Use of zero-hours contracts is likely to rise if plans go ahead to allow Jobcentre coaches to 'mandate' zero-hours contracts where the position is suitable. So what are the pros and cons of such contracts and what does the future hold for them?
What is a "zero-hours" contract?
The term "zero-hours" is not a term of art but generally indicates a contract for casual work under which the employer is not obliged to provide a minimum (or any) amount of work, and hence pay, to the worker. Sometimes contracts impose an obligation on workers to accept all work offered by the employer, in others they are given more freedom to turn work down. In essence, zero-hours contracts allow employers to put workers "on cal"; ensuring they are available for work when required but with no obligation to actually offer work.
Recent research undertaken by the Office of National Statistics indicated that from January to February 2014 around 1.4 million individuals were employed on zero-hours contracts with no guaranteed minimum number of hours of work. This is a vast difference to their previously published figure of only 583,000 individuals for the period October to December 2013. In addition, the Government has recently announced plans which mean that where the offer of a 'reasonable' zero-hours contract is refused by a jobseeker that jobseeker could lose their benefits as part of the Government's Universal Credit scheme, which should adjust benefit levels to automatically correspond with the number of hours worked.
The good, the bad, the future?
Unions have already called for action against the use of zero-hours contract. Government consultation was also launched last year to deal with the overall concern that the use of such contracts allows employers to hire staff with no guarantee of work, only as and when they are needed and often at short notice. Other concerns included the use of exclusivity clauses and the general lack of transparency regarding the working arrangements set out within the zero-hours contract. Critics have said that this leaves workers with little stability or security and, as such, workers are open to exploitation.
On the other side of the coin, the use of zero-hours contracts allows employers to remain flexible and with the ability to respond to fluctuations in demand. Where work levels are fluctuating these contracts can be a significantly cheaper option than employing full-time employees who must be paid regardless of how productive they are. Zero-hours contracts are particularly useful for businesses that face seasonal fluctuations where their use can help take the pressure off permanent staff and maintain morale.
It is estimated that more than one in five employers in health and social work now use zero-hours contracts with around half of all businesses in the tourism, catering and food sectors employing staff on the same basis. Such contracts can also provide flexibility for individuals and research shows that zero-hours workers are more likely to be satisfied with their work-life balance compared to other employees and have comparable job satisfaction. Zero-hours contracts can also be beneficial for workers who want occasional earnings on a flexible basis, for example, those who are studying or part-retired.
Whilst it is clear that there are no current plans to ban the use of zero-hours contracts the overall aim is to ensure that there are greater protections in place for workers engaged on them. Proposed solutions, not yet confirmed from the consultation, include an outright ban on the use of exclusivity clauses within zero-hours contracts unless there is a justifiable reason; Government guidance or an employer led code of practice on the use of zero-hours contracts and exclusivity clauses; or giving employees on zero-hours contracts a legal right to a fixed hours contract after 12 months of working on a zero-hours basis.
In the meantime
Whilst waiting for results of the Government's consultation, and to prevent risk of damage to reputation, employers could consider:
- Engaging individuals on a permanent basis rather than as a zero-hours worker;
- Not creating a bigger pool of zero-hours workers than is necessary;
- Making sure the zero-hours contracts go no further than is commercially necessary e.g. consider whether it is strictly necessary that the workers are always available for work;
- Making sure the contract is clear and transparent and the individual truly understands what they are signing up to;
- Ensuring compliance with National Minimum Wage and Working Time legislation; and
- Creating a fair system of how work is offered to zero-hours workers.