What is a zero hour contract? Download your free template for hiring staff

What is a zero hour contract? If you run a small business, you might only need to employ extra staff on an ad-hoc basis. A zero hour contract, therefore, is a type of casual contract that you can use if you need staff but can’t offer them a set number of hours.

We’ve teamed up with Farillio to bring you a free zero-hours contract template. Farillio is a resource site that provides businesses with document downloads and other tools to help them get ahead.

The attached document has been produced by Farillio so we can’t take responsibility for its contents. We'd recommend you take professional advice before making any important decisions based on its contents.

What is a zero hour contract?

A zero hour contract is a type of contract you can use if you can’t offer staff constant work, or only need them on an ad-hoc basis.

If you have an employee on a zero hour contract, you don’t have to give them a minimum number of working hours – but they don’t have to accept work you offer them.

In practice, this means that if you have no work for someone on a zero hour contract, there’s no need to pay them for a set number of hours just because they’ve got a contract. They’re paid only for the hours they work.

In our zero hour contract template, the worker isn’t obliged to accept all or any of the work you offer them.

What does a zero hour contract mean for employment status?

Your employees (including those on a zero hour contract) can be classed as either employees or workers depending on their contract and how they work in practice, including frequency of hours and type of work undertaken.

Workers are people contracted to do work personally for a company and sit somewhere between employees and the self-employed in terms of employment rights.

Employees work under an employment contract and have more employment rights than workers, including protection against unfair dismissal and time off for emergencies.

There’s no fixed answer to the issue of employment status of someone working on a zero hour contract.

Our zero hour contract template will often suggest that they’re workers rather than employees. But sometimes they’ll be classed as employees, especially if they work for you regularly and frequently for an extended period of time.

It’s best for you to consider the terms of the contract and how your staff member works in practice, and get professional advice if you’re not sure about anything.

Zero hour contract rights

As mentioned, rights depend on employment status – employees have more rights than workers. But every worker on a zero hour contract is entitled to:

• national minimum wage and national living wage
• paid holiday
• pay for work-related travel
• pay for being on call

You can’t stop a staff member on a zero-hours contract from working for someone else and you can’t treat them unfairly if they do work for someone else. If they’re legally classed as an employee, you can’t dismiss them for this either.

People on zero hour contracts have the same rights to rest and rest breaks as other employees and you’re responsible for their health and safety. You’ll also pay them through PAYE, deducting income tax and National Insurance.

Zero hour contract advantages and disadvantages

A zero hour contract has advantages for both employers and staff.

It lets you set out a clear legal framework for ongoing employment, including performance reviews and grievance procedures. It can also help you establish a longstanding relationship with a worker, which could be beneficial over the long term.

For workers, they have rights and legal protections, so it might be more appealing than freelance or other temporary work.

The disadvantages of a zero hour contract for employers include the fact that staff don’t have to accept work that’s offered to them. You’re also unable to stop them working for someone else.

The staff member doesn’t have stability as they’re not being paid a regular income, and they can’t predict when work might come along next.

Zero hour contract holiday pay

As explained above, employees on zero hour contracts are entitled to holiday pay but working it out can be difficult for employers. This is because holiday entitlement is usually based on a five-day working week, with a set number of hours.

Zero hour contracts don’t have fixed hours, so you can’t calculate holiday entitlement on a monthly basis because the employees' hours vary month-to-month.

To work out how much holiday your employees are entitled to, you’ll need to calculate how many hours they’ve worked. The standard 28 days’ holiday (including bank holidays and public holidays) is 12.07 per cent of the 52 week year.

Put simply, for every hour an employee works, they accrue seven minutes of holiday.

Employees are entitled to their normal hourly wage whilst on holiday but not all employees are on an hourly rate. Using this holiday entitlement calculator will help if you’re struggling to work out holiday pay for your employees on zero hours contracts.

Using the zero hours contract template

In our zero hours contract template, words in square brackets should be replaced or altered to match the specifics of your business.

When altering the contract make sure you read it through to check there are no conflicts or ambiguities – if you’re unsure, speak to a legal professional.

Why use a Farillio template?

Farillio gives legal tools and templates to help you take control of your business’s journey. Many small businesses find that they don’t need (or have the money) to hire a lawyer. But when you do want legal advice, you want it to fit your needs as closely as possible.

That’s why we’ve teamed up with Farillio to bring you quality, relevant legal documentation that you can customise to fit your business’s needs.

Why not check out these other resources from Simply Business and Farillio:

• Should I form a limited liability partnership?
• Equal opportunities policy template for UK businesses
• What is employers' liability insurance?
• See all our business resources from Farillio
• See all our landlord resources from Farillio