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Ian Brinkley
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Ian Brinkley

Zero hours contracts and the Labour Party - Part 2

Authors: Ian Brinkley

07 April 2015

The announcement last Wednesday by the Labour Party that it will restrict the use of zero hour contracts can be portrayed as an anti business attack on the UK’s flexible labour market and thereby endangering jobs or as an overdue intervention to protect those without bargaining power from exploitative employers that while help improve job security and productivity. As I suggested in my blog of April 2014 when the idea was first floated, the hype on both sides is overdone.

Our best guess from ad hoc surveys that between 30 to 40 per cent of people are on zero hours contracts are on them because they have no choice and that about the same proportion are on them because they find they suit their personal circumstances. The remainder appear indifferent or do not offer a view one way or the other.

Labour’s proposal that people should have the right to a regular contract after three months employment should have no direct impact on those who want to be on a zero hour contract. However, if employers think offering zero hours is a more risky option they may make fewer available in the future even to those who like the flexibility they offer.

Some of those who are only on a zero hours contract because they have no choice would seek to move to regular employment contracts, but some would be deterred if they think that as a result their job might be at risk or that they would be victimised by their employer. So it would reduce rather than eliminate involuntary zero hours working. We do not know which way those who express no view one way or the other would jump if offered a choice about staying on zero hours or moving to a regular contract – presumably some would move to regular contracts but others would stay.

Labour’s proposal may have a one off shock, as the right to a regular contract would presumably apply to all current contracts of more than three months duration. Any adverse impacts on the overall flexibility of the labour market are however likely to be small, especially over the medium term. Zero hours contracts are still a relatively small share of total employment and employers have many options around flexible working arrangements, especially for large employers who are the big users of zero hour’s contracts.
This may not always be a good thing, as one option is for some employers to offer work as a contract for the self-employed who to all intents and purposes are still tied to the employer but with none of the protections of being an employee. It would be a poor bargain if we saw a fall in involuntary zero hour working accompanied by a rise in low income, part time bogus self-employment.

There may be bigger impacts at sectoral level, especially in hospitality and the care sector where zero hours are much more common than across the workforce as a whole. Some employers in the care sector have suggested that the use of zero hours contracts is linked to the way local authorities structure their care contracts, and that phasing out of zero hour contracts implies higher costs that might not be met by higher contract prices. Labour‘s proposal will test whether these concerns are justified or not.

Restricting the use of zero hours is a not a panacea to insufficient hours and poor treatment at work. A frequent complaint of some zero hours workers is that they do not have enough hours, although many regular employees also have the same issue. Regularising hours of work does not directly address this problem. It also does not necessarily solve the problem of poor treatment at work. Moving people onto regular contracts may strengthen their bargaining position a little, but in non-unionised workplaces bad employers are just as capable of treating workers on regular contracts poorly as they are those on zero hours.

There might be a small positive impact on pay rates. Employers who pay zero hours workers less than their regular employees doing similar work would find it harder to continue the abuse if all their employees where on regular contracts. There is some evidence that this practice is relatively uncommon but there is uncertainty about the true extent.

In many ways the debate on zero hours reflects the narrowness of the main political parties approach to work and the workplace. I live in hope rather than expectation that their manifestos will set out a vision of what good work and the good workplace should look like over the next decade; how they would improve the quality of employment for the whole workforce regardless of contract status; and how they intend to empower and support employers, trade unions, and others to work together through collective bargaining machinery and labour market institutions to find solutions to improve workplace productivity and job quality for all.