Flexible Employment Contracts | AQA Q2.2, Paper 2 2019

Here are two suggested answers to the 9-mark question on the advantages and disadvantages for a business of employing people using flexible employment contracts.

ANSWER 1

An advantage to WR of flexible contracts is that it makes it easier for WR to match demand for taxi rides with supply. For city-based taxi rides there will be predictable peaks in demand (for example at rush hour and late-night) where WR needs to maximise the supply of available drivers in order to maximise the taxi bookings completed. Similarly, there will be periods of very low demand (e.g. early morning) where WR doesn’t need much supply. By using methods of flexible employment, such as zero-hours contracts, WR should be able to minimise employment costs during periods of low demand, whilst at the same time maximising its revenues and profits during periods of peak demand.

A disadvantage to WR is that flexible employment may mean it finds harder to recruit and retain sufficient numbers of taxi drivers. Whilst flexible employment may work well for WR, for some drivers it will not provide them with sufficient security of employment, particularly if there is uncertainty about what their taxi earnings will be each shift or over a longer period. A consequence for WR may be that it experiences higher labour turnover than competing taxi firms and that it loses some of its best drivers to competitors who are prepared to offer greater job security. This is likely to increase WR’s employment-related costs in areas such as driver recruitment and training.

ANSWER 2

An advantage may be that WR is better able to attract and retain sufficient taxi drivers to help it meet demand for taxi rides. Increasing numbers of people are looking for flexibility in terms of when and where they work and this is just as likely to be the case for taxi drivers who, for example, might want to work during periods of peak taxi demand (e.g. rush hour or late evening) when they can maximise their bookings and revenues. If WR is able to use flexible working to retain its base of drivers, this should allow it to reduce its recruitment and training costs as well as improve the quality of customer service by providing a more consistent supply reliable drivers for WR customers.

A disadvantage is that WR may not be able to meet sudden or unexpected surges in demand for taxi rides, thereby losing bookings and revenues. If taxi drivers have the flexibility to choose when they work and for how long, then it may be that a surge in demand results in other taxi competitors taking a greater market share over a short period if WR’s taxi drivers do not make themselves available for hire. For example, disruption to public transport systems (e.g. a tube strike) may result in large numbers of people wanting to use taxis, however WR would only be able to take advantage of this opportunity if it had sufficient supply of vehicles available to book.