ZERO HOURS CONTRACTS: Progressive or Exploitative?

Zero hours contracts have had a lot of press and political coverage recently, much of it negative with some calling for a complete ban on these ‘exploitative’ contracts. But are they really as bad as all that and is there a place for them in UK businesses going forward?

According to The ONS, the number of people in the UK employed on zero hours contracts has quadrupled since 2000 with 1.7 million zero hours contracts in operation at the end of 2016, representing 6% of all UK employment contracts. Under the terms of a zero hours contract, a worker needs to be available for work but the employer does not have to offer work, nor does the worker have to accept it. The recent zero hours’ boom is partly attributable to the emergence of the gig economy requiring greater flexibility from ad hoc workers. But zero hours contracts have also been widely used by powerhouse brands in the retail, leisure and hospitality industries where demand for labour can fluctuate and the use of ‘casual’ labour is commonplace.

Progressive?

Let’s start with the positives. Zero hours contracts offer great flexibility for workers whose availability fluctuates and they are not able or willing to commit to fixed hours each week. Students are a great example of this, working in paid employment in bulk during the holidays and then taking on fewer hours during busy exam and assignment periods. The retail industry in particular benefits from this schedule as the holidays coincide neatly with busy retail periods such as Christmas and Easter.

Other groups that benefit widely include working parents who schedule work around school hours and therefore don’t want a traditional nine to five job and those who have more than one job or are doing something on the side, such as starting their own business or trying to break into another career. There is also a market for those returning from a leave of absence; whether it’s health related or otherwise, a zero hours contract offers a great path to re-entering the job market.

There are obvious benefits for employers too. Zero hours contracts mean that as an employer, you pay people to work when things are busy and don’t have people sitting around doing nothing when it’s quiet. It enables easier adjustment around peaks and troughs, offers flexibility in workforce planning and widens the recruitment pool to include those that would not be willing or able to commit to a fixed hours role. In this sense, zero hours contracts seem to be a progressive and positive response to the changes in the labour market of the 21st Century.

 Exploitative?

Among the many criticisms of zero hours contracts is that they do not guarantee a minimum number of working hours in any given week. This can prevent workers earning any money at all by putting them on standby for work which doesn’t then materialise. Anecdotal reports also indicate that shifts are changed at very short notice and that those who turn down work may be passed over in the future. Employers can no longer enforce exclusivity clauses which limit workers’ rights to seek or take on alternative employment (they were banned in May 2015) meaning that workers could potentially have zero hours contracts in force with numerous employers. But even having several zero hours contracts on the go does not eliminate the element of uncertainty or the inability to plan more than a few days ahead.

Only this week, workers at McDonalds have staged a strike, demanding, among other things, the end of zero hours contracts which put their lives in a constant state of uncertainty. Whilst management claim that the contracts offer flexibility, the workers themselves claim to experience insecurity and an inability to plan even the most basic of appointments in advance because they don’t know when they will be working. McDonalds will be introducing guaranteed hours contracts as an option for all workers by the end of the year and have already offered 115,000 fixed hours contracts after workers complained that being employed on zero hours contracts with no fixed hours or earnings had prevented them from being able to apply for mortgages, loans and even mobile phone contracts (BBC News 6th September 2017).

Of course this is only one example in one company and there are many more that can be found to support or dismiss the argument for zero hours contracts. But it raises some interesting points. According to the TUC, people on zero hours contracts are much more likely to be young, part-time and women, and so zero hours can potentially exploit the most vulnerable groups of workers who find it hardest to penetrate the job market. The TUC has called for the government to ban zero-hours contracts and has found that staff on these contracts earns a third less per hour than the average worker (The Guardian 25th April 2017). This is particularly evident for younger workers under the age of 25 who are legally entitled to the National Minimum Wage but don’t not qualify for the (higher) National Living Wage.

So what are the rights of zero hours employees?

Zero hours workers are still entitled to the minimum wage and annual holiday entitlement as per normal workers’ rights. They are also legally entitled to ignore any contractual clauses that prevent them from looking for work or accepting work from other employers. The employer is responsible for their health and safety and has a duty of care as for any other workers.

Engaging a zero hours worker is not the same as hiring a freelancer or contractor as those people would likely be classed as self-employed and look after their own tax and NI as an example. With zero hours workers, there is an employment relationship present, even if either party does not wish it to be the case. This means that the employer has to act fairly and reasonably and consistently as they would with other workers/employees and the worker has to tow the company line.

The future of zero hours contracts

The zero hours’ juggernaut seems to have come to a halt with numbers levelling off in 2016. Whether this is companies bowing to pressure from political circles and the press or due to the buoyant employment market with more abundant job possibilities, allowing job seekers to be choosier, is hard to say. If we see a shift in political power, Labour would almost certainly ban this type of contract as has already happened in countries such as New Zealand.

And that would be a shame. It’s easy to believe the media hype about huge corporate businesses exploiting workers in a David and Goliath scenario (McDonalds being a classic case in point) but there is no denying that the zero hours model does work well for some workers in offering true flexibility but also with the benefits of employment. Not every zero hours contract worker is being exploited; many are empowered in being able to take on work that they otherwise would have to turn down.

Employers too are benefitting, operating a leaner workforce planning model that is more adaptable and responsive to business needs. It is a model that genuinely works best in some businesses. The ongoing concern is that zero hours workers are paid fairly and comparably to fixed hours staff and that the flexible nature of the contracts isn’t abused by either party: this comes down to trust, which is the very core of an employment relationship. Without mutual trust, it’s hard to see how the zero hours model can work effectively or have any future, however convenient it may be.

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