Author: Elaine Burns

Should we be in defence of Zero Hours Contracts?

Should we be in defence of Zero Hours Contracts?

Many column inches and tweets recently have been dedicated to the debate of how “exploitive” zero-hour contracts can be and with some unscrupulous employers that can indeed be the case.

But what are “Zero Hours” Contracts?

A zero-hour contract is a contract of employment used in the United Kingdom which while meeting the terms of the Employment Rights Act 1996 by providing a written statement of the terms and conditions of employment contains provisions which create an ‘on call’ arrangement between employer and employee. It does not oblige the employer to provide work for the employee, nor does it oblige the employee to accept the work offered. The employee agrees to be available for work as and when required, so that no particular number of hours or times of work are specified

How have they been abused?

It has been brought to light under reviews by the government and CIPD research that there have been some unethical practices with regards to “Zero Hours” contracts such as allocation of shifts, being penalised for refusing work or not being offered work, not calculating the accrual of holidays etc.

To this end, it is hoped that Vince Cable’s official review will ensure that abuse of the zero hour principle is curtailed, wherever it exists. Hopefully, Mr Cable will also consider the reasons why so many people have to accept uncertain terms to do unskilled jobs that they are often over-qualified to do.

Reasonable alternative for some – when applied fairly?

Contrary to all the bad publicity that has been conjured up about zero-hours contracts, our belief is that they actually offer a reasonable alternative to SME businesses whose work is seasonal or intermittent, such as retail, property sales and hospitality/tourism or where money is tight due to trading restrictions of one type or another.

Far from sitting at home, waiting for the phone to ring, many workers are using zero-hour contracts (and juggling more than one zero-hours contract) to supplement their income while they study or train to acquire new skills, care for dependents or give their time voluntarily to charitable causes. In this scenario, the contract provides the freedom to pick and choose to work as and when convenient, planning and using time effectively to create a good work/life balance.

Zero hour contracts are not for all; that much is clear

If you are on a zero-hours contract and need to achieve full-time hours with a regular income (probably a good percentage of the population), then the lack of regular income, sickness cover and security is going to cancel out any benefits of such a flexible contract for you.

There is an obvious issue if people who should working full-time, and are doing full-time jobs, are on such contracts – not just because of the lack of security but because the cost of sickness and intermittent employment then falls upon the state rather than the firm. There is also a danger that their more widespread use would create a two-tier employment market, divided between those with protection and those without, as happens in France.

But one reason why many people have to take uncertain, unskilled jobs is because they lack the training and experience to do anything else. So, in my opinion, better opportunities to work flexibly whilst acquiring new skills will do far more to fix the problem than rigid employment practices.

We hope Mr Cable’s review, due to be published at the end of this year, will help curtail abuses where they exist but please… give our British SME’s a break! To abandon zero-hour contracts entirely and curb the flexibility that has made Britain’s employment market so robust even in the past five recessionary years may be a backwards step.

Accruing holidays when off sick

Catching up on some legal news in the GHR office this week and came across the EAT confirming that holiday accrual whilst off sick is only limited to the basis of 20 days holidays and not the full 28 days. The EAT has confirmed that the additional 1.6 weeks’ statutory annual leave cannot be carried over into the next leave year, unless there is a ‘relevant agreement’ to this effect in accordance with Regulation 13A(7).

This has been confirmed through a recent case of Sood Enterprises Ltd v Healy. In this case, Healy, an employee of Sood Enterprises, had a stroke in 2010 and, following a period of sick leave, resigned from his employment on 6 June 2011. Healy was entitled to the minimum 28 days’ annual leave each year under his contract. Because Healy’s illness prevented him from taking all his leave in 2010 and 2011 (he had 17 days accrued and unused from 2010, and 14 days from 2011), he asked for a payment in lieu on termination of his employment. The employer refused, and Healy brought a claim for unpaid wages before an Employment Tribunal. The Employer argued that if Helay was entitled to carry-over his untaken leave from 2010 and be paid for it, then it should be restricted to the four weeks’ basic leave in Regulation 13(1), and not the additional 1.6 weeks under Regulation 13A.

Initially the Tribunal upheld Healy’s claim that he should be allowed to carry forward the full 5.6 weeks (28 days) of annual leave, however it has now been overturned and the EAT have confirmed the 1.6 weeks cannot be carried over.

Impact for Employers

This decision will be welcomed by employers – as they will only need to carry over the minimum 20 days under Regulation 13(1) of the WTR, unless they have specifically agreed to allow for carry-over of the full statutory entitlement of 28 days (or even additional contractual holidays).

However, some employers may choose to carry over the full entitlement. Therefore, going forward it may be beneficial to have this written in policy (attendance at work/managing absence policy) as this will clarify the position you as an employer are taking if the issue were to arise.

Depending on how you have managed this in the past may determine how you manage this going forward, and therefore if you wish to make changes to your policies, then you may well have to consult with your employees regarding these changes.

Contact us to discuss further

Please do contact a member of the team at Gravitate HR on 0131 225 7458 if you wish to discuss this further – or if you would like to make changes to your policy.

Will zero hours contracts stand the test of time?

Will zero hours contracts stand the test of time?

The use of zero hours contracts will be the subject of a Government review into concerns that they are being misused and abused by employers. Zero hours contracts, in practice, means that there is no obligation on either party to offer or accept work, but where it is offered and accepted, wages are solely paid on the number of hours worked. All other entitlements, for example sick pay and holiday pay are pro rated accordingly.
Many SME’s including some of our clients successfully use zero hours contracts to assist with flexibility and peaks and dips in demand for their business. Often, it suits the business and suits the individual circumstances. However, industry concerns are that employers use these contracts to put staff on standby, without a guarantee for any minimum pay, rendering the contract unsecure from the employees point of view and therefore abusing the labour market and putting individuals in vulnerable positions.

The use of zero hours contracts

Businesses have defended the use of the contracts as they help provide employment opportunities where there might not ordinarily be need to employ people. They enable organisations to respond flexibly, and in most cases suit those individuals who enter into the contracts. For example, zero hours contracts may offer the younger generation with invaluable working experience. Zero hours contracts often do lead to permanent and full time pay for staff, so it’s a route in the door, in some cases.
The Office for National Statistics showed that the use of zero hours contracts had increased to 200,000 between the last quarter of 2012. We don’t disagree, there is likely to be evidence found in the review that the use of zero hours contracts are being misused and hopefully those will be weeded out as part of the review. We also hope for clarification and ratification of the proper use of zero hours contracts so that they have a firm employment status. We agree that there can be ambiguity when hours are regularly offered and worked, creating an almost certain custom and practice, and therefore almost a legally enforceable employment contract – and the point at which it reaches that stage is unclear.

The future for zero hours contracts

However, we hope that the use of zero hours contracts are not abolished, as we firmly believe that this could put significant barriers in the way of our clients, and other organisations, who are trying to work flexibly. Further, the abolition would undoubtedly impact on unemployment rates across the UK, and the experiences that some zero hours contracts offer.
Beyond the legality of the zero hours contract, we also have to consider the employee engagement with zero hours staff. It is the belief that well run organisations will perform better with committed and engaged employees, and that zero hours staff may not necessarily be engaged and committed. Providing that zero hours contracts are just that, and are not misused, then the level on engagement required from the staff may not be as great as it would with core, permanent staff, and therefore serve their purpose in todays tough climate.

Introduction of Tribunal Fees

Introduction of Tribunal Fees

As per our last blog on Tribunal fees in September 2012, it has now been announced that the Tribunal fees will come into force on Monday 29 July 2013. A claimant who submits a claim after this date will be required to pay an “issue fee” on submitting their claim, and a “hearing fee” before a full hearing. The fee will vary depending on the complexity of the claim.

The basic fee structure will be as follows:

  • Level 1 claims: £160 issue fee and £230 hearing fee. These are the more straightforward, lower value claims, generally for sums due on termination such as unpaid wages, payment in lieu of notice and redundancy payments.
  • Level 2 claims: £250 issue fee and £950 hearing fee. This will cover all other claims, including those relating to unfair dismissal, discrimination and equal pay. We expect that most claims will fall within this bracket.

Where are the fees paid to?

The fees will be paid directly to the Tribunal. The judge will have the power to order the respondent to reimburse any fees paid by the claimant if the claimant wins, although this will be at the judge’s discretion rather than automatic.

It is hoped by introducing the fees that this will reduce the number of low level opportunistic claims coming through the system. Please see our previous blog for more information on reasons and reactions to tribunal fees.

In addition to this, from early 2014 anyone thinking about making a claim through the employment tribunal system will need to contact ACAS first. This will then lead to ACAS instigating Early conciliation, in an attempt to resolve the issue more quickly therefore being more cost effective.

Real Time Information – Payroll has Changed

Real Time Information – Payroll has changed

We reported in the Autumn 2012 that payroll, as we currently know it, is changing.
From 6th April 2013, all employers will have to submit PAYE information online each pay period, to HMRC (Instead of complying with RTI arrangements on April 6th 2013, employers with fewer than 50 employees will have until October 5th 2013 to comply with the legislation). This replaces the requirement to complete an annual return of PAYE.
HMRC have outlined key steps which employers and payroll providers should take to prepare for this change and we have summarised practical tips below.

  • 1. Check if your payroll software is compatible and up to date to cope with the HMRC reporting requirements
  • 2. You must ensure employee data is complete and correct. If you are not sure you should check!
  • 3. Finally, you must be pro-active – there will be a need to manage & record employee events and issues as they happen. This includes changes to hours of work, overtime, bonuses, sick absences and other periods of leave.
  • 4. Review your new starts & leavers processes. Are you gathering all of the information that you need for new starts? Is this information accurate and ready on time for payroll? If not, review your processes to ensure that you do!

Real time information. Payroll has changed.

Real time information. Payroll has changed.

We reported in the Autumn 2012 that payroll, as we currently know it, is changing.

From 6th April 2013, all employers will have to submit PAYE information online each pay period, to HMRC. This replaces the requirement to complete an annual return of PAYE.
HMRC have outlined key steps which employers and payroll providers should take to prepare for this change and we have summarised practical tips below.

1.Check if your payroll software is compatible and up to date to cope with the HMRC reporting requirements

2.You must ensure employee data is complete and correct. If you are not sure you should check!

3.Finally, you must be pro-active – there will be a need to manage & record employee events and issues as they happen. This includes changes to hours of work, overtime, bonuses, sick absences and other periods of leave.

4.Review your new starts & leavers processes. Are you gathering all of the information that you need for new starts? Is this information accurate and ready on time for payroll? If not, review your processes to ensure that you do!

Our first week at Gravitate HR

Josie Steele

I graduated in 2012 from the University of St Andrews with Joint Honours in Management and Psychology. Studying a Human Resource Management module confirmed that HR was the career for me. Upon graduating, I gained HR exposure and some hands on experience within the Employee Relations team at Perth & Kinross Council which I thoroughly enjoyed. My temporary contract was extended, allowing me the opportunity to gain experience within the HR Consultancy team also.
I was very excited to be offered a permanent HR Assistant position within Gravitate HR. I know that this position will be the perfect opportunity to develop my HR experience and knowledge even further. I have also moved from Monifieth to Edinburgh in order to start employment here, so that is an adventure within itself!
In my first week, I have been introduced to the team, and have assisted the Account Managers with various tasks including revising client handbooks and contracts, recruitment, and general filing, allowing me a greater understanding of the organisation.
In the next few weeks and months, I am looking forward to getting to know my fellow colleagues and clients, and will soon commence studying towards CIPD accreditation. I have already been made to feel at home here, but there is much to learn, and I look forward to the challenge!

Rosie Hart

I studied Hotel and Hospitality Management with HRM at Strathclyde University and graduated in July 2010. I worked as HR Assistant for a recycling company part time during my last year of university and then full time for 3 years following my final exams. I started studying for my Advanced Level Diploma in HRM through the CIPD in April 2011 and I am due to complete this in June 2013.

When I discovered that Gravitate HR were recruiting for an HR Assistant in February I decided to apply as I wanted the opportunity to work within an HR focused team and have the chance to progress my career. I wanted a new challenge and to work in an environment that would give me the opportunity to use the skills and knowledge I had gained from both my work and my CIPD qualifications.

I was delighted to be offered the position of HR Assistant and was pleased to know that Josie was starting the same day – I wouldn’t be the only new person!
I started my employment on Monday and spent my first day sitting with my new colleagues learning about all the different client accounts and systems. By my second day I was helping to make changes to handbooks and contracts and writing letters to employees changing their terms and conditions of employment. I was made to feel like part of the team right from the start and I am really looking forward to working with everyone over the coming weeks and months.

Looking forward to 2013

Compromise Agreements

Plans are underway to change the way businesses can offer and prepare compromise agreements, with a view to terminating an employment relationship. Firstly, compromise agreements will be renamed ‘settlement agreements’ and under the new law employers will have more flexibility and opportunity to draft agreements to offer to an employee, irrespective of whether there is a dispute or not.

The consultation paper published in September 2012 indicates that the codes published with the new legislation will include template letters and template agreement documents that, with some populating, will form the final offer. There are benefits to this, in that it may often take away the need and cost of lawyers’ intervention in drawing up the agreement, and may make the negotiation process smoother. These conversations are said to be without prejudice, or off the record, however there is little guidance or rules as to what constitutes a without prejudice conversation, and therefore parts, or all of the discussion may still be used in litigation if employers are unsure.
Commentary on the proposals suggest that employers may not be skilled or equipped to be able to manage and offer settlement agreements, particularly those which are complex or which lead to formal litigation.

The proposals also make room for employers not to follow performance or other management practices, and as the new settlement agreements do not require a pre-existing dispute; employers may offer the agreements with little thought or effort.

Tribunal Fees

From July 2013, the Government has confirmed that the employment tribunals will charge claimants for bringing a claim to court, and a further charge should the case be heard. The aim of introducing the fees are to encourage parties to settle the dispute at an early stage, and to avoid the courts being blocked. The proposals include remission for claimants whose income falls below a defined threshold.

Parental Leave

In March 2013, the parental leave that working parents are entitled to will be 18 weeks, rise from 13 weeks. Parental leave is an unpaid entitlement, and therefore it is not expected that this rise will impact employers significantly.

Employee-shareholder contracts

This widely reported proposal is likely to come into place in April 2013. It will introduce a new type of employee status, ‘employee-owner.’ Employees will be able to waiver certain employment rights in return for a share in the business, ranging from £2,000 to £50,000, although discrimination rights will not be affected. Employers will have the option to recruit any new starts on this basis, but it will be optional and according to consultation- whether existing employees are transferred to this new type of employment.
We previously reported on the impact that the new shareholder option may bring, see our blog on Employee- Shareholder for our report.

Collective Redundancy

The Government is proposing to reduce the 90 day minimum collective consultation period for redundancies of 100 or more employees, to 45 days. The proposals include guidance on how to conduct redundancy consultations. If these changes go ahead, they are likely to take effect 2013.

Real Time Information – Payroll

From April 2013 employers will have to submit real time information about payroll to HMRC. We previously reported about this in our Winter 2012 newsletter , see for further information!

Statutory payments

From 1st February 2013, the statutory redundancy payment will increase to £450 per week (cap), meaning that the overall maximum payment will rise to £13,500.

From 6th April 2013 the Statutory maternity, paternity and adoption rates will increase to £136.78

From 6th April 2013 the SSP rate will increase to £86.70 per week.

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