With staffing provision more difficult than ever, what should retailers know about employing staff on zero-hours contracts ahead of the Christmas peak? Tina Chander, head of the employment law team at Wright Hassall, explains …

The festive peak period, and the sourcing of seasonal staff, is something that will be high on the agenda for employers now that winter is upon us.

But there have been some changes to the law in the last year with regard to employing casual staff on zero-hours contracts that employers should be conscious of as they embark on their Christmas recruitment campaigns.

Following a recent landmark Supreme Court ruling, all employees and workers in the UK must now receive the same minimum level of paid annual holiday leave, regardless of how many hours they work.

Having been asked to rule over whether leave entitlement should be calculated proportionally as full-time employees or whether it should be calculated by ignoring the weeks they do not work, the Supreme Court declared that workers with atypical contracts should not have their holiday entitlement calculated on a pro-rata basis - marking a significant development for the rights of the 1,018,000 UK residents that are currently in employed on a zero-hours contract.

Generally speaking, zero-hours contracts are attractive to employers with fluctuating or seasonal demands, but they can be controversial, and there are some that view them as being exploitative.

Often, the pay and benefits do differ for those doing the same job but on contracted guaranteed hours, but it should be understood that those employed on zero-hours contracts still have fundamental rights in the workplace, and this Supreme Court ruling will be incredibly helpful for bringing those matters back to the fore.

What do you need to know about zero-hours contracts?

For many years, zero-hours employment contracts have received a lot of negative media attention, as commentators argue they are unfair and offer employees little security in the already-competitive employment market.

That being said, many employers and employees enjoy the flexibility these types of contracts provide, as they allow individuals to take work when they want, whilst enabling businesses to better manage irregular workloads during seasonal peaks. So, does the controversy stem from a simple misunderstanding of what zero-hours contracts actually represent?

What are zero-hours contracts?

A zero-hours contract is a non-legal term which refers to an agreement between two parties through which one is expected to carry out work for the other but where there isn't a set minimum number of contractual hours that an individual has to work.

Although they are described as ‘atypical’, zero-hours contracts still need to outline the employment status, rights and obligations of those undertaking the work, like a traditional contract would.

They must state what the person will be paid if they undertake work, and what they can expect to happen should they turn down any work that is offered to them (if indeed that is an option, as some will always be obliged to accept).

What rights do people with zero-hours contracts have?

Individuals working with zero-hours contracts have numerous basic entitlements under UK law, which include: those aged over 23 are entitled to the National Living Wage, whilst those aged under 23 will be eligible for the National Minimum Wage; many of those on a zero-hours contract will still be entitled to Statutory Sick Pay (SSP) if they meet particular criteria, including whether they’ve previously worked for the employer, and if they’ve earned at least £120 per week for the past eight weeks; and they are entitled to the same rest breaks/days as other employees with more traditional contracts.

The new landmark ruling by the Supreme Court has made it clear that any employee or worker in the UK who has a permanent contract but works part of the year, including those on zero-hour contracts, is entitled to 5.6 weeks’ of annual leave. In addition: the amount of leave cannot be pro-rata based on the portion of the year when work is actually done; annual leave must be calculated and paid using the method set out in the Employment Rights Act 1996 (ERA); the average earnings of those on zero-hours contracts (over the previous 52-week period) must be used to calculate holiday pay; and, when calculating pay for these persons, if there are any weeks within the 52 weeks prior to the period of leave in which the individual did not work and therefore did not earn, the employer must discount this and calculate the pay based on a full 52 weeks before leave in which the individual worked.

Consider the long-term impact

Although zero-hour contracts have become progressively more popular as business owners look to reduce their costs and improve dexterity in an ever-challenging commercial environment, it’s still important to properly consider how working in this way can affect long-term sustainability and stability. After all, they don’t adhere themselves well to succession planning, particularly for small businesses.