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Ian Brinkley
Economic Advisor
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Ian Brinkley

The rise of zero hours contracts?

Authors: Ian Brinkley Senior Economic Advisor

10 March 2016

The new figures on zero hours contracts show yet another increase, up from just under 700,000 in 2014Q4 to just over 800,000 in 2015Q4 or from 2.3 per cent to 2.5 per cent of total employment.
One of the big problems in interpreting the rise in zero hours contracts has been how much is due to increased awareness among people in work leading to higher reporting and how much is due to a genuine increase in the use of such contracts.
Between 2000 and 2012 the number on zero hours showed no clear upward trend, varying between 0.4 and 0.8 per cent of total employment. But in 2013 the numbers more than doubled and have continued to rise ever since. As there was no obvious trigger and it is very unlikely organisations spontaneously switched to zero hours overnight on a big scale, it is more plausible to say that the estimates prior to 2013 seriously understated the level of zero hours working.
Increased awareness must have played a big part in the rise in reported zero hours work from 2013 onwards, but we would expect this effect to be much weaker by the end of  2015. Given the blizzard of publicity in recent years, few people in work today will not have heard about zero hours. My guess is that most of the rise between 2014Q4 and 2015Q4 is due to more people on contracts rather than increased recognition.  So what might be driving the increase?
The detailed tables provided by the ONS show that much of the increase is for the young and mostly for students. The number of people in full time education  on zero hours increased by over 50 per cent between 2014Q4 and 2015Q4. These groups now make up about 23 per cent of all those on zero hours contracts compared with 17 per cent a year ago. It is not obvious why there should be a big jump in students on zero hours, and this may be a one-off which is not sustained.
Without wishing to diminish the need for students to have good contracts of employment, an increased share of zero hour working among students is of less concern than an increase among the rest of the workforce. For students it is a strictly temporary arrangement where many may welcome the flexibility for combining work and study commitments. For those for whom it is the only way of earning a living the consequences can be much more serious.
What the ONS figures do not tell us is whether people are in zero hours out of choice or necessity. We now have three, albeit small-scale, survey results from the CIPD and UKCES which all give similar results and show that most people are satisfied with their contract .
This leaves policy makers with a dilemma. It is clear that many people do not want to be on zero hours and zero hours employment contract are often weighted heavily in favour of the employer. Nontheless, it is hard to argue for the legal abolition of zero hours contracts when most people on zero hours appear to be content with or indifferent to these arrangements.  It is also unlikely that abolition would be very effective in combatting cases of abuse. Exploitative employers can treat their workers just as badly through more conventional employment contracts or declare them as “bogus” self-employed where they have very few employment protections.  
That said, this is a form of employment contract best used sparingly and only when business necessity makes alternatives impractical. UK employers have many ways of achieving flexibility which can avoid some of the downsides of zero hours contracts, such as unpredictable variations in weekly earnings. For larger companies better forecasting of future demand can help reduce the need for such contracts. Where zero hours contracts are used, guidelines issued by Acas, CIPD and others on good practice should be followed. Public sector organisations can ensure good practice among their own workforce and can also influence private sector organisations who deliver public services, especially in social care. Campaigns by trade unions and others have an important role in highlighting bad practice linked to the abuse of zero hours.