Zero-hours Contracts

20 September 2013

What are they?

A zero-hours contract is a contract of employment which creates an ‘on call’ arrangement between employer and employee.

The employer is not obliged to provide work and the employee is not obliged to accept work. The employee agrees to be available for work as and when required and no particular number of hours is guaranteed. The employee is expected to be on call and is paid only for the hours worked.

When are they used?

Zero-hours contracts are used predominantly in the private sector and traditionally in the healthcare and retail sectors. It has been reported that Sports Direct has 90% of its workers on zero-hours contracts while J D Wetherspoon has 80%. Their use has, reportedly, increased considerably through the economic slowdown.

What are the benefits for employers?

Zero-hours contracts allow an employer to maximise flexibility and meet varying demand. This is particularly attractive to employers susceptible to volatile demand. Zero-hours contracts allow an employer to scale up very quickly without the commitment to an increased wage bill.

What are the benefits for employees?

Zero-hours contracts may be ideal for some people such as retirees, students and part-time workers who want occasional earnings and want the flexibility to determine when they work. But people in the general working population, including those with mortgages and responsibility for supporting a family, run the risk of unpredictable hours and earnings.

What is all the fuss about?

Workers subject to zero-hours contracts are potentially subject to exploitation. The relationship can become very one-sided and the employee is forced to meet the employer’s requirements/conditions to receive work. A refusal to work in any one instance for any reason can result in a prolonged period of no work. Due to the uncertainty of the workers’ schedules, zero-hours contracts present problems for workers with children due to the difficulty of arranging child care.

What are different organisations saying?

The number of employers using the controversial contracts is unknown. Earlier this year the ONS predicted 250,000 workers are on them, the CIPD said there could be one million, and last week trade union group Unite predicted around 5.5 million workers could be on a zero-hours contract.

As one would expect, Trade Unions are concerned by the trend towards zero-hours contracts.

Quote from Len McCluskey, General Secretary of Unite:

“Zero-hours contracts create a throwaway workforce. They form a one-way street, whereby employers bear no risk, avoiding sickness and holiday pay and overtime.

Unite has undertaken the biggest survey of insecure workers of recent times. Some 5,000 people from right across the economy contacted us because they want a better deal at work. Very few said that they “enjoyed” the flexibility. The vast majority said that they wanted decent, secure employment.”

Conversely, the Institute of Directors, has defended the contracts as providing a flexible labour market, citing the lack of flexibility in Italy and Spain. Jacob Rees-Mogg MP, a former investment banker, has also argued that they benefit employees including students by providing flexibility and could provide a route into more permanent employment.

According to The Work Foundation only 26% of those on zero hours contracts want longer hours (see their statistics here).

What is the government doing about it?

Vince Cable, Business Secretary, is considering closer regulation of the contracts but has ruled out a ban. Among a number of policy announcements, Mr Cable said he had launched a consultation on how to tackle abuses in zero-hours contracts, particularly where employers do not offer guaranteed hours, but insist that workers do not work for anyone else.

Click here to see the press release from the Business Department on the consultation.