Government consults on regulating ‘zero hours’ contracts

In December 2013, the British Government began consultation on the possible regulation of ‘zero hours’ employment contracts. Trade unions are highly critical of zero hours contracts, saying the current system is open to abuse. Employer groups defend their use, saying many employees are happy with them, and that they helped save jobs during the economic crisis. It remains to be seen whether the consultation will result in legislative intervention or new guidelines.

Background

So-called ‘zero hours’ employment contracts in the United Kingdom (UK1308029I) allow employers to take workers on without guaranteeing any specific amount of work,

There has been growing unrest about the use of this type of contract. On 19 December 2013, the government announced a formal consultation on possible moves to regulate some aspects of their use.

Options identified

The 12-week consultation follows a preliminary information gathering exercise initiated by the ConservativeLiberal Democrat coalition government in the summer of 2013 (UK1306049I).

The consultation document (232 KB PDF) published by the British government says the information gathering exercise showed that zero hours contracts:

…can be useful and valuable for both employers and individuals in specific circumstances. They can promote flexibility for both parties, making it easier for business to hire new staff and suiting individuals who want the freedom to arrange their work around other commitments.

Nevertheless, the information gathering exercise identified ‘certain concerns around the use of zero hours contracts’. In particular these involved:

  • ‘exclusivity clauses’ which in some cases can prevent an individual from working for another employer, even if the current employer is offering no work;
  • the ‘transparency’ of the contracts, which did not always make it clear to employees what their rights were.

The consultation document notes that:

…individuals are not always clear on the terms, conditions and consequences of a zero hours contract, and employers do not always fulfil or understand their responsibilities. Individuals also referred to uncertainty over access to personal finance markets and their eligibility for benefits payments when their hours of work frequently changed.

The consultation document sets out a range of options for addressing these issues, including ‘maintaining the status quo’. The government states that, at this stage, it has ‘no preferred option’.

On exclusivity clauses, the government is seeking views about:

  • legislating to ban the use of exclusivity clauses in contracts that offer no guarantee of work;
  • issuing government guidance on the fair use of exclusivity clauses;
  • an ‘employer-led’ code of practice on the fair use of exclusivity clauses, with government sponsorship of the code as an additional option;
  • relying on existing common law redress which enables individuals to challenge exclusivity clauses.

On the transparency of zero hours contracts, the government is seeking views about:

  • improving the content and accessibility of information, advice and guidance;
  • encouraging a broader, employer-led code of practice which covers the fair use of zero hours contracts generally;
  • whether and how the government could produce model clauses for zero hours contracts.

Contrasting social partner reaction

In a statement commenting on the government’s announcement, Frances O’Grady, General Secretary of the Trades Union Congress (TUC), said:

The growth of zero hours contracts is one of the reasons why so many hard-working people are fearful for their jobs and struggling to make ends meet, in spite of the recovery. But while the government has identified some of the problems faced by those with zero job security, it is desperately short on solutions to curb the use of these contracts. Through the consultation, the TUC and unions will propose tougher action in order to tackle abuse of zero hours contracts.

For the Confederation of British Industry (CBI), Neil Carberry, Director for Employment and Skills, said:

The government has recognised the important role that zero hours contracts play in the UK labour market. These contracts have helped to save jobs through tough economic times and enabled businesses to respond rapidly to new opportunities. Zero hours contracts offer a choice to those who want flexibility in the hours they work – such as students, parents and carers – and provide a stepping-stone into the jobs market for those most vulnerable to long-term unemployment.

In its most recent survey on the issue, published on 26 November 2013, the Chartered Institute for Personnel and Development (CIPD) found the majority of people employed on zero hours contracts were satisfied with the arrangement. The survey, however, also identified areas of poor practice. Problems included the lack of notice many zero hours staff received when work was cancelled. The CIPD has produced a good practice guide, and argues that:

The emphasis should be on improving management practice and enforcing existing regulation first, rather than bringing in new legislation which would be extremely hard to do without unintended consequences.

Commentary

The debate about the extent and impact of zero hours contracts has been one of the most high-profile issues in UK employment relations during 2013. The latest CIPD research confirmed the organisation’s earlier estimate that there are about one million people (3.1% of the UK workforce) employed on zero hours contracts, compared with the official figure of 250,000 quoted in the government’s consultation document.

Trade unions have been highly critical of zero hours contracts and the Labour Party has said it would act to prevent their abuse. Crucially, however, employer organisations have sought to defend zero hours contracts and their opposition to legislative intervention seems likely to influence the outcome of the government consultation.

Mark Hall, IRRU, Warwick Business School

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