The Sunday Times of the 6th August 2013 noted the rise of the zero hours contracts and suggested that up to 500,000 people are employed in the UK with no guaranteed hours. The latest survey by CIPD, the UK body for HR practitioners, has now confirmed that up to 1 million workers in the UK are on zero hour contracts. The practice was thrust into the spotlight last week when Sports Direct, the UK tracksuit and trainer retailer, was exposed for employing the bulk of its 23,000 staff on these contracts. Sports Direct had been lauded as a model employer for its generous employee bonus scheme with 2,000 full-time staff about to cash in bonuses of €115,000. Sports Direct aren’t alone and others using these contracts include Boots and McDonalds, and even Buckingham Palace!
There has been little confirmation of whether zero hour contracts are used as frequently here in Ireland but one can guess that they must be, or will be in the near future, as employers seek to cut their costs base. So, what are zero hours contracts? And why so prevalent now?
In essence, zero hours contracts are contracts of employment with no guarantee of hours of work in any particular week. They have played a role in allowing employers to respond to short-term peaks in demand for staff, and the arrangement quite often suited the employees, a lot of whom were students, carers, or parents of young children who did not want to commit to full-time hours. The current controversy has arisen, however, because zero hours contracts have increasingly turned into more permanent arrangements. This leads to a lack of job security for the employees, and the lack of a regular income makes it increasingly difficult to budget for household bills, and almost impossible to get a mortgage.
So, how does Irish law treat zero hours contracts? The answer is very little consideration is given to such contracts. Some legal commentators suggest that you can include a clause to the effect that both employer and employee agree that it is not an employment contract at all, but I simply don’t buy that. Section 18 of the Irish Organisation of Working Time Act 1997 does refer to two categories of zero hours contracts. The first, category A, is where a certain number of hours are contracted each week. The second, category B, is where the employee is asked to make himself available as and when the employer requires him to do so. Section 18 does not make such contracts illegal but provides for minimum payment for that employee in a week where no hours are worked. On one reading, an employer might be obliged to pay a category B employee for up to 15 hours in a week where no hours of work have been provided, but this contrasts clearly with the rights of a category A worker who is limited to 25% of the contracted hours. Accordingly, an employer is legally entitled to enter into a contract for a stated number of hours, for example 8 hours per week, and if no work is provided in any week, the employer is only obliged to pay that employee for 2 hours only.
Another question that occurs to me is why now? One suggestion is that zero hours contracts hide the true extent of unemployment, given that those on such contracts are not regarded as unemployed. Another reason, and one I find far more compelling, may be the reduction in popularity of agency contracts since the implementation of the Agency Workers Directive both in the UK and Ireland, which in effect gave agency workers the same rights as permanent employees.
What rights do employees on zero hours contracts have? They clearly must be paid at least minimum wage for each hour that they work, which in Ireland is currently €8.65 per hour. If employed on a contract guaranteeing a certain number of hours per week, then the employee must be paid at least 25% of the contracted hours for weeks in which they received no hours of work at all. They are also entitled to holiday pay which is paid proportionality according to the hours they work; this is calculated by reference to section 19 of the Irish Organisation of Working Time Act. The employees are also entitled to be protected from discrimination from one of the ten grounds referred to in the Irish Equality Acts. One of the biggest unions in the UK is UNITE, and when you see that their response is to write a letter to the boss of Sports Direct, it shows you how weakened unions are in the face of what is a perfectly legitimate and legal contract of employment in these very straightened financial times for employers and employees alike.
It will be interesting to see whether the Irish legislature will be motivated to make changes in the law that could greatly increase existing costs for already challenged employers.