Casual or “zero-hour” contracts are part of a big shift in the ways we're working in the UK. They're simple enough in principle: your boss basically isn't required to offer you any specific hours of work each month. That said, they also mean you're not obliged to accept any hours you're offered either.

In 2005, there were only about 100,000 UK workers on zero-hour contracts. Now the Office for National Statistics (ONS) is telling us that figure could hit a massive 1 million by the end of 2020. That's a million of us on contracts with no guaranteed work or pay.

What's the problem with zero-hour contracts?

Zero-hour contracts have a reputation for being unfair, or even exploitative. Certainly, it's a precarious way to provide for yourself or your family. You can easily find yourself denied work and without income with no warning. Some people even talk about these contracts more as weapons for employers to swing at employees, rather than mutually acceptable agreements between them. A few employers have even dropped zero-hour contracts altogether in the face of backlashes from their workforces or the public at large.

Working on a zero-hours contract isn't necessarily all bad news, though. Honestly, there's a lot of valuable flexibility that comes along with the risk. If you're a student, a carer or a parent, for example, they can be a pretty convenient way to work. In real terms, it's actually not that different from working as a freelancer. A typical freelance contract is short-term, and won't guarantee any work in the future. However, freelancers use Self Assessment for their tax returns and count as self-employed. That means that, on top of the unreliable hours and lack of security, they also miss out on a range of employee rights and benefits. Even on a zero-hour contract you still count as an employee, so you're actually in a stronger position overall.

Is it healthy that so many people opting for zero-hour contracts?

From an employer's point of view, zero-hour contracts are a great way of cutting costs. A lot of employees were basically left with the choice of either agreeing to the new terms or looking elsewhere for work. The 2007-8 financial crash set off an avalanche of zero-hour contracts that still looks set to surge even higher.

The UK government has been generally supportive of flexible working arrangements, including zero-hour contracts, but there are still concerns about how exploitative they can be. For every success story of a parent welcoming the versatility and lack of restrictions, you hear another of a worker forced into an unstable situation with no choice in the matter. There's also the tax angle to consider. Zero-hour workers usually earn less than other employees, meaning they pay less tax and need more in the way of in-work benefits. You can be sure that HMRC's keeping a close eye on that little statistic.

Can zero-hour contract workers still claim tax refunds?

As long as you're paid PAYE and cover essential costs like travel to temporary workplaces yourself, you can still claim tax back on your expenses. There are a few wrinkles in the rules to keep in mind, though. For one thing, you'll need to be earning enough to pay tax in the first place. For instance, the tax-free Personal Allowance for 2019/20 is £12,500. If you make less than that in a year then you won't have paid any tax to claim back. Obviously, that all depends on your tax code being correct, which can be a problem if your earnings aren't fixed. Give RIFT a ring to find out where you stand, or use our free online tax refund calculator.

I'm on a zero-hour contract. Should I be worried?

Not necessarily, but you should probably be alert. You'd generally be on more stable ground with a more conventional set-up, of course. That said, if you're only interested in irregular or casual work, then you may well be on the right track. According to the ONS, about 2 in every 3 zero-hour workers are happy with the hours they're offered. That still leaves plenty who wish they had more than they're getting, though.

It's worth remembering that you're not totally at your boss' mercy on a zero-hour contract. In fact, there's been a ruling from an Employment Appeals Tribunal that if your hours stay regular for a long time, then your “zero-hour” contract is actually no different from a normal one that any average employee gets. It makes no difference that your paperwork says you're not guaranteed any hours. Your “true” contract has to account for the hours you're actually working.

Even if the UK isn't being flooded with zero-hour contracts in quite the way it was a decade back, we're still looking at a big chunk of the country's workforce here – particularly if the ONS prediction comes true. The government's in two minds about how healthy all this is. How about you?

RIFT are the UK's leading tax rebate and tax return experts. We've been in the business since 1999 and are the only company in the tax industry to be awarded the ICS ServiceMark for outstanding customer service.