Zero hours contracts advantages and disadvantages

By Anna Jordan on Small Business UK - Advice and Ideas for UK Small Businesses and SMEs

Zero hours contracts (ZHCs) continue to be contentious as employers look for ways to plug the labour shortage in certain sectors.

With over a million UK employees working on zero hours contracts, it’s important to keep up to date on the issues as an employer. We take a look at what the advantages of zero hours contracts are for employers.    

Advantages of zero hours contracts

Flexibility

As we’ve seen recently, there can be a real ebb and flow in staff numbers, influenced by factors inside and outside your business. It’s especially true of the hospitality and service sectors.        

Having zero hours workers helps employers to deal with sudden staff shortages and busier periods like the lead-up to Christmas. You could even utilise zero hours workers to cover longer-term absences like extended sick leave or maternity leave.

They can also be helpful for a business that’s starting out that only needs sporadic help to fill in some gaps.

An easier way to grow your business

If you want to grow your business but can’t afford to take on extra fixed-term staff just yet, workers on zero hours contracts could be a suitable alternative.

More affordable

Speaking of affordability, ZHCs are cheaper than paying an agency fee and commission for agency workers. What’s more, you only pay people for the hours that they’ve worked, rather than paying salaries.

Can lead to longer-term/full-time employment

If your business takes off, you can take on your zero hours staff on a part or full-time basis. The prospect of more secure employment can encourage zero hours workers to take shifts with you over other employers.  

Be careful about contract rights because it’s a fine line between a zero hours contract worker and an employee. Read more at contractual rights, by heading over to Zero hours contract rights.         

Good work/life balance

Zero-hour employees often report a good work/life balance, with 45% of employees saying that zero hours contracts had a positive effect on mental health, partially down to the flexibility that these types of roles offer. Working with employees who don’t feel too tired or overworked can only be a positive for your business, and is the difference between having employees and having a team.

Disadvantages of zero hours contracts

Higher turnover because of unguaranteed work

Conversely, you might find yourself with less worker reliability because workers can’t get the secure level of employment they need. This is why it’s important to encourage worker loyalty, such as not cancelling shifts at the last minute. 

Difficulty getting staff, especially at short notice

Zero hours is (in theory) as much of a flexible working arrangement for them as it is for you. Just because you ask for your staff to work doesn’t mean that they have to accept it.  

Different people doing the same job

If you’ve got different people doing the same job, then the quality of the work will inevitably be different. This might not matter too much in some roles, but if it is something more specialised it’s a factor worth taking into consideration.    

Working out holiday pay and redundancy

This can be difficult to work out, but you can make things easier for yourself. Read on at Zero hours contracts holiday entitlement and holiday pay.

Redundancy is also a tricky area with zero hours contracts. Find out more at Zero hours contract redundancy.

Establishing company culture and values

With high turnover in workers and employees it is more difficult to establish what your business’ vision is and what values it operates by.

How do I create a zero hours contract?

With new laws put in place in recent years, not messing up your zero hours contracts is crucial. Try following this zero-hour contract template to keep in check: Zero hours contract template.

Could zero hour contracts be banned?

With the UK headed towards a general election in 2024, there’s plenty of questions around how business legislation might change, and whoever wins will have their own ideas that could affect small businesses going forward.

Labour has previously suggested a ban on zero hour contracts if it were to win, but has since rolled this back, allowing employers to offer contracts based on an employee’s recent work pattern. It’s important to keep an eye on any employment law changes that may occur – these can happen at any time and not just at a change of government.

Do you use zero hours contracts? What are the advantages and disadvantages in your opinion? Let us know in the comments below.

Read more

What employers need to know about zero hours contracts

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