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Zero-hours contracts: Key issues for the 2015 Parliament

After much debate in the last Parliament, opinions on zero-hours contracts (ZHCs) remain polarized. Employee organisations argue that they can leave workers and their families in a state of financial insecurity and uncertainty.

Many employers, meanwhile, stress that without the flexibility afforded by arrangements like ZHCs, employment would have fallen faster during the recession and recovered more slowly since.

The statistics on ZHCs are not reliable enough to prove that they have become more prevalent in recent years. Currently, fewer than one in forty workers is thought to be employed under a ZHC.

However, for many, their existence and possible growth, at a time when job opportunities are scarce, and penalties for not taking up work are more severe, exemplifies a general trend towards more precarious and exploitative forms of employment.

The debate over zero-hours contracts highlights the competing demands that any Government faces in deciding how the labour market should be regulated: on the one hand, the need to protect workers from exploitation; and on the other, the requirement among businesses for a degree of flexibility to respond to fluctuating demand and changing economic conditions.

In the case of ZHCs, the quandary may be worsened by difficulties in enforcing restrictions on their form and use.

How prevalent are zero-hours contracts?

Based on survey data, the ONS estimates that there were between 1.4 and 2.2 million zero-hours contracts (more precisely, employee contracts not providing a guaranteed number of hours) as of August 2014, and that they were used by around 11% of businesses in Great Britain.

This estimate covers only those contracts which actually provided work within the survey reference period; it omits any zero-hours contracts which did not provide employees with work. Using a different survey, the ONS estimates around one in forty workers were on such contracts during the last quarter of 2014.

The prevalence of zero-hours contracts varies by industry. They are particularly prevalent in sectors subject to seasonal fluctuations in demand: for instance, more than half of businesses in the accommodation and food (i.e. hospitality) sector use zero-hours contracts.

Chart: Proportion of zero-hours contracts by industry

The administration & support and hospitality sectors together account for more than half of all zero-hours contracts.

Proportion of zero-hours contracts by industry, Q4-2014

Chart showing proportion of zero-hours contracts by industry

Towards a consensus?

Although some organisations continue to call for an outright ban on ZHCs, a broader consensus has emerged that they are best regulated by preventing unfair and exploitative practices associated with their use. Views differ about exactly which practices fall within this category, but among those commonly cited are:

  • ZHCs being used to avoid obligations such as sick and maternity pay
  • Penalising workers on a ZHC for not being available when requested
  • Cancelling pre-arranged work at short notice
  • On-call requirements
  • Exclusivity clauses, which prohibit individuals under a ZHC from taking any work from another employer

Following a consultation, the previous Government concluded that exclusivity clauses represented a particularly concerning feature of some zero-hours work, and enacted legislation to ban them in one of the final Acts of the previous Parliament (the Small Business, Enterprise and Employment Act 2015).

In addition, the previous Government committed to work with business representatives and unions to develop a zero-hours contracts code of practice.

The passage of the legislation banning exclusivity clauses highlighted some of the difficulties of enforcing restrictions on particular practices associated with ZHCs.

First, it may be easy for an employer to circumvent any restriction that relies on a legal definition of zero-hours contracts by providing a very limited amount (e.g. one hour) of ‘certain' work. The legislation banning exclusivity clauses attempted to close this loophole by allowing the Secretary of State to use secondary legislation to broaden the definition of ZHCs.

Secondly, even if a particular practice is banned by law, employers may be able to achieve a similar practical effect by subjecting workers to detriment (e.g. employers could provide fewer hours to individuals not working exclusively for them).

As well as implementing the exclusivity ban, the next Government will have to determine which other practices associated with the use of ZHCs require a response, and whether to tackle them through legislation or codes of practice.

The statutory definition of zero hours contracts

The Small Business, Enterprise and Employment Act 2015 defines zero hours contracts as “a contract of employment or other worker's contract under which:

  1. the undertaking to do or perform work or services is an undertaking to do so conditionally on the employer making work or services available to the worker, and
  2. there is no certainty that any such work or services will be made available to the worker”

25 hours per week. Average number of hours worked by individuals on a zero-hours contract

125,000. The number of workers thought to be operating under zero-hours contracts with exclusivity clauses, which the previous Government passed legislation at the end of the last Parliament to ban.

Party Lines

  • Conservatives: eradicate exclusivity in ZHC's
  • Greens: ban ZHC's
  • Labour: ban ZHC's, those who work regular hours for more than 12 weeks will have a right for a regular contract
  • Liberal democrats: create a formal right to request a fixed contract and consult on the right to make regular patterns of work contractual after a period of time
  • SNP: will support efforts to end ZHCs
  • UKIP: no exclusivity, right to a secure contract after a year if worker requests one

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