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One of the criticisms levelled at the Employment Rights Bill is the complexity of its provisions. Nowhere is this more apparent than in respect of the new obligation to offer zero and low-hours workers a contract that reflects their actual working hours.
The right to a guaranteed hours offer is intended by the government to ensure that all jobs provide a baseline level of security and predictability and to address the “exploitative nature” of zero-hours contracts.
This might be a simple proposition but the legislation introducing the right is dense and key details, that would allow employers to understand the new duty and begin to prepare for the regime, are still to be confirmed.
The right to a guaranteed hours offer (GHO) is introduced via new provisions inserted into the Employment Rights Act 1996. Employers will be required to make an offer to eligible workers of a contract that reflects the true hours they have worked over a reference period. The duty to make the offer is triggered where there is a mismatch between the hours specified in the contract and those actually worked.
A guaranteed hours offer could take the form of a variation of contract or a new contract (provided that, taken as a whole, the contract is no less favourable). However, the exact nature of a compliant offer is opaque since the obligation is to provide a contract that “reflects” the hours “regularly” worked. This leaves open the question of how hours should be determined, suggesting that employers may not be required to make a purely mathematical calculation.
The right to a GHO applies to zero-hours and low-hours workers. Agency workers are also eligible, providing that the number of hours on which they are engaged is at or below the low-hours threshold. What is not set out in the Bill, is the definition of “low hours”. This makes it impossible to evaluate the overall scope and impact of the Bill and for individual employers to determine whether their engagement models will be caught.
The government has promised that the low-hours threshold will be determined following consultation and will be set out in regulations. Most recently, it indicated that the threshold may be set at 16 hours. This would draw many stable part-time roles into the scope of the right, meaning that employers who do not engage contingent workers would need to monitor overtime to ensure compliance with the regime.
A further critical aspect of the right which remains uncertain is the length of the reference period over which working hours must be calculated. In its policy paper Next Steps to Make Work Pay, the government indicates that the expected timeframe is 12 weeks. However, the period will be subject to consultation and set out in future regulations.
If 12 weeks does prove to be the relevant period, it is likely to be highly problematic for businesses that are subject to seasonal fluctuations in demand. Businesses that experience a surge in activity over the summer months will find themselves obliged to make GHOs to workers for hours that far exceed demand during off-season periods. Restaurants and bars in tourist destinations are unlikely to be able to afford to staff their businesses in November in the same way that they do in August.
The right to a GHO was the subject of lengthy debate in the House of Lords in early May. Concerns were raised about the profound impact the right could have on the operations of businesses of all sizes, as well as the availability of part-time flexible work for individuals. It was noted that the requirement to guarantee additional hours to those who voluntarily work overtime will inadvertently prevent the additional hours being offered at all, reducing opportunities for those who value flexibility.
The need for a system to track the hours of workers and calculate correct entitlements to ensure compliance represents a significant undertaking. Lord Wolfson, the CEO of Next UK, indicated that this could entail “at least a year of systems work and several million pounds of cost just to develop the system needed to manage this process”.
Baroness Lawlor also observed that a large majority of workers were not expected to take up a GHO since they had no wish to permanently increase their hours, valuing the flexibility of having additional hours available when it suited them. Examples of those who were unlikely to want a permanent increase in working hours included students seeking work during university holidays and working parents with greater availability during school term time. The time and cost involved in calculating and offering GHOs would in many cases provide no benefit to workers, raising questions about the proportionality of the obligation.
To address this point, Lord Sharpe proposed two alternatives: providing workers with a right to request a GHO or creating an opt-out that would allow workers to notify an employer that they did not want to permanently increase their hours. Either of these, it was asserted, would avoid the unnecessary administrative burden on employers of offering contracts which in many cases would be rejected.
The complexity of the legislation is due in part to the extensive anti-avoidance provisions that have been built into the right. Workers have the right to bring complaints to the employment tribunal where an employer:
The latter obligation, in particular, is likely to lead to fact-heavy disputes with extensive evidence required about the allocation of hours.
What’s more, the Bill also imposes restrictions on the use of fixed term contracts which might otherwise have been used to engage staff during peak periods. Fixed term contracts can only be used where “reasonable”, with a presumption applying that it will not be reasonable where another worker is engaged on a permanent contract to perform work of the same or of a similar nature.
This matrix of rights will severely limit an employer’s ability to manage its exposure to the obligation.
The new right to guaranteed hours is one of the most challenging aspects of the Employment Rights Bill, with the potential to create a significant admin burden for employers and to severely curtail flexibility in relation to staffing arrangements. Although the full impact of the right will remain unclear until such time as the threshold for low-hours workers is set, the new right has the potential to fundamentally change the way in which businesses operate.