What is a zero-hour contract & how does it work?

Zero-hour contracts are designed to offer the opportunity for a more casual agreement between employers and employees. This type of contract works well when organisations have changing workloads and expectations. However, zero-hour contracts have become quite a controversial subject in the UK.

In this post, Natural HR looks at what zero-hour contracts are, how they work, their legality, and more. Keep reading to find out everything you need to know about this type of contract.

What is a zero-hour contract?

A zero-hour contract is a type of employment contract in which the employer is not legally obliged to offer the employee a guaranteed amount of working hours. There is no minimum amount of monthly working hours in these contracts, which allows employers to save on labour costs when workloads are volatile. These contracts are generally used for “on-call” work or short-term projects.

While employers are not required to offer any guaranteed work hours, the employee is not obliged to accept any work offered to them. They can also work for other employers, making this casual contract mutually beneficial for both employers and employees.

Note: A self-employed individual does not fall under this category. While they can accept a zero-hours arrangement, they remain self-employed.

How do zero-hours contracts work?

In this employment contract type, the employer will offer the individual work when it is available, and the employee can choose to accept the work or not. These contracts are more like casual agreements, but the employer must pay at least minimum wage for whatever hours are worked.

Are zero-hours contracts legal?

Zero-hour contracts are legal in the UK. That said, they are rather controversial. With trade unions, newspapers and other workers’ bodies condemning them as exploitative, zero contract hours have come under fire. In 2015, it became illegal to offer zero-hour contracts that prohibited an employee from working with another employer at the same time.

Holiday entitlement for zero-hours contracts

Like most other workers, those with zero-hour contracts are entitled to 5.6 weeks of paid holiday every year. Their labour rights entitle them to a week’s pay for each week of statutory leave they take. The week’s pay is calculated according to the average hours the individual works in a week and how they are paid for the hours.

Should you offer zero-hour contracts?

If your organisation has regularly changing workloads it may be worth considering offering employees zero-hour contracts. However, these contracts are not always popular, and you may find fewer talented people to fill the roles you need. In addition to this, because employees can decline the jobs offered to them, you may find yourself stuck without the staff you need.

If you need help setting up contracts and managing staff, get in touch with us today. Our HR software was created by HR professionals to makes human resources easy and straightforward.

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Affecting employers with more than 250 staff, it’s a legal requirement for the following figures to be made publicly available:

–        Gender pay gap (mean and median averages)

–        Gender bonus gap (mean and median averages)

–        The proportion of men and women receiving bonuses

–        The proportion of men and women in each quartile of the organisation’s pay structure

As reported by the BBC in April 2019, 78% of companies overall showed a pay gap in favour of men, 14% in favour of women, and the rest showing no change at all. Clearly, there’s more still to be done.

Reporting on your gender pay gap isn’t going to solve the problem overnight. But what it can do is give insight to an organisation, and HR professionals within it, on potential causes of any pay gap that exists. From this, you can begin to identify strategies to address it.

Before you even get to that stage though, you’ll likely face a few key challenges.

1. Lack of Resources

Who is responsible for Pay Gap Reporting? HR, Payroll, Finance? It’s probably not something you’re going to fight over, but failing to provide these reports on time leaves your business potentially facing legal action from the EHRC (Equality and Human Rights Commission)

If an HR team is expected to complete the report – which is often the case – it’s likely you won’t be allocated extra resources to do so. This might simply be because they’re not available, or perhaps because the size of the task is underestimated.

The data you need to complete the report must be identified, exported, cleansed, and imported into your chosen format. Without the right people and tools, a potentially arduous task gets a lot more difficult.

The administrative side will require clear responsibilities, plus communication and collaboration between internal departments, and possibly external service providers.

A clear list of tasks, the identification of resources required, and allowance of time to complete the report, are all essential. This will help your case when it comes to asking for extra, or more dedicated support, to be allocated to the project.

If resources are still stretched, software that includes gender pay gap reporting as a function will be a massive time saver. Or alternatively, external assistance could also come via consultancy from an expert in this area.

2. Accuracy of Reporting

Compiling accurate data requires in-depth knowledge of your organisation’s HR and payroll structure. If your HR and payroll systems aren’t integrated, it certainly won’t make life easier.

Building your dataset will also depend on the software your organisation uses and its readiness for the task. If in doubt, seeking support from your provider could be a good start.

As touched upon previously, the data you collect will undoubtedly require some cleansing before it can be imported into your chosen report format.

If you don’t get it right, your organisation’s reputation can be negatively affected. Although no companies have yet been sanctioned for late filing, this doesn’t rule out any retrospective action.

Aside from the reputational impact, with inaccurate reporting, you’re unlikely to identify and address any causes of the gender pay gap within your workplace.

On the flip side, there are incentives to getting this right. Transparency and accuracy with gender pay gap reporting, along with any necessary actions, could:

• Boost the morale of employees and increase retention rates
• Attract new talent, reassuring candidates they are provided with fair opportunities
• Reduce issues for HR, i.e helping to deal with gender inequality
• Provide insightful knowledge of how your company is comparing against competitors and the UK as a whole.

Whether you’re completing the report as a mandatory requirement, or as part of an organisational initiative, a thorough approach is essential.

3. Complexity of Reporting

In order to achieve accuracy, you’ll need to get your head around the complexity of the reporting requirements too.

Some of your staff may be part-time, others full-time, and perhaps paid using different systems.

Currently, the regulations state:

“An employer must comply with the regulations for any year where they have a ‘headcount’ of 250 or more employees on 5 April (where the private and voluntary sector regulations apply) and 31 March (where the public sector regulations apply), but employers of all sizes should consider the advantages.”

What this doesn’t clarify, is exactly who counts as a relevant employee where gender pay gap reporting is concerned. This information can be found in the Equality Act 2010.

To pick just a few examples:

1.     Employees on leave (e.g. maternity or sick) are only relevant for reporting whilst on full pay, not reduced.
2.     Agency workers are considered relevant employees for the agency that provides them, rather than your organisation.
3.     Self-employed people paid by you to personally carry out work, and who cannot be substituted, should be included.

Having a clear picture of who should, or shouldn’t, be included in your headcount is crucial.

If your HR database and software isn’t geared up for the complexity required to complete the gender pay gap report, a rethink may be required.

Summary

You may be carrying out gender pay gap reporting because you have to, or because your organisation sees it as an important process. Either way, you’ll need to address these 3 key challenges for it to run smoothly.

Having a clear plan and an idea of the resources required is the first step. Then, you’ll need to ensure the accuracy of your data, and get your head around the complexity required to draw conclusions from it.

If you can do all of this, you’ll be carrying out a meaningful exercise rather than a box-ticking one.

The post The 3 HR Challenges of Gender Pay Gap Reporting appeared first on Natural HR.