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Ian Brinkley
Economic Advisor
Ian Brinkley

The Labour Party and zero hours contracts

Authors: Ian Brinkley

25 April 2014

Press reports say that the Labour Party is proposing to limit the use of zero hours contracts by giving zero hours workers the right to ask for a regular contract with fixed hours after six months with the same employer and an automatic offer of a zero hours contracts after 12 months. However, individuals can opt out of the automatic offer and continue to work zero hours if they wish to.

Zero hours are totemic of all that this wrong with today’s labour market and are linked with much wider issues such as under-employment and job insecurity. So it is not surprising that early signs that Labour was considering measures along these lines have now been firmed up. The Coalition has also been actively looking at the issue. BIS recently issued a consultation asking whether employers should be banned from requiring zero hours workers just to work for them, even if they had no work available.

We should not pay too much attention to the knee-jerk response from some, that these proposals will cause aggregate unemployment to rise. They will not. At worst, we are looking at marginal reductions in flexibility that may cause some problems for some employers and some groups in the labour market, but is very unlikely to have any measureable impact on either employment levels or unemployment rates.

Labour has introduced an opt out for the individual; a useful and welcome flexibility that acknowledges that many people are in these forms of contracts because of choice. We can assume that most of these people will exercise the opt out. However, individual opt outs also have a downside. Zero hours workers in weak bargaining positions may be reluctant to exercise the right to regular work if they think their job is at risk or that they will be unfairly treated as a result.

There are other ways of evading the measure. Zero hours are just one form of casual employment, so expect some employment lawyers to be working on variants of existing zero hours contracts in an attempt to get round the provision. A less subtle response would be a shift to short duration contracts of less than 12 months, although that implies tolerating a much higher rate of turnover. Both however are risky for employers, as employment tribunals have up till now been more influenced by employment practice rather than the letter of employment contracts in deciding cases.

We have not yet seen the detail on how a regular contract is to be defined. Some employers might simply convert to “mini-jobs” with a few hours of guaranteed work and the rest declared as variable. Others might well stop offering zero hours altogether and simply go for this form of contract from the start. This is better than no guarantee, but in practice the gain may be limited.

Some sectors may find the proposed change harder to deal with than others. Social care providers have argued that while they are receptive to moving away from zero hours, this will have cost implications for local authorities.

Overall, Labour‘s proposal is unlikely to do much, if any, harm to aggregate employment. The provision that allows zero hours contracts to continue for those who want them is a very welcome flexibility that supports individual choice. They will discourage the current use and future growth of these particular forms of employment, especially where people are doing them because they have no choice. But I strongly suspect they will have much less impact on casualization, insecurity and poor employment practices at the bottom end of the labour market than supporters of the measure might hope. 

Comments in Chronological Order (Total 1 Comments)

Tracey Cowan

26 Apr 2014 4:38PM

Ive worked in the care sector now for almost 3 years and have experienced the rotten practices & exploitations that go hand in hand with zero hours contracts. They should be limited to 3 months and no more. I have never heard a fellow carer say that they are happy with their contract and are more inclined to leave!!.