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Ian Brinkley
Economic Advisor
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Ian Brinkley

Zero hours contracts and the flexible labour market

Authors: Ian Brinkley Ian Brinkley

17 August 2012

Recent media interest in zero hours contracts has shed some light into a largely forgotten corner of the UK’s flexible labour market. The zero hour contract, in effect, requires the individual to be available for work, but his or her employer are under no obligation to provide work.  Some employers see zero hours contracts as a way of ensuring flexibility and remaining competitive in situations where work fluctuates unexpectedly from day to day or week to week. However, some of those on zero hours contracts see them as exploitative, where they bear all the risk and where the balance of interest lies almost entirely with the employer.

Hard facts on zero hours contracts are limited. The most up to date figures come from the household Labour Force Survey (LFS), which shows that in the last quarter of 2011 there were around 160,000 people on zero hours contracts – or 0.6 % of the workforce.  So they are clearly not as widespread as often assumed.

However, it is possible that the incidence is being underreported, because while people may be aware they are employed on a casual basis, they may not be aware that the contract is called zero hours. The 2011 Labour Force Survey gives respondents a choice of flexible working arrangements to describe how they work, which includes zero hours contracts – but also includes on-call working.  The ONS thinks that most people know what the various categories mean and the survey guidance says that if someone is uncertain, they are coded either to the “on-call” category or as not working flexibly. In 2011 there were another 440,000 people doing on-call working – the most obvious examples being hospital doctors and live-in carers.

The LFS allows us to look at where zero hours contracts are concentrated and who is on them – but these figures come with a strong health warning. The LFS sample of workers with zero hours contracts is very small – and the smaller the sample the less reliability can be placed on the figures. 

Those on zero hour contracts are more likely to be women (56 %).  Zero hours as a share of the workforce are most common in the arts, entertainment, and recreation services (2.5 % of the workforce); in accommodation and food services (2.2 % of the workforce); and healthcare services (1.2 %).  Not surprisingly, they are most common in caring and leisure occupations (1.7 per cent) and also among the less skilled (1.4 %).

Although as the figures suggest zero hours contracts are more often associated with hotels and restaurants and the entertainment industries, zero hours contracts are also used in the NHS to manage short-term staffing shortages and provide short-term cover, by universities for teaching and support staff where demands are highly unpredictable, and in education to provide supply teachers.

Are zero hours contracts on the increase?  The perception is that they are. The additional pressures brought about by the recession and public spending cuts are both reasons why they might have increased. Unfortunately, here we have to be even more cautious with the statistics. The same figures for 2007, just before the recession, stand at 140,000 – but the difference between this and the figure for 2011 could be just as easily within the normal margins of statistical error as a genuine increase. Moreover, the 2007 survey did not include the “on-call” category and we have no idea whether its inclusion would have affected the numbers saying they worked zero hours contracts.  So while the incidence of zero hours contracts may have increased, we cannot safely conclude that it has.

Are zero hours contracts necessary or desirable? The UK labour market is already highly flexible and many other forms of working are available which give both employers and employee the benefits of flexible working.  The fact that these other forms of flexible working are much more popular and widely used tells its own story. So if zero hours contracts did not exist, it is not obvious the overall flexibility of the labour market would greatly suffer. On the other hand, if they became much more widespread it would damage productivity. Employers have no incentive to invest in casual labour. It would also greatly increase job insecurity and leave many low income working households hard pressed to handle unpredictable fluctuations in income without going into debt.  None of these developments would help put the UK economy back on a sustainable growth path.

That said, there will be jobs where demand is so unpredictable that employers would otherwise struggle to provide the service required at a competitive cost.  Zero hour contracts can suit some people, especially those with skills in demand or those looking for an occasional rather than regular income.  

On balance, there is a place for zero hours contracts – but it should be a very small one. My three recommendations are as follows. First, zero hours should only be used if no other flexible option is tenable and there is a genuine need to move to this form of working arrangement. Second, where they have to be used, learn from best practice elsewhere. Third, the enforcing authorities must be alert and respond quickly wherever evidence of sharp practice and employers using the contracts to evade legal responsibilities comes to light.

Comments in Chronological Order (Total 15 Comments)

Alan Perestrello

20 Aug 2012 12:31PM

Very interesting and I fully agree but in the current climate, can we really see either government or business agreeing to the third recommendation. Unlikely I think.

Nikola Hall

20 Aug 2012 12:43PM

I look forward to more statistics being available around zero hours working as this issue is unlikely to go away.

Nick Durrant

24 Aug 2012 8:02PM

Isn't a "zero-hours contract" the moral equivalent of a financial market "call-option", but operating in the context of the labour market?

And as this is commonly recognised as having value, isn't this value being appropriated from the labour market participant without proper compensation?

And so why isn't this a considered a form of larceny?

Brian

29 Aug 2012 11:45AM

Interesting that little is known about this area. I shall add a link to this page to the current discussion on the Graduate Fog website.

Jackie

03 Sep 2012 1:12PM

I applied for a job as a breakfast chef on 20hours per week as advertised. After 2 months I was asked to sign a zero hours contract after agreeing my work was good. When I queried the terms, my employer fired me saying he didnt want to be in the situation where I had any employment rights. Is this legal and does it not have to be made clear in the job advert.

andy

14 Sep 2012 5:37PM

i like my zero hour contract. however, i've been given the right to refuse work when i'm unavailable.
i think this should become a legal requirement in zero hour contract because your virtually self employed.

liz james

16 Sep 2012 4:26PM

my employer (a nursery) employs a number of staff on an as and when basis to reflect rise and fall in occupancy. However because these staff have been working pretty regularly (be it different days and hours each week )the employers have been told by the union that they have to give us set contracts. The employers say they cannot afford to do this and the nursery is at risk of going under. We would rather have a job on a casual basis than no job at all. Surely this cant be right?

Peter Hall

19 Oct 2012 9:13PM

I'm on a zero hours contract, luckily I have a pension from 30 years in my previous employment. Effectively these "contracts" are no better than, and have no more value than being picked from a casual group of desperate workers, waiting on a street corner each morning, They are designed to get round hard earned workers protections, if they were fair to employees they would not exist. More and more major employers are abusing, sorry using these contracts, and it seems only the courts are trying to stop them, by making fair judgements on employee status, but employers just go back to the HR drawing board, and create new wording to avoid their legal obligations. Ban them

Georgia

31 Oct 2012 9:00PM

I am on a zero hour contract and I recently upped my availability up to full time, however this was a month ago. Things have not changed for me since I increased my availability I still get little or no work at all, even after writing my name down on the schedule as interested to work on a certain day. As a result of this "job" I am now looking for advice on my rights. However I have discovered that there is little information on the topic. This is unfair and I sometimes feel exploited by my employer. I also have little money coming in. Times are hard its about time this taboo subject of zero hours contract gets looked at so other people don't get ripped off.

Jayne

06 Dec 2012 12:34AM

I have been working on a zero hours contract in a retail environment for 10 months now. I was regularly working 16 hours a week ( a number of hours that I agreed upon with my manager when she interviewed me) and this was all fine. Occasionally I did extra hours when they needed and I am considered a Permanent member of staff by the company. During the Olympics, the company took on a load of temps on a lower hourly wage rate than myself and my permanent colleagues on zero hours contracts. When the predicted retail frenzy failed to appear, myself and my colleagues found our hours cut (often to a token 4 hours a week), whilst the temps on a lower wage were given full time hours. This was despite an order by our company for all us regular workers to make ourselves available throughout the olympics….to which we all duly complied. It's quite immoral --really, they should have laid the temps off and given us permanent staff our regular hours back. Now I find that the same has happened at Christmas. The company has taken on christmas temps and whilst I find my hours slashed to 10 hours a week – even though I am available for at least 16 hours – the (lower paid) temps are given 30-40 hours a week. Surely if an employer has permanent zero hours workers, they have a duty to give them the option of the hours first and then fit the temps in around this?

The robbed

01 Aug 2013 8:31AM

You should be looking at the parasite tax on worker to

My boss pays an agency £20 P/H ,the agency gives me £14 P/H

£6 P/H parasite tax

The agency never got me the job, the boss just likes the freedom to pick up the phone and move people on

Doug

01 Oct 2013 10:18PM

Are Zero hour workers regarded as members of staff even though they are not regarded as employees????

Reason I ask is that a Zero hour worker has been put through the "Disciplinary Procedure for all staff"

Does the fact they have done this show that they regarded the Worker as an employee......or can they use the statement "Disciplinary Procedure for all staff" as an excuse for putting a zero hour worker through the process without regarding them as an employee???

It does say in the zero hour contract that "the company can take the worker off their register any time without reason given."

They are using this worker as a scape goat to a serious f*** up of theirs, this could be one reason they put the worker through the disciplinary process so they could pin gross misconduct on the worker and have it in their records. The workers case (defence) is P*ss easy, it is so clearly dodgy. But having hard time proving Employee status to Tribunal.... get this, after months of unfounded evidence they have finally made an offer of "compensation" so worker does not take it to tribunal.....lol, £500 but they say they cannot "undo" the "gross misconduct sanction" in the same breath they promise not to tell anyone about the "gross misconduct" (that the employee is completely innocent of)

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16 Jul 2014 7:58AM

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