What is a zero hour contract?

Zero-hour contract is a term primarily used in the UK, referring to an arrangement in which an employee isn’t guaranteed a regular salary, but rather is only paid for the hours she actually works. While the term ‘zero hours’ may be more specific to the UK, this contract type exists all over the world – with differences of course.

How do you calculate zero hour pay?

Calculating zero hour pay will differ country to country but in general the process may look something like this:

• Calculating gross pay, by multiplying the number of hours worked in a week by the hourly rate
• Deducting any national insurance or taxes
• Paying according to the agreed upon frequency

It’s important employees keep as accurate records as possible of their employees’ clock in and clock out time so as tot to overpay or underpay the employee and risk disputes.

Advantages and disadvantages of zero hour contracts

Zero hour contracts can present certain benefits for employers, including flexibility and fewer payroll hoops to jump through – including overtime and certain benefits.

However, there are also some risks, especially in terms of unintentional legal breaches and lack of predictability.

Companies may also face backlash for hiring through zero hour contracts, since this contract type has gained a reputation of lacking care and security for the employee’s financial wellbeing.

Zero hours contract entitlements

Employee entitlements under zero hour contracts differ country to country but for the most part they’ll include the following:

• Minimum wage
• Paid annual leave
• Protection from unlawful deductions
• Protection from discrimination

Do zero hours contracts include sick and holiday pay?

Holiday and sick pay allowance will depend on the employee’s contract. If an employee is classified as a worker, rather than a freelance contractor, they should be entitled to benefits like holiday pay and sick pay. Most likely, though, the amount of pay they receive won’t be static and will depend on the average amount of hours they’ve worked.

Managing zero hours contracts within a global workforce

A lot of countries will allow for some form of zero-hour contracts. However, the requirements for these types of contracts may differ significantly from one another. Companies with global workforces who pay international employees by the hours they work rather than a set amount, need to be privy to all these differences. Breaking any contractual obligations can mean severe penalties and fees.

There are a number of things businesses can do to stay out of the woods, including:

• Relying on local regulatory expertise to navigate laws surrounding zero hour contracts.
• Maintaining a transparent culture and making sure employees are aware of their rights and entitlements within the contract
• Using technology to manage payments, keep records, save time, and decrease human error

Partnering with a payment execution platform is one way to overcome these difficulties. These providers can not only offer expertise in multiple jurisdictions but also automate most of the payment process.