The number of people on zero hours contracts has increased sharply in the last couple of years. But what are zero hours contracts – how do they work?
Q. Zero hours contracts – how do they work?
A. According to ACAS (the conciliation service) there’s no legal definition of a zero hours contract, but it’s generally taken to mean:
- You aren’t guaranteed a set number of hours of work, or indeed any work at all.
- You don’t have to accept work offered by your employer if you’re on a zero-hours contract.
SAVVY TIP: Zero hours contracts exclusivity clauses, which banned you from working for another employer, even if you’re not being offered any work on your contract, have been outlawed from May 2014.
Q. Do I have any rights under a zero hours contract?
A. You still have employment rights under a zero hours contract, although you may not necessarily be an employee. If you’re an employee, you get the right to redundancy pay, and protection from unfair dismissal (this may be after two years’ employment or could be straightaway, depending on why you were dismissed).
If you’re an agency worker or self-employed contractor on zero hours, you’ll get less protection but you’ll still be able to get paid annual leave and the minimum wage.
Q. Are there any advantages to a zero hours contract?
A. The only real advantage is that you don’t have to work if you don’t want to. So, if you have caring commitments, are combining working with studying, have a family or want to work part-time as you retire, you can turn down work if you want to. The flip side is that you may not be offered work when you need it.
Q. Can an employer penalise me if I don’t accept work?
A. They shouldn’t because the point of a zero hours contract is that it’s a two way street and that you don’t have to accept work if you don’t want to.
However, there’s plenty of evidence that employers don’t see it like this. A government survey showed that one in five workers on a zero hours contract were always or sometimes penalised if they didn’t accept work.
Q. Would I get a mortgage on a zero hours contract?
A. You may be able to get a mortgage but it will depend on your circumstances and the mortgage lender you choose. This is the current situation (May 2017):
- Some mortgage lenders won’t take your income from a zero hours contract into account, no matter how much you earn.
- Some mortgage lenders will take income from a zero hours contract into account if you’re taking out a mortgage with someone else and they have a regular employment contract.
- Some mortgage lenders will take income from a zero hours contract into account if you’ve been on the same contract for one or two years (it varies from lender to lender).
- SAVVY TIP: It will be easier for you to buy a property if you have a large deposit. Ideally, you need at least 25% of the property’s value as equity or deposit. The more you have, the easier it is likely to be.
Talk to a mortgage broker if you are on a zero hours contract. That’s because the approach taken by mortgage lenders varies so widely. A good mortgage broker will be able to tell you what you’ll have to do to get a mortgage, which may well involve getting a job on a fixed hours contract. There are lots of tips on finding a mortgage broker in my article How to find a good mortgage broker.
Q. Can I get a pension if I have a zero hours contract?
A. Yes. Automatic enrolment is currently being phased in. This means that millions of people are being automatically signed up for their workplace pension scheme.
If you’re on a zero hours contract you’ll be automatically signed up if you earn more than the minimum amount. In the tax year 2016-17 it’s £10,000 a year. If you earn less than this but more than a lower threshold (which is currently £5,824 a year) each year, you can ask to join your employer’s pension scheme. You are also entitled to contributions from them into it.
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