Zero-hours Contracts on the Rise

 Imagine working for someone where you need to be available for work, but there are no guarantees how much work you will be given and, therefore, how much you will be paid. That it is the reality for potentially 1 million employees in the UK, according to recent research by the CIPD. The use of controversial “zero-hours contracts” has become much more widespread in recent years and now they are firmly in the spotlight with the UK government ordering a review into their use.

The CIPD’s survey of more than 1,000 businesses found one-fifth (19 per cent) of employers had recruited staff on zero-hours contracts, with the practice more common in the voluntary and public sectors than in private industry. Nearly half (48 per cent) of employers in the hotel, catering and leisure sector had used zero-hours contracts, compared with 35 per cent in education and 27 per cent in health care. Large organisations were more likely than small businesses to offer the contracts. The CIPD found young adults (aged 18 to 24) and older workers (over 55) were most likely not to be offered the contracts.

There's no doubt that there has been a sharp increase in recent years in so-called 'zero-hours' contracts, as employers try to find cost-effective ways of meeting short-term staffing needs.

A zero hours contract is a flexible contract of employment with no limit on number of hours worked. Under these contracts, people agree to be available for work as and when required, but have no guaranteed hours or times of work. Zero-hours contracts effectively provide employers with a pool of people who are 'on-call' and can be used when the need arises.

Many well-known business brands and employers now use zero-hours contracts including McDonalds, Boots, Sports Direct, Subway and KFC. In fact McDonald’s has admitted 90 per cent of its UK employees are on zero-hours contracts. Cineworld also employs the bulk of their staff – part-time workers and students – on zero-hours. Boots has said zero-hours deals suit parents who wanted to fit working around school drop offs and older workers not ready to retire.

Supermarkets tend not to use zero-hours arrangements, preferring instead to use contracts that stipulate a minimum number of hours. This is also the case at sandwich chain Pret a Manger which says it guarantees all employees a minimum of eight hours work a week.

Critics of zero-hours contracts have rounded on their increased use and the issue has also attracted demonstrations by pressure groups outside prominent retailers. Sports Direct has come under specific pressure after the business was exposed for employing nearly all its 22,000 staff on the controversial contracts at a time when 2,000 full-time staff are about to cash in bonuses of up to £100,000.

“For many workers, zero-hours contracts mean a life of permanent uncertainty. They leave staff fearful of turning down work,” said Matthew Pennycook of the Resolution Foundation.

“Fluctuating incomes and low job security can wreak havoc with household budgets, with many people . . . penniless if their work dries up,” according to Gillian Guy, chief executive of Citizens Advice.

However, groups representing businesses claim that the rise of zero-hours contracts and part-time work has helped save jobs through tough economic times.

Neil Carberry at the CBI has said:

"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 Institute of Directors (IoD) has also supported the growing use of zero-hours claiming that banning the use of zero hours contracts could have negative consequences for Britain's economy as some companies do not have the funds to hire full time staff.

Head of regulatory policy at the IoD Alexander Ehmann has said:

"Calls to ban zero hours contracts are deeply misguided and any such action would have extremely damaging results. It would hurt thousands of employees who rely on the flexibility such contracts allow and employers, especially small and medium sized firms, would struggle to hire the staff they need to meet varying demand."

In a recent article, the FT describes how the use of zero-hours is now a key part of the business model of many firms operating in certain markets (in other words - they may be here to stay):

"Social care, retail, hotels and restaurants – which account for hundreds of thousands of zero-hours contracts – are generally sectors that are low skilled, not subject to international competition and where employers compete primarily on cost. Productivity is low, and so are wages. Unions are either absent or weak. For many companies, zero-hours contracts are a logical extension of the business model."