How many on zero hours contracts? Nobody knows
Authors: Ian Brinkley
Ian Brinkley, director of The Work Foundation
09 July 2013
We held a well-attended and lively event on zero hours contracts at The Work Foundation recently with an excellent panel spanning a wide range of views. Yet a remarkable consensus emerged that we badly needed to find out much more about the use of zero hours contracts in practice before policymakers and organisations could take an informed view of whether more regulation was required and what form it should take.
Like everyone else, we have drawn mainly on the Labour Force Survey (LFS) for our information on zero hours contracts and as the most recent figures show in our recent infographic , around 200,000 across the economy in the fourth quarter of 2012. Yet a recent answer to a Parliamentary Question (PQ) found that using a different and less well-known dataset covering social care there were over 300,000 of these contracts. The actual difference is even higher, because the domestic care estimate is for England only, and the LFS estimate is for the UK.
The same dataset was used for a very good analysis produced for the Low Pay Commission earlier this year. Although focused on the operation of the National Minimum Wage, it also covered the use of zero hours contracts in domestic care. It shows that one driver has been the shift in the way care is now delivered, with the move from contracted blocks of hours to individualised packages within framework agreements. Some private sector providers suggest that zero hour contracts are the only practicable way of delivering care.
As we post this blog, a 90-minute Westminster Hall debate is about to start on zero hours contracts and some MPs have put in freedom of information requests to try and get a better picture of the use of zero hours across the public sector, focusing on universities and the NHS. Once this information is collected and collated, we can add these figures to the domestic care estimates to get a better idea of the true level of zero hours contracts. But we still have no reliable way of telling whether the LFS estimates for private sector services such as hospitality and retail also seriously under-represent the use of zero hour contracts.
If this was not bad enough, there is also a significant problem of seasonality with the interpretation of the statistics produced by the LFS. The question on zero hours is asked in just two quarters, Q2 and Q4. The answers to some questions do not appear to vary very much from quarter to quarter, but others show pronounced differences. For example, in 2012 Q4 the share of people in the top three occupational groups (“knowledge workers”) on zero hours contracts was much higher than in 2012 Q2. So which quarter you pick could have quite an influence on what the data tells you about both the level and the composition of zero hours contracts. As things stand, we have no easy way of knowing which quarter is to be preferred in order to convey a more accurate underlying picture.
The BIS informal consultation announced by the Secretary of State on the use of zero hours contracts was very welcome. But it is increasingly clear that there is much more work that needs to be done to get an accurate picture on the numbers, use and drivers of zero hours contracts on which to base sensible policies and it is not clear that the review in its current form will do the job.
We would favour a more formalised and systematic approach – perhaps along the lines of the Coalition’s Fair Pay Review or through a Select Committee Inquiry – which brings together the information and insights from a wide range of institutions and organisations. This could have three clear goals. Firstly, to get the best possible picture of the incidence and drivers of zero hours contracts from all currently available information sources. Secondly, to set out what good practice looks like. Thirdly, on the basis of the evidence, make recommendations on any legal or regulatory changes or changes in public procurement practice that may be required to discourage abuse and encourage best practice. The Work Foundation would of course be happy to offer support to either of these approaches.
In the meantime, you can tell us if you think zero hours contracts offer flexibility or insecurity by voting in our poll.
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