Zero hours contracts in the spotlight

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The issue of zero hours contracts has become one of the hottest political topics in the UK. Zero hours contracts allow companies to keep staff on standby while offering no guaranteed work. During August 2013, pressure grew on the UK government to make changes to legislation. Research into the extent of these types of contract was published, the opposition Labour Party called for tougher rules to cover their use, and there was a high profile industrial dispute over zero hours workers.

Background

The absence of any general legal regulation of working time in the UK, together with employers’ freedom in contract formation, provides the context for a variety of forms of flexible working hours. A long-running political debate in the UK has focused on the use of so-called zero hours contracts. This type of contract allows an employer to keep staff on standby and offer no guaranteed work or predictable levels of pay (UK1306049I). Discussions have been ongoing about the extent and effects of zero hours contracts. During August 2013, a series of high profile developments meant that the issue continued to generate media headlines.

Labour Party ‘summit’

On 20 August 2013, the Shadow Business Secretary for the opposition Labour Party, Chuka Umunna, held a ‘summit’ meeting of employer and union representatives and legal experts to discuss the regulation of zero hours contracts. Mr Umunna said: ‘The huge spike in the use of zero hours contracts has brought increased reports of abuses and bad practice. There should be zero tolerance of this.’

He said a future Labour government would not ban such contracts completely. Instead, the party is reportedly exploring ways of reducing their use. Ideas put forward include a statutory code of practice for zero hours contracts, and obliging employers to provide guaranteed working hours after a certain period.

Zero hours contracts increase

New research released in August 2013 suggests the use of zero hours contracts has increased significantly.

The Chartered Institute of Personnel and Development (CIPD), which represents human resources managers, carried out a survey that suggested a million people were employed on zero hours contracts – four times the official figure of 250,000 given by the Office for National Statistics (ONS).

The CIPD’s ‘best estimate’, using data from its Summer 2013 Labour Market Outlook (2.58 MB PDF) survey of employers, is that 3%–4% of all the workers covered in the survey were on zero hours contracts. The CIPD says this would equate to about a million workers across the UK labour force.

The ONS has acknowledged that official figures for zero hours contracts are likely to be underestimates and has said that new survey questions will be introduced from autumn 2013 to generate more robust data.

Data from the CIPD’s quarterly Employee Outlook survey series shows that 14% of workers on zero hours contracts reported that their employer ‘often’ or ‘very often’ failed to provide them with sufficient hours.

In the latest JobsOutlook survey from the Recruitment and Employment Confederation (REC), 27% of employers questioned said they employed at least some workers on zero hours contracts. Of the remainder, 7% said they were ‘unsure’ whether they did or not.

The Work Foundation, which is part of Lancaster University, has also published a report, Flexibility or insecurity? Exploring the rise in zero hours contracts (676 KB PDF), reviewing the available evidence about the incidence and impact of zero hours contracts.

The report’s author, Work Foundation Director Ian Brinkley, argues that calls to ban zero hours contracts because they encourage bad employment practice are misplaced. He also questions the view that they are a uniquely exploitative form of contract. His analysis indicates that those on zero hours contracts are more likely to be part of the permanent workforce than in temporary employment, and that a significant proportion (43%) are in the top three occupational groups (managers, professionals and associate/technical staff). The report concludes that a more in-depth review is needed to find out how widespread zero hours contracts really are, and how and why they are being used.

Bakery strike over zero hours contracts

On 28 August 2013, workers at a Hovis bread factory in Wigan began a week-long strike over the introduction of agency staff reportedly on zero hours contracts. The move by Premier Foods, the owners of the Hovis brand, follows around 30 redundancies among the bakery’s permanent staff and a reduction in working hours.

According to the Bakers, Food and Allied Workers Union (BFAWU), the company sought to ‘make up the ensuing staff shortfall with agency labour, with many being utilised on an “as and when” basis, in other words [on] zero hours contracts’. The union is seeking ‘the withdrawal of agency labour from the site’. A further one-week walk-out began on 11 September, and other strikes were also planned.

The company said:

We are disappointed that we have not been able to resolve the dispute and will continue to search for a satisfactory outcome, accepting that the limited use of agency labour to cover seasonal peaks, holiday and sickness absence is an integral part of our operational flexibility that is understood and accepted by all our other sites.

Legal challenge

It has also emerged that a former sales assistant at Sports Direct has brought an employment tribunal claim against the retailer. Sports Direct is one of a number of prominent companies identified as using zero hours contracts for the majority of their staff.

The former sales assistant is arguing that workers on zero hours contracts are discriminated against in contravention of the Part Time Workers (Prevention of Less Favourable Treatment) Regulations 2000 and Directive 97/81/EC (97.9KB PDF). Her case is being backed by the campaign group 38 Degrees. If she were to win, it could have significant implications for all organisations using zero hours contracts.

Commentary

There is continuing disagreement between employers’ organisations and unions – and between the main political parties – about the desirability of zero hours contracts. However, recent developments could increase pressure on the government to act.

The opposition Labour Party has said that it will set out specific proposals to tackle the abuse of zero hours contracts in September 2013. Government ministers also say they are concerned about the possible abuse of zero hours contracts by some employers and will decide shortly whether to hold formal consultations on measures to regulate their use.

Mark Hall, IRRU, Warwick Business School

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