Employment Rights Bill: the rising risks of zero hours workers

The House of Lords is in the process of scrutinising the Employment Rights Bill (ERB), with three key debates taking place in April and May. Although these debates could result in aspects of the Bill being changed, it’s expected that the final version will be introduced by this summer, with the first changes taking effect later this year.

In this article, we’ll be looking at the Bill and key changes it will introduce. We’ll explore how these changes will affect employers, the challenges it creates and ways to prepare.

ERB gives employees greater security

The ERB introduces a right to guaranteed hours of work and penalties for shift cancellations without reasonable notice. The intention is to end one sided flexibility and exploitative zero hours contracts, creating a baseline of security and predictability so workers can better plan their lives and finances.

Employers will be under a legal obligation to offer workers on zero or low hours contracts guaranteed hours of work. The guaranteed hours are to be calculated on the average number of hours the person has worked over a 12-week reference period. And employers will have to repeat the calculation process every 12 weeks.

That means employers will have to monitor working hours and put in place a system to make an automatic offer after every 12-week reference period for workers that qualify. Not only that, but the offer may also need to factor in the days and times of the week the person was working.

Option to offer fixed term contracts

Employers might be able to offer fixed term contracts, which would be excluded from the right to guaranteed hours. The legislation states that this would be limited to ‘when it is reasonable to do so’, with the intention that this will allow for seasonal work. However, we still don’t have clarity on what this stipulation entails.

Other aspects of the legislation also need more clarification if employers are to implement the rules properly and for workers to understand their rights. A key detail missing is a description of what counts as a low hours contract. There were rumours of it being four hours per week, but the government has rejected this on the basis that employers could circumvent the rules by offering contracts with more than four hours work per week.

New right to guaranteed hours: wider impacts for employers

This new guaranteed hours right will place greater inflexibility on an employer’s labour supply, which will likely increase costs in various ways. Firstly, employers will face a greater administrative burden on managing the right. Secondly, there may be costs arising from litigation. And thirdly, employers will find themselves stuck with fixed labour costs for 12 weeks even if there is no need for the work.

In a welcome development, the government has included an exemption from the right if agreement is reached with a recognised trade union. However, that leaves employers that don’t recognise a trade union exposed to the additional costs and risks of having to comply with the rules, which currently look complex.

When could employers be penalised for cancelling shifts?

Under the ERB, employers will also be liable to pay for a shift if they cancel, move or shorten it without reasonable notice. If they fail to make the payment, the worker can bring a claim against the employer for the wages owed.

Yet again though, more clarity is needed, with the most obvious being what counts as ‘reasonable notice’? Will it be a matter of hours or days, or will it depend on the length of the shift the worker was scheduled to work? Employers will need to know the time limits they’re working to, so they can implement this process properly to mitigate the risk of penalties and potential disputes with workers.

What should employers do now?

The direction of travel is that there will be regulatory reform on the use of zero hours workers, but the extent of it is yet to be confirmed. The House of Lords has been debating the ERB, with various amendments proposed to the right to guaranteed hours and shift penalties. If these are approved, they will go back to the House of Commons for further consideration. This deliberation could push back when the ERB comes into effect, but this would be no bad thing if it means there is clarity on those areas of uncertainty.

In the meantime, employers should audit which areas of the business are using casual labour and consider whether this should be the case.

• Are you using low hours workers and, if so, what are the current guaranteed hours of work?
• Are you using seasonal workers and what are the reasons for doing so?
• What are the current terms of employment for casual workers?
• And what would be the risks or costs associated with terminating contracts to move to a new model when the ERB comes into force?
• What are the use cases for this type of labour over the next 12 months and projections on the numbers needed going forward?

By answering these questions, you can get a better picture of your labour supply chain needs in the future, the costs and risks associated with changing to a new model, and whether there are any alternatives that would avoid or mitigate the use of casual workers.

If you would like to speak to someone about preparing for the Employment Rights Bill or your use of zero hours workers, please contact Charlie Barnes.