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Zero hours contracts - The government's response
19 May 2015

Zero hours contracts are not without their detractors, but when used appropriately they provide organisations with a highly flexible talent pool. In response to public criticism about the way in which zero hours contracts were being used, the government started a public consultation in the latter part of 2014. This focused on zero hours contracts and the issue of exclusivity. 

The consultation’s findings, from a diverse range of responses, have now been published. They  will help shape Small Business, Enterprise and Employment Bill (“the Bill”) which is currently going through the House of Lords.

The key conclusion drawn from the consultation is that the Bill in its current form would make avoidance of the ban relatively simple. 

In response the government has therefore has drafted regulations which will come into force at the same time as the Bill to prevent this:

  • The Regulations will prohibit the use of exclusivity clauses in both zero-hours contracts and low income contracts (“Prescribed Contracts”). Prescribed Contracts are all contracts where a worker is entitled to receive less than a guaranteed minimum per week. The minimum will initially be £6.50 (the adult minimum wage) multiplied by the number of agreed hours;
  • This regulation will not however apply to a Prescribed Contract under which the rate of pay for each hour worked under the contract is at least £20;
  • Any individual who is unfairly made subject to an exclusivity clause or who is subjected to a detriment for working for another employer will be able to bring a detriment claim in the Employment Tribunal and receive compensation accordingly. The Regulations do not impose a limit on this amount; and
  • An employer who contravenes the exclusivity rules could be subject other to civil penalties.

There is clear feedback from the consultation that improvements need to be made to the information, advice and guidance available with regard to zero hour contracts. The government is therefore continuing to invite business and union representatives to develop codes of practice on the fair use of zero hours contracts in their respective industries.

Those employers who use Prescribed Contracts will need to follow this new legislation closely to avoid falling foul of it and they may have to revise their contracts.

The government has also announced that it will be conducting a review of ‘employment status’ with the aim of clarifying what rights an employee is entitled to. This is in line with their drive to provide greater information and guidance. We shall report on their findings and proposals for change in due course...

For more information about the issues in this article or to find out more about how the Employment team can help you please contact the team on 0118 952 7284 or email [email protected].

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

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