Zero-hours contracts – the good, the bad and the ugly

Zero-hours contracts are in the news again. From the estimates last summer that 200,000 employees were on zero-hours contracts, it now appears that there are an estimated 1.4 million jobs offered on such terms, according to the latest figures from the Office for National Statistics (ONS).

More than one in 10 employers use such contracts. Recent figures from the ONS indicate that the number of workers now on zero-hours contracts is just under 600,000, which represents 2 per cent of the total workforce.

Emotive headlines paint a contradictory picture. Zero-hours contracts ‘keep people in jobs’ said the Telegraph last summer, reporting on the position from the Confederation of British Industry (CBI) that zero-hours contracts kept unemployment below 3m. According to the CBI such contracts helped the economy by keeping thousands in work and off the dole.

ITV reported today (May 12) that zero-hours workers are ‘too afraid to look for work’, while an editorial in today’s Financial Times called for an end to zero-hours abuses.

The FT is right to raise concerns. While zero-hours contracts offer flexibility to both workers and employers, they are open to abuse and there are plenty of examples.

The Good: advantages of zero hour contracts

On the plus side, such contracts allow employers to pay for workers when they are needed. This suits the retail, hospitality, leisure and tourism sectors in particular. While in the public sector, they are becoming increasingly common in education and healthcare. This has undoubtedly kept wage bills and unemployment figures down during the recession, which has been positive for the UK economy.

Such contracts suit many workers, for instance students, women and those already in part time work looking for extra hours. For many they provide an opportunity to earn without having to commit to long hours or a full-time contract. Two-thirds of those on zero-hours contracts have no desire for additional work.

They can also provide work experience for the young and act as a stepping-stone back to work for the long-term unemployed.

There are even some examples of companies offering zero-hours contracts complete with pensions and paid holidays, however that is far from the norm.

The Bad: disadvantages of zero hour contracts

For those whose only source of revenue is a zero-hours contract, the disadvantages can be huge; no job security, irregular income, lack of full employment rights, antisocial hours, difficulties with childcare or similar arrangements.

A study by the conciliation service ACAS reveals a rise in insecurity and mistrust among workers tied to such contracts, with many too afraid to look for new work elsewhere for fear of losing the job they have.

The Ugly: opportunity or exploitation?

Many employers are writing exclusivity clauses into zero-hours contracts, effectively restricting the earning potential of the workforce which cannot be helpful for the economy overall.

Others are keeping a significant percentage of their workforce underemployed (less than 30 hours), preferring to pay more people less rather than offering full employment terms.

The ACAS study also revealed a lack of transparency in contractual arrangements with many workers unaware that they were on a zero-hours contract, believing they had a permanent contract due to their length of service.

While zero-hours contracts clearly offer flexibility which can be beneficial to employer and employee alike, the line between opportunity and exploitation is easily crossed. Exclusivity clauses in zero-hours contracts are exploitative, preventing individuals from accessing the job market fully. Good companies recognise the benefits of treating their workforce well, using their code of conduct to reinforce company values as well as setting our a clear framework of expectations. While this may ensure a fair and more transparent approach to the use of zero-hours contracts in those organisations motivated to prioritise the fair treatment of all stakeholders, a bolder, more proactive stance from government to rule out exploitative terms and conditions for UK workers would be welcomed.