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Wednesday, February 3, 2016

The recent publication of the University of Limerick Business School Report on “Zero Hours” contracts in Ireland makes for interesting reading.  The report was commissioned by the Minister for Business and Employment in 2015.

“Zero Hours” contracts are controversial.  They were the focus of a great deal of attention in the UK last year, for example, in the run up to the general election.  Among other things, Britain’s Labour Party indicated that they would ban “Zero Hours” contracts if they came to power.  To a lesser extent, they have attracted attention in Ireland too, particularly in the last couple of years.  One of the aims of the University of Limerick report was to try to assess how prevalent (or not) they are in Ireland.

So what is a “Zero Hours” contract? 

Put simply, it’s a contract of employment that compels an employee to be on stand-by but doesn’t provide for that employee to be paid wages unless they’re actually called to work.

A typical Irish employment contract will stipulate set hours that an employee is obliged to work.  As long as the employee is available to work during those hours, there is an automatic entitlement to be paid.  However, if you have a “Zero Hours” contract, you are only entitled to be paid for the hours that you actually work during a given week (subject to one exception, mentioned below).  Obviously if an employee isn’t called into work, they won’t get paid.

“Zero Hours” contracts have been criticised as being exploitative and as preventing an employee from being able to manage their income.  As well as that, an employee may find it difficult to fit in family and other commitments around their working week if they don’t actually know on Monday what they’ll be doing in the days leading up to Friday.

Before looking at the University of Limerick study, it’s worth making one point that distinguishes Irish law from UK law.  The Organisation of Working Time Act, 1997 guarantees a certain (albeit limited) level of compensation to Irish employees on “Zero Hours” contracts – UK workers don’t have the same protection.  The Act sets out certain thresholds.  If you are only called to work for certain of your “on call” hours, then you must be paid a sum equal to 25% of your “on call” hours as if you had worked them.  If you weren’t called to work at all, then you’re entitled to either 25% of the “on call” hours or to be paid for 15 hours – whichever is less.

That obviously means that an Irish employee will be at least entitled to some level of compensation even if they aren’t called to work during a particular week (although critics of “Zero Hours” contracts, particularly trade unions, don’t accept that even this level of compensation is enough).

The University of Limerick report, interestingly, suggests that “Zero Hours” contracts aren’t used extensively in Ireland.  This doesn’t come as an enormous surprise – there have been very few tribunal or court decisions suggestomg “Zero Hours” contracts are routinely used in Ireland.

What’s interesting though, is the fact that the study suggests that so-called “If and When” contracts are in use here.  There’s no legal definition of an “If and When” contract but they are similar to “Zero Hours” contracts with one crucial difference.

That difference is that an employee on a “Zero Hours” contract is obliged to make himself or herself available for work.  Someone on an “If and When” contract isn’t under an obligation to do this.  This is obviously a contract model with the greatest possible element of flexibility included within it.  An employer isn’t obliged to offer work; an employee isn’t obliged to accept work.  On one reading, this seems like something that empowers an employee – that employee is completely free to decline an offer of work (perhaps because they have a better offer elsewhere).

However, it’s been suggested that these contracts are susceptible to abuse.  The Minister, for example, has said that he is concerned at the fact that the study suggests that employers may be using these contracts to avoid paying compensation to workers for being on call.  In other words, there is an imbalance of power in the relationship – an employer can always source an employee on an “If and When” contract somewhere else but an employee may not enjoy identical flexibility in securing work.

The study makes a number of recommendations.  Among other things, the study suggests that there should be a minimum of 3 continuous working hours where an employee is obliged to report for work (and if the employee isn’t called, he should be paid for the 3 hours anyway).  The study also recommends that there should be mandatory notice and cancellation periods of 72 hours  – in others words, an employee has to be given 72 hours notice of work and 72 hours notice of cancellation of work.

Perhaps most significantly, the study recommends that some minimum level of pay should accrue to employees with these contracts and that this minimum level of pay should be calculated by reference to the average hours worked in the previous 6 months.

That would certainly create a security blanket for employees although it is highly likely that employers (particularly those that are adopting this type of contract for sound business reasons) will object.

It’s yet to be seen what action will be taken on foot of the report – and it’s obviously something for the next Government to consider.  One crucial question that might inform the debate is the number of Irish employees who are actually working on these contracts in the first place.

The Central Statistics Office estimates that around 5.3% of employees have variable working hours – employees whose working hours don’t comply to the normal “9 to 5” model.  CSO statistics also suggest that 2% of employees work one to eight hours a week and 6% work nine to eighteen hours a week.

This suggests (in the absence of any conclusive data on the number of atypical contracts in Ireland) that the numbers affected by “If and When” contracts may be comparatively small.  That may mean that there is less of an impetus on the next government to take legislative action in relation to these contracts (particularly, as is likely, when there will be many other pressing issues crying for their attention).

However, it’s most unlikely that this is an issue that’s going to go away.  Developments in employment law in practice in the UK generally find their way over here eventually and the variable hours contract model is unlikely to be an exception.  That’s particularly the case as we see an increasing number of British businesses set up shop in Ireland, particularly retail businesses.

We’ve already, in 2016, seen some evidence of large supermarket chains trying to move away from the standard “9 to 5” working hours model.  We can expect further developments in this area.


Patrick Walshe