Unions welcome government review of ‘zero-hours’ contracts

Employers in the UK are increasingly using ‘zero-hours’ employment contracts, which allow them to keep staff on standby and offer no guaranteed work or predictable levels of pay, prompting renewed debate about this contentious employment practice. Business Secretary Vince Cable announced a review of zero-hours contracts in June 2013. This was welcomed by the Trades Union Congress which has called for the contracts to be banned, describing them as exploitative.

Zero-hours contract review

In June 2013, Business Secretary Vince Cable told The Independent newspaper that the Department for Business, Innovation and Skills (BIS) was conducting a review of the use of ‘zero-hours’ employment contracts. BIS officials will review how zero-hours contracts work, and investigate whether they tend to lead to abuse by employers. Vince Cable said ‘There has been anecdotal evidence of abuse by certain employers, including in the public sector … . Whilst it’s important our workforce remains flexible, it is equally important that it is treated fairly.’

Recent research

Employers use zero-hour contracts to keep staff on standby, without guaranteeing them regular working hours and, therefore, predictable levels of pay.

Labour Force Survey statistics were quoted in a recent report, A Matter of time: the rise of zero-hours contracts (943 KB PDF), published by the Resolution Foundation, a think-tank that aims to improve living standards for those on low and middle incomes. According to the report, the number of people employed on zero-hours contracts rose from 134,000 in 2006 (0.5% of the workforce) to 208,000 (0.7%) in 2012. But these figures are thought by some analysts to be an underestimate, reflecting uncertainty among those on zero-hours contracts about their actual contractual situation.

Initially introduced in shops, restaurants and hotels, zero-hours contracts have more recently become prevalent in the public services, including the National Health Service (NHS). Trade unions are concerned that continued privatisation and outsourcing in the public sector will drive an increase in the use of such contracts.

Social partners’ contrasting approaches

The Trades Union Congress (TUC) has called on the government to impose stringent restrictions on zero-hours contracts.

Welcoming the Business Secretary’s announcement, TUC General Secretary Frances O’Grady said: ‘With the tough times set to continue, now is the perfect time for the government to be reviewing – and hopefully regulating – the increasing use of these exploitative contracts.’

The TUC, among other organisations, has warned that young and vulnerable workers are particularly put at risk by zero-hours contracts.

However, Neil Carberry, Director for Employment and Skills at the Confederation of British Industry (CBI), told BBC News that ‘zero-hours contracts and other forms of flexible working mean there are half a million fewer unemployed people than there might otherwise have been’.

Key findings

The Resolution Foundation report warns that the growing use of zero-hours contracts across the economy is undermining basic employment rights and hitting younger workers especially hard. Key findings of the report include:

  • those employed on zero-hours contracts work fewer hours on average than those who are not;
  • those employed on zero-hours contracts receive lower gross weekly pay than those who are not;
  • workplaces that use zero-hours contracts have a higher proportion of staff on the national minimum wage than those who do not;
  • 18% of those on zero-hours contracts are actively seeking alternative employment or additional hours compared to 7% of those who are not;
  • the prevalence of zero-hours contracts is higher among young people than other age groups, with 37% of those employed on such contracts aged between 16 and 24;
  • 8% of workplaces across a wide range of sectors now use zero-hours contracts;
  • 20% of those employed on zero-hours contracts are to be found in health and social work, 19% in hospitality, 12% in administration, 11% in retail and 8% in arts, entertainment and leisure.

The report argues that, while a minority of workers with zero-hours contracts value the flexibility and choice they provide, for many others they mean a working life permanently on-call, with serious implications for the management of household budgets, family and caring commitments, employment rights and relations, and access to tax credits and other benefits.

Legislation proposed

Labour Shadow Health Secretary Andy Burnham said in April 2013 that his party should make a commitment to ban zero-hours contracts.

A private members’ bill to prohibit the use of zero-hours contracts received a formal first reading in the House of Commons on 24 June. The Zero Hours Contracts Bill, put forward by Labour MP Andy Sawford, is scheduled for a second reading in January 2014, but is highly unlikely to reach the statute book without government support.

Mark Hall, IRRU, Warwick Business School

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