Zero hours contracts have been in the news lately. The term ‘zero hours contact’ doesn’t sound good, does it? But what’s it all about?
What is a ‘zero hours contract’
In a note for Members of Parliament (dated 4 July 2013), Doug Pyper and Daniel Harari define the term as: ‘a type of contract used by employers whereby workers agree to be available for work although have no guaranteed hours’
Essentially it means that the employer agrees to pay the employee when work is available and the employee agrees to work when work is available.
Why would anyone want to employ people on this basis?
Matthew Pennycook, Giselle Cory and Vidhya Alakeson produced a report for the Resolution Foundation in which they set out some of the key reasons why employers might choose this type of contract:
- To adjust more easily to variations in demand
- To manage risk better
- To reduce initial costs of hiring
- To avoid particular employment obligations
From an employer point of view, all these are understandable. But employment rights (or employer obligations) have been hard won in the past and we allow them to be eroded at our peril.
Of course there are areas of work where there is a significant fluctuation in demand; but there is also a base level of demand that is predictable.
There have been a number of examples of high profile employers mentioned as using such contracts. Often this is because work is seasonal or dependent on the weather; but with other employers it is simply a matter of wanting maximum flexibility at someone else’s cost.
What about risk? This is really about bidding for contracts and not getting them. So staff are on stand-by for when the contract comes off and don’t get to work (or get paid) if a contract does not come off or is delayed. So it’s the staff rather than the employer who takes all the risk. But wasn’t there something about ‘capital’ carrying the risk in capitalism?
Having a pool of people who have already worked for a particular employer who can be called upon to work as and when required gives the employer the benefit of their experience; but what benefit do they get from the periods when they don’t work?
The avoidance of employment obligations
Of course, this is where the rub really is. Employment obligations such as holiday pay, sick pay, redundancy pay, health and safety, and so on are all hard won rights which can be undermined by zero hours contracts. Interestingly, however, this is not part of the legal contract. Looking at a model zero hours contract (and some introductory information) provided by the Children, Young People and Families’ Consortium and downloadable here it is, however not quite as simple as that.
In fact, much of the employment law applies to staff on zero hours contracts just as much is does to other staff. But the difficulty is enforcing it.
The power relationship between employer and employee when the employee only works and gets paid if the employer offers work on a day to day basis means that the employee has to cope with fluctuating income, uncertainty of income, and often no choice other than to accept what is dished out.
What is more, and even though zero hours contract staff are entitled to Statutory Sick Pay, Maternity Pay and Paternity Pay, because all of these are subject to a minimum income threshold it is very easy to ensure that employees don’t get enough work for a period of time in order to keep them under that threshold. This is particularly the case with statutory maternity pay, as the fact that someone is pregnant is known well in advance of the eligibility period.
How big a problem is it?
Well, that’s what seems to be the $ 64 million question. Both the reports referred to above took their numbers from the Office for National Statistics’ Labour Force Survey and both therefore were quoting numbers in the order of 200 000. But on Monday 5 August 2013, the press reported that there was some evidence that these numbers were a significant underreporting of the true situation.
Research by the Chartered Institute of Personnel and Development based on a poll of over 1000 employers suggests that the number is likely to be nearer one million. That is quite a significant number and quite a significant proportion of the work force.
But even on the basis of the figures from the Office for National Statistics Labour Force Survey there is a marked upward trend in the numbers on such contracts, with a significant seasonal variation. And there is evidence that there has been a marked increase since 2010.
What does it mean for the daily lives of those who are forced into such contracts?
You may argue that some people welcome the flexibility that a zero hours contract offers. But many of these contracts actually say that the employee can only refuse work because they are sick or on agreed leave. In other words, they are tied into the contract and can’t work for anyone else.
So who are the people who have such contracts?
The research is a bit thin on the ground for various reasons, but the study by the Resolution Foundation mentioned already, has some indications:
- First of all, there is evidence that people under 25 are far more affected by these contracts than older people. In that age group (16 to 24 years) far more people are on zero hours contracts than not; the only other age group where this is the case (and to a far lesser extent) are the over 70s.
- The industries which use these contracts most in order of prevalence are:
- Health and Social Work – more people on zero hours contracts than not
- Hospitality- more people on zero hours contracts than not
- Arts and Leisure
- Transport and Storage
- Public Administration
In terms of the occupations that are most affected, the graph below shows indications that some are more affected than others:
The question of whether these contracts are more prevalent in the private, voluntary or public sector is less clear-cut. The Resolution Foundation report would suggest that they are more prevalent in the private sector, whilst the Chartered Institute of Personnel and Development report suggests the opposite; in fact their press release says that
‘Employers in the voluntary sector (34%) and the public sector (24%) were more likely to use zero hourss contracts than private sector employers (17%)’
Whilst they do not say this in the press release, the fact that the health and social work sector has such a high level of use of these contracts and the fact that these contracts are so prevalent in the voluntary sector might lead to the conclusion that this is because the voluntary sector provide a lot of contract work in health and social care. Indeed, case studies reveal again and again that people on zero hours contracts are employed as domiciliary care workers.
Local authorities – who purchase such care on behalf of residents in their boroughs – are hard pressed to make ends meet; are we to assume that they frame their contracts with voluntary sector service providers in such a way that they do not have sufficient certainty to employ people on proper contracts with at least some guaranteed hours each week?
What is the effect on people’s lives?
So what happens if you are on a zero hours contract?
First, you have no guaranteed income; that means, if you want credit you will find it hard to get it; if you want to rent a home or get a mortgage you will find it hard to find someone to lend to you.
Second, you will have a hard time planning your life; if you don’t know when you will be at work, how do you arrange child care? If you don’t know what you will earn, how do you budget? If you don’t have regular hours, how do you have a social life?
Third, if you have irregular income, it is very difficult to manage benefits (such as housing benefit for example) because the amount of entitlement is based on the household income and if that fluctuates then housing benefit will also fluctuate and this will lead to constant changes and over- and underpayments which the claimant has to manage on what is, in any event, a difficult budget.
Fourth, because you never know what work you will get, you tend not to turn work down when you are offered it. As a result some people on these contracts sometimes work incredibly long hours. 50-hour weeks or more can happen, interspersed with weeks of no work or little work and no income or little income. It’s also a means of getting round the working time directive because the average of some short weeks and some long weeks may comply with this. And employees can be asked to opt out of the working time directive – and if you’re on a zero hours contract do you have a choice?
On the basis that many of the people on zero hours contracts work in domiciliary care or in the health sector, does anyone think that people who have done a 50-hour week are in good shape to look after vulnerable people?
Who are the employers?
Again, there is no definitive list; but a number of high street names have been in the press. The big supermarkets, big high street chains, McDonalds, J.D. Wetherspoon Pubs, Boots and more have been named. The National Trust uses them; Buckingham Palace does, as does the Tate. But they are by no means the only companies to do so. If it’s something you feel strongly about, ask the companies with whom you do business – and make sure they know how you feel about it.
What should happen?
Some commentators suggest that these contracts can have benefits for the employees – and in some very limited cases that may be so. But they should not be allowed to spiral.
When there is evidence that there are companies who have most of their staff on such contracts that suggests that this is more about controlling employees and denying them employee benefits rather than a need for flexibility.
So there should be legislation that ensures that such contracts should be the exception rather than the norm and that in every case the employer has to demonstrate why such a contract is necessary.
One of the worst aspects of these contracts is that often they include clauses preventing employees from working for other employers (on similar contracts) at the same time. In other words, the employee can’t have a range of employers in order to ensure a sufficient number of hours and their own flexibility. This should be outlawed completely. If an employer is not prepared to offer a contract with sufficient pay and hours to allow the employee to earn a decent living, then they should not be able to enforce exclusivity clauses.
The Business Secretary, Vince Cable, is currently reviewing the use of zero hours contracts. It important that he hears from citizens/voters how they view this from of modern day slavery.
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