Notice periods can be difficult to navigate, particularly in relation to zero-hours contract workers.
It is important for employers to remember that in spite of the flexibility a zero-hours arrangement can bring to your organisation, the employees who work for you in this way are nevertheless entitled to rights relating to pay, annual leave and rest breaks.
In light of the flexible nature of the zero-hours working relationship, contract terminations should be carefully managed, as we explore below.
Use of zero-hours contracts
‘Zero-hours contract’ is not a defined term in English law. However, employees on zero-hours contracts are entitled to be paid the minimum wage, to receive rest breaks, to have paid annual leave and to protection from discrimination.
In addition, in drafting a zero-hours contract, you should note the following:
- exclusivity clauses are specifically banned in zero-hours contracts, i.e. you cannot seek to prevent an employee on a zero-hours contract from working for another employer, nor can you require them to ask your permission before they take up such additional work;
- the contract should state whether the employee is obliged to accept work or a percentage of the work per month if it is offered;
- the contract should establish a mechanism by which an employee will be offered work, including how much notice they will be given that there is work for them to do;
- if the work is cancelled at short notice or even once the employee has turned up at the workplace, you should decide whether they will receive a compensatory payment for this, or a contribution to any childcare costs incurred; and
- holiday arrangements: once the employee has worked for you for one year, they can take paid holiday before they have accrued it.
Zero hour notice period to be given by the employer
Contracts should also contain provisions surrounding notice.
The notice arrangements will depend on whether it is anticipated that the employee will build up continuity of employment or that the work will be unpredictable or irregular enough that a weekly pattern will not be established.
Where the contract will be terminated after each ‘work task’ or engagement
Because of the flexible nature of the arrangement, it may well be that there is longer than one calendar week (seven days) between each work task undertaken by the employee. A full calendar week is defined as being from Sunday to the following Saturday. In law, this counts as a break in employment. As such, an employee is entitled to be paid for
- any holiday they have accrued but not taken, and;
- any wages owing plus notice pay if the employee has been employed for more than a month, or if the contract contains specific provision for notice above and beyond the statutory minimum.
There is no entitlement to be given the paid statutory minimum notice in this scenario. This is because it is most likely that a person hired under these arrangements would be classified as ‘worker’ for employment law purposes.
Workers do not have the right to statutory minimum notice, nor protection against unfair dismissal and the right to a redundancy payment. They are more likely to be engaged on precarious zero-hour contracts under which they cheaper to hire and easier to dismiss than employees.
It can be quite onerous both administratively and logistically, to treat the worker’s engagement as terminated after each task. If, for example, they work for five days, followed by a ten-day gap, you will be obliged to calculate and pay holiday pay for those five days. It was established by the European Court of Justice back in 2006 that rolled up holiday pay, i.e. including a notional amount in lieu of holiday in the hourly pay, was unlawful.
However, the practice appears to continue. It should be the case that the employer works out holiday entitlement in the normal way. That is, calculating the pro-rata entitlement of the employee/worker to 5.6 weeks per year and using a pay reference period. The pay reference period was increased from 12 to 52 weeks on the 6th April, 2020, but where the worker has not worked for the employer for 52 weeks, then the reference period is the number of weeks for which they were engaged.
Of course, practically, the employer can simply stop offering work to the worker under the zero-hours contract. However, it is not wise to pursue this course of action.
Whilst the contract remains in place, the worker is ‘on your books’, regardless of whether they are actually doing any work for you. There are health and safety, and reputational reasons why allowing a redundant arrangement to roll on is unwise. In addition, by continuing not to offer work, you run the risk of being sued for discrimination.
Where the contract is ongoing and must be terminated by giving notice
If an employee is engaged at least once every seven days on their zero-hours contract, for a number of months, then the employee will have continuity of employment and the contract must be terminated either by giving statutory minimum notice (see below) or by giving notice in accordance with the contract.
An employee will also have continuity of service if you decide at the outset of their employment that they will be hired on an ‘umbrella’ contract. An umbrella contract is ongoing, regardless of whether there are breaks in employment, because both employer and employee recognise that there are continuing obligations between them. It is also possible that a zero-hours contract that purports to hire a ‘worker’ on an assignment by assignment basis, becomes an umbrella contract over time if the engagements become regular and both employer and employee have an expectation of ongoing work.
Therefore, you will have to have a mechanism in the zero-hours contract for giving notice and terminating the contract.
Statutory notice periods are as follows:
- if the employee has been employed for between one week and two years, then the notice period is one week;
- for between two and twelve years of employment, the notice period is one week for each complete year of employment; and
- for employment over twelve years, the notice period is capped at twelve weeks.
In addition, you will have to calculate any holiday pay due to the employee. If the employee was employed for two years or more they will also be entitled to a redundancy payment and you will have to calculate this and explain your calculation to the employee.
Of course, you do not need to offer your employee any work during their notice period, nor do they need to accept work from you once you have given notice to them, subject to their contract of employment obliging them to accept work offered.
Notice period to be given by zero-hour workers
Just as, theoretically, you never need to give notice to a worker on a zero-hours contract, the situation is the same in reverse.
If a worker wishes to terminate their zero-hours contract, they need not communicate this to you. Instead, they can simply decline your offers of work until, presumably, you stop offering it.
As an organisation, you have to be aware of this inherent instability in the ‘zero-hours’ employment model. The benefits of the flexibilities offered by zero-hours arrangements can be outweighed by the higher staff turnover and challenges that come with managing a less stable and potentially less reliable workforce.
However, by issuing a contract which sets out the standards of conduct you will display towards your worker, you can expect that this is reciprocated. In addition, you should remember that there is no legal right to a reference. You can explain that the worker’s conduct in giving notice to you will stand them in good stead should they need a reference from you.
If an employee is employed on an overarching or umbrella contract or has simply built up continuity of service through regular work, then they will be obliged to give you the statutory minimum notice to terminate their contract. Statutory minimum notice is one week. However, it is suggested that if you hire your zero-hours employees on such a contract, that you insert a clause requiring a longer period of notice, for example one month.
Terminating contracts is an area fraught with employment law risk. Where zero-hours contracts are concerned, there is additional uncertainty.
Last updated: 29 April 2020