful. Indeed, it is generally accepted by all parties that zero hour contracts are necessary in many employment scenarios. The main bone of contention appears to be where employees are on zero hour contracts but in practice work set hours week on week and it is this element that may result in reform. indeed, ICTU have made calls this year for an amendment to the OWTA to allow employees to take a claim to a tribunal where they are on a zero hour contract but in practice they work a certain pattern of hours week on week. The proposal here is that where an employee customarily works a set pattern of hours that the tribunal will be able to declare those hours as fixed or guaranteed each week, thus ending the “zero hour” element of the agreement. Such an amendment is not beyond the realms of possibility, although clearly such a proposal would no doubt undermine the flexibility of the contract which both the employer and employee agreed in the first place and upon which the employer relies in order to properly run their business. If you have any questions on zero hour contracts or the use of same in your business then please do not hesitate to contact our 24 Hour Advice Service on 01 855 50 50.