Recent changes to zero hours contracts and minimum wage penalties: what do they mean for employers?

May 29, 2015

zero hours1

A number of provisions within The Small Business, Enterprise and Employment Act 2015 (Act) came into force on 26 May 2015, and has brought about some decisive changes to employment law.

The most notable change is that, after much press during the election campaign, exclusivity clauses in zero hours contracts are now finally banned. The new laws mean that any clause in a zero hours contract which prohibits the worker from working or performing services elsewhere, or which requires the employer’s consent to do so, is unlawful and unenforceable.

A further very significant change is that the maximum financial penalty for underpayment of the national minimum wage is now £20,000 per worker. This is a big departure from the previous maximum fine of £20,000 per employer notice (which could cover any number of workers) and is particularly significant, given that no account need be taken of whether a breach of NMW legislation is inadvertent.

Our comment

The ban on exclusivity clauses in zero hours contracts has the potential to impact significantly on the flexibility and availability of zero hours workers. Employers may need to review their use of zero hours contract requirements in this context, to ensure they are legally compliant, whilst being able to provide the flexibility they require to deal with fluctuating demands.

Given that zero hours employees will be able to work elsewhere, employers should ensure that they have adequate provision in the contracts for protection of confidential information and IP.

Employers should also ensure that they are paying the national minimum wage to all workers, without any omission in any part of their business. HMRC are naming and shaming employers who fail to pay the NMW, from H&M Hennes to small family-owned hair salons. In the H&M Hennes case, the underpayment was due to errors in the time logging system, but this made no difference to the penalty the business incurred. Given the significant increase in the penalty for breach, employers should be vigilant.

For further information or assistance on any related matters, please contact Jo Tindall.


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