Contract Types – Annualised, Fixed Term and Zero Hours

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Contract Types – Annualised, Fixed Term and Zero Hours

2018-10-23T11:13:57+00:00 April 3rd, 2017|All, HR News|

The most common forms of employment contracts are the full time or part time permanent contracts. When it comes to zero hour contracts, fixed term contracts and annualised hours contracts it can be very confusing for any employer to know when the varying contract are applicable to different employees.

In this article we have tried to simplify any contract confusion you may have:

Annualised Hours Contract

This is a contract that is ideal for businesses that have different staffing needs throughout the year due to seasonal where the business is open for longer or shorter lengths of time; for example, a theme park, a Christmas tree supplier or a school.

The actual hours that the employee works under an annualised hours contract will vary month to month, but they will receive the same pay each month. . The manager would be expected to keep a tally of how many hours have been worked on a weekly or monthly basis and periodically report to the employee how many hours they have left to complete in the year.

In an annualised hours contract it is likely that employees may work more than 48 hours a week during certain times of the year and therefore the employee will need to sign an opt-out agreement as detailed under the Working Time Directive.

In an annualised hour contract, holidays would be based on hours and not days so instead of 5.6 weeks holiday, an employee would have 224 hours holiday. It is recommended that these hours and details are confirmed in a workforce agreement that is to be signed by both the employer and the employee.

Fixed Term Contract

Fixed term contracts are used for a particular project or a particular length of employment such as maternity cover, for example. The fixed term contract clearly needs to set out the date that the project / employment starts and the end date, while also including clear provisions to terminate the contract earlier if the project is completely quicker than expected or for example the maternity leave ends sooner and the mother returns to work.

The fixed term contract will automatically end on the date given but it is possible to extend this employment with a further fixed term contract if the project is not completed. However, you must bear in mind that if the fixed term contract is continuously extended and runs for four years or more the fixed term employee would then become a permanent employee and a permanent contract would be required.

Employees on a fixed term contract would still receive the holiday entitlement and other benefits that other employees receive, but this would be on a pro-rated basis and they would be based on the length of time the employee has been with the company on this fixed term contract.

Zero Hours Contract

A zero hour’s contract is generally understood to be a contract between an employer and a worker where:

  • the employer is not obliged to provide any minimum working hour
  • the worker is not obliged to accept any work offered

Unless the employee is sick, it is expected that the employee will work the hours that they are given. If they do not work these hours then you are to deal with their absence as you would with any other employee and continue the disciplinary procedure that you have in place in your business.

All employees are still entitled to annual leave under this type of contract. The employee needs to be provided with paid annual leave at reasonable intervals during the year so that they have the opportunity to take those paid breaks. It is considered reasonable to pay accrued leave every quarter. Please remember that all employment contracts must be issued to the employee within 8 weeks of employment, regardless of the type.

If you find employment contracts to be a minefield for your business then please contact aspire cambridge directly on 01223 855441; we can help make sure you have the right contracts in place for the right employees.