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Professor Robert Fildes
Joint Director of Centre for Forecasting
Professor Robert Fildes

The alternative to zero hours contracts is better demand forecasting

Authors: Professor Robert Fildes Professor Robert Fildes, joint director of Centre for Forecasting

13 August 2013

Some employers say they need zero hours contracts to meet the organisation’s varying demand. Companies using such contracts include McDonald’s, Wetherspoon, Subway and Sports Direct, not to mention Buckingham Palace. However, much of demand is predictable – this includes hourly, daily and weekly seasonal patterns, holidays and some special events. Of course some workers will prefer such contracts – most won’t, especially when they preclude benefits such as sick pay. What the companies should be doing is using sensible forecasting methods to estimate base demand and deliver contracts that motivate its workforce but at the same time protect costs. Forecasting linked to careful planning can cope with the problem of demand uncertainty.

Looking at past demand data, it is possible to produce reliable forecasts with measurable uncertainty. Statistical baseline forecasts can capture any structure in the data, while expert judgemental adjustments can be used for extraordinary circumstances. Subsequently, using such forecasts, it is possible to plan resources for any given level of uncertainty. Forecasting research has established best practices as to how to produce such forecasts and how to cope with uncertainty. Companies who make extensive use of zero hours contracts should take a serious look at the forecasting alternative. Lancaster University’s Centre for Forecasting is happy to help.