What the FT? Zero hours contracts on the rise

The FT has reported that the number of individuals on zero hours contracts has increased by 20 per cent in the last year, with half of the increase being accounted for by workers aged 25 and over. Bird & Bird’s Furat Ashraf and Penny Hunt explain the situation.

Zero hours contracts
Read the original FT article at the bottom of the page.

What is a zero hours contract? 

A zero hours contract is generally understood to be a contract between an employer and a worker where the employer is not obliged to provide work and the worker is not obliged to accept it. This means that the employer does not have to guarantee a minimum number of working hours and that, in theory, the worker can turn down work as and when they want to.

While there are different types of zero hours contracts, most will give individuals ‘worker’ status under law entitling them to certain limited employment rights such as annual leave, the national minimum wage and the national living wage.

That said, workers on zero hours contracts are more likely to have breaks in their employment so they are less likely to be entitled to employment rights which accrue based on continuity of service, like the right not to be unfairly dismissed or the right to receive a statutory redundancy payment. 

Why are the number of zero hours contracts increasing?

Employers say that zero hours contracts provide them with flexibility; they are able respond to constantly changing staffing needs and save money by only paying workers for the work they actually need them to do.

The FT has reported data from the Office of National Statistics (ONS) which shows that zero hours contracts are most common in the accommodation and food service sectors, where seasonal demands can have a greater impact on the ebb and flow of business. The utopian view from employers is that zero hours contracts allow individuals to obtain employment experience and skills without tying them down to fixed employment.

This is supported by a recent survey which suggests that 70 per cent of workers on zero hours contracts are happy with the number of hours they work. A student for example, may prefer working whenever they choose, fitting it around the time they need to spend studying.

In the age of apps like Tinder, it’s perhaps unsurprising that young people might welcome a more commitment-free working life.

So why the bad press? 

Unfortunately, flexibility for employers translates into instability and uncertainty for workers, especially in circumstances where the zero hours contract is their main or sole source of income.

No guaranteed hours means no guaranteed pay which makes it hard for workers on zero hours contract to budget, not the just the future, but also their day to day lives. Unions argue that the balance is tipped in favour of employers and that the so-called casual nature of the contract does not apply equally to both parties. While workers are not obliged to accept work offered, many practical experiences show that in reality they do, either because they don’t know when they will be offered work again or out of fear of not being selected for future shifts.

Job security also remains an issue for zero hours workers. Work is generally offered to workers on an ad hoc basis so they tend to have regular breaks in their employment. A break of more than one calendar week from Sunday to Saturday can break a worker’s period of continuous service which leaves them without unfair dismissal rights which requires workers to be continuously employed for over two or more years.

The most recent measure to redress the balance came in May 2015 when the Government introduced new regulations which prevents employers from enforcing exclusivity clauses in zero hours contracts. It is now unlawful for an employer to subject a worker to a detriment or dismiss them because they work for another employer.

This has been advocated as a step in the right direction by offering true flexibility for workers as well as for employers; workers are no longer expected to be available all the time in circumstances where their work is not guaranteed.

Could zero hours contracts be a business model for the future?

Zero hours contracts were initially touted by the government as a short-term response to high levels of unemployment in a damaged economy, but with the numbers steadily on the rise, they might well be here to stay. The ONS figures reported by the FT show that they still only account for 2.9 per cent of all workers but they are becoming a popular way of keeping overheads down and offering a flexible work pattern to those who want it.

With employers under attack for their treatment of zero hours workers and mounting pressure from unions, the stigma might just be too much. Some larger employers have already started have started to move staff off zero hours contracts.

Following intense media scrutiny and relentless union pressure, Sports Direct, which previously had 80 per cent of its staff on zero hours contracts, announced in September that shop staff will be moved on to contracts with guaranteed hours.

The Everyman Cinema is also dispensing with zero hours contracts and moving staff on to contracts which guarantee a minimum of 40 hours a month, while the pub chain, JD Wetherspoons, announced that it would offer workers the choice of whether they wanted to shift to permanent hours. 

To combat the negative narrative – that zero hours are just another way for employers to access cheap labour and keep businesses profitable – some companies are now choosing to simply treat their zero hours workers better. Cineworld has chosen to continue to use zero-hours contracts across their business but to allow staff on these contracts the same benefits (pro rata) as their colleagues on fixed-hours.

We may increasingly see a move by employers to implement “hybrid” zero hours contracts, retaining the flexibility of casual labour but offering workers a better overall package and more rights.

It would certainly be an improved PR strategy for some of the big names that will otherwise undoubtedly remain in the firing line. 

Furat Ashraf is an associate and Penny Hunt is a legal director at Bird & Bird.


UK workers on zero hours contracts leaps a fifth

by Sarah O’Connor and Employment Correspondent

Zero hours contractsThe number of people working on zero hours contracts has surged a fifth in the past year, fuelling the debate over job insecurity in Britain’s post-crisis economy.

Official data show the number of people who say their main job involves one of these hyper-flexible contracts, which do not guarantee a minimum number of hours, has risen 20 per cent over the past year to reach 903,000. Half of the increase was accounted for by workers aged 25 and over.

While the contracts remain a relatively small phenomenon, accounting for 2.9 per cent of all workers, they have been growing more prevalent in Britain even as the labour market has recovered from the crisis.

Some experts had thought the contracts were a fleeting post-recessionary phenomenon that would fade as employers became less nervous about hiring permanent employees, but they appear to have become embedded even though unemployment is at an 11-year low of 4.9 per cent.

While zero hours contracts are not the only type of flexible work arrangement, they have become totemic in the debate over the pros and cons of Britain’s flexible labour market. Business groups say they offer valuable flexibility to workers and employers; trade unions say they are exploitative because they do not give workers any income security.

Nick Palmer, statistician from the Office for National Statistics, said: “The ONS will continue to monitor and report on this trend to help inform understanding of changes in the UK’s employment market. It is likely though that some of the increase we are seeing is because public awareness of the term ‘zero hours contract’ has continued to grow.”

Theresa May, the new prime minister, raised the issue of insecure work in her first speech on the steps of Downing Street, saying: “If you’re from an ordinary working class family, life is much harder than many people in Westminster realise. You have a job but you don’t always have job security.”

Conor D’Arcy, policy analyst at the Resolution Foundation think-tank, said Mrs May should “deliver on her powerful maiden speech critique of insecurity in the workplace by protecting the workers who get stuck on zero hours contracts long-term when they would prefer a fixed-hours contract.”

Sports Direct, the sports retailer, is perhaps the most famous example of an employer that has put staff on zero hours contracts. After a union campaign, political pressure and shareholder rebellion, the company promised this week to offer guaranteed hours to workers instead.

Big employers are far more likely to use the contracts: more than 40 per cent of businesses with 250 staff or more use them, compared with about 10 per cent of businesses with 10 staff or fewer. They are most common in accommodation, food services, transport, health and social care.

The characteristics of people on zero hours contracts have not changed much over the past year. They are more likely to be young, part-time, women, or in full-time education.

One in three people on the contracts want to work more hours, compared with 10 per cent of workers as a whole.

Original article published on FT.com. Reproduced with permission.