Business response to the economic environment: zero hours contracts

From the employer's point of view, a zero hours contract is a great example of the benefits of the flexible labour market. They allow the employer to change the number of hours an employee works each week, with more shifts offered when they are busy, and fewer when they are not; costs can therefore be controlled and matched more exactly to revenue. They are particularly popular with the fast food outlets like McDonalds and Subway, and high street chains like Boots and Sports Direct. Those employers draw heavily on the younger end of the labour market, with many of their staff being students who are looking for flexible shifts that work around their study hours; for them a zero hours contract may work well. However it is also important to consider whether this will have a detrimental effect on the business's culture; with a high proportion of staff working irregular hours it may become much more difficult to instil a culture and sense of identity with the organisation.

The graph above suggests there is a seasonal pattern, with higher numbers at the end of most years than in April- June; this looks logical as those high-street businesses have a very seasonal pattern of demand. What is also striking about the chart is the very significant increase in the total number of zero hours contracts since the start of the recession. Neil Carberry at the CBI says that they have helped to save jobs during the recession and stagnant GDP growth: "It's zero hours contracts and other forms of flexible working that mean there are half a million fewer unemployed people than there might otherwise have been." The main emphasis of this BBC report about these figures from the Office of National Statistics (ONS) is on the impact on youth employment, as the number of 16 to 24-year-olds on zero hours contracts has risen from 35,000 in 2008 to 76,000 in 2012. This means that one in every three people on a zero-hours contract is under 25, but that proportion doesn't look as if it has changed very dramatically throughout the period shown. So the opportunity to take advantage of the UK's flexible labour laws looks to be helping businesses to respond to the difficulties posed by the economic environment. If this is good for the employer, how is it for the employee?

That depends on their circumstances. Some are only seeking part-time work either because they are studying, or in order to fit around childcare arrangements, and for them the flexible contracts work pretty well. However for others, this may be their sole source of income, and for who have regular outgoings of rent and household expenses to meet, the uncertainty and irregular income can create a real difficulty. With unemployment remaining high, and particularly youth unemployment at over 20%, this should raise the question of whether a job with uncertain hours is better than no job at all.