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One million people on zero-hour contracts

New research from the Chartered Institute of Personnel and Development (“CIPD”) suggests that a fifth of employers use zero-hour contracts. They are used for casual working arrangements under which the employer does not guarantee to provide the worker with any work and pays only for work actually carried out. With other costs for business being fixed (such as rent and business rates) they give the employer flexibility over its labour costs. They have traditionally been used for lower paid casual jobs such as bar work, retail, hospitality and restaurants to cope with fluctuations in demand for labour. They are, however, being used increasingly by contractors who perform outsourced services for public-sector bodies, such as NHS trusts and educational establishments. Highly qualified workers, such as academic lecturers and hospital technicians are also being required to work on a zero-hour basis. 

The retail chain Sports Direct, online group Amazon, Buckingham Palace and Tate Catering, a wholly owned subsidiary of the Tate art galleries, have been reported as using zero-hour contracts that critics argue allow employers to drive down wages. Business Secretary Vince Cable has announced that the Government is currently undertaking a review, to report in September 2013, on zero-hour contracts. This review will establish what action, if any, is needed. Employers need to keep abreast of developments in the Autumn.

Latest figures from the Office for National Statistics suggest that approximately 250,000 people (less than 1% of those in employment) consider themselves to be on a zero-hour contract.  However, the new CIPD research “2013 Labour Market Outlook”, based on a nationally representative survey of over 1,000 employers, suggests that this may be an underestimate and there could be about one million zero-hour workers in the UK.

The CIPD research shows that among the fifth of employers who make use of zero-hour contracts, the majority employ less than 10% of their workforce on these contracts. Employers in the voluntary sector and the public sector are more likely to use zero-hour contracts than private sector employers. The industries where they are most common are hotels, catering and leisure, education and healthcare.

The research looks at the hours typically worked by those on zero-hour contracts. On average 19.5 hours are worked per week, with only 38% of zero-hour contractors working the equivalent of full time hours. Of the 62% who are working part time, about a third would like to work more hours. Across all zero-hour contract workers (both part-time and full-time) 14% report that their employer often or very often fails to provide them with sufficient hours to have a basic standard of living. However 18% say this does not happen very often and 52% say this does not happen at all often. By age group, those who are primarily employed on zero-hour contracts are twice as likely to be young (18 to 24) or old (55 plus) than other age groups.

Some may argue that without this flexibility this work would not be on offer and hard-pressed organisations would struggle. Furthermore, zero-hour contracts may provide opportunities for workers who wish to work flexibly rather than having fixed hours per week to fit around other commitments. However, for some this may be a significant disadvantage where they need more certainty in their working hours and earnings.

Notionally, workers have also the flexibility to reject an offer of work.  In reality, those who are not available to work when required are likely to find themselves jettisoned for someone who is willing to commit to being available without any guarantee that there will be work. With the current general labour surplus, it could be said that the advantages of these contracts lie almost exclusively with the “employer”, who benefits from the labour with few of the associated social costs.

Most zero-hour contracts also limit the scope of statutory protection for an individual as their contractual arrangements mean they are not “employees” for the purpose of acquiring any statutory protection.  However, the scope of various statutory employment rights has in recent years been more widely applied to “workers” which applies to a wider definition of the workforce than “employees”.  Workers will not acquire protection against unfair dismissal but they will be covered by legislation on anti-discrimination, whistleblowing and working time, for example.

An employment tribunal will always look carefully at the actual working arrangements and may find, even if there is a zero-hour contract that this does not reflect the reality of the arrangement and that there is in fact an employment relationship.  A number of factors are considered in assessing employment status, but whether an individual is genuinely free to turn down work without fear of sanction is often a key consideration.

Workers’ organisations are also alive to the prospect of challenging large-scale zero-hour contracting. Apart from potentially being bad for workforce relations, serious thought is being given to challenges on the basis of indirect sex discrimination as more women than men are employed on these contracts.

There is a place for zero-hour contracts in the labour market, but the legal position for businesses is not so clear cut as to allow them to deploy them at will to fit any circumstance. Businesses have every reason to give these contracts careful consideration, and the contracts can benefit workers too. The contracts can provide a framework in which workers can earn flexibly while businesses incur relatively low ancillary costs. However, as with any contractual decisions, it is important for any business to have a professional advisers on hand to advise on the best way to proceed.

Words by Tanya Gruneberg, Associate, Ashfords LLP

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