Zero Hours Contracts – The Debate

The ethical considerations of employing people on zero hours contracts have been brought sharply into focus by a raft of media coverage over the past few days.

Concern has been raised that use of these contracts has increased significantly during recent years. A poll published this week by CIPD estimates that more than one million workers are now employed under these terms – significantly more than previous government estimates.  Critics claim that some unscrupulous organisations are not using the contracts in the spirit in which they are intended and are exploiting vulnerable staff and evading their responsibilities.

Under a zero hours contract, the employer is not obliged to provide work and can effectively have people ‘on standby’ to work only when they need them.  Employees on zero hours contracts often get no holiday or sick pay either – and are often regarded unfavourably if they don’t take up the offer of work at short notice, even though they are under no obligation to do so.

It has been mooted that in difficult economic times, employees have little choice but to accept these contracts and that it’s the beginning of a slippery slope which will see employment rights in the UK gradually being eroded.

Of course not all employers are using zero hours contracts inappropriately.  They can be a really useful mechanism for fast-growing businesses with unpredictable staffing needs or companies that need flexibility to cope with seasonal peaks and troughs.  There are plenty of employees who welcome the flexibility they bring too – older employees who want to keep their hand in by doing occasional part-time work, for example, or students who are combining work with their studies.

The CIPD has called for a closer look at the definition of a zero hours contract and guidance on what makes for good and bad practice.  Business Secretary Vince Cable has also expressed concern about possible abuse of the contracts by employers and has ordered a review into their use.  In an article on their website, employment law firm Clarks Legal report that Cable is thought unlikely to support a ban – but may look at how people employed on zero hours terms are treated by the benefits system.

The business community will be awaiting the outcome of these deliberations with interest.  But in the meantime, what are the issues your business should be considering if it already employs – or is considering employing – people on zero hours contracts?

The first is to make sure you are getting the balance right between being fair to employees, while also building a flexible workforce that meets your resourcing needs.  Most forward-looking employers would want, for example, to offer a guaranteed minimum of hours and basic entitlement to benefits such as holiday or sick pay in order to keep staff engaged.

Research has shown that in companies where levels of employee engagement are high, there is a significant increase in areas like innovation, productivity and staff retention.  People are unlikely to want to delight customers, bring their best selves to work or go the extra mile if they feel the implicit contract between employer and employee (I will work hard if I can see you appreciate my efforts and are giving something in return) has been broken.

Open communication is also key. If employees are clear about what level of work is likely to be available, how much is guaranteed and what benefits are on the table, they are able to enter the agreement with realistic expectations there is less likelihood of disillusionment or resentment further down the line.

It’s also important to consider whether the business is actually managing staff resources in the most efficient way.  In a small rapidly growing business, staff needs can sometimes be difficult to predict, but technology is now available to help medium and larger size businesses predict trends in work flow and manage flexible work patterns more effectively.  If a business is managing its resourcing well, there should really be no need to have large numbers of staff on zero hours contracts.

If nothing else, maybe the growing debate around zero hours contracts will ‘nudge’ the government to look more closely at some of the red tape that still surrounds employment practice, so that companies are more confident about the best way to build flexible workforces that meet their needs without eroding employees rights or falling foul of the law.

What’s your view?  Are you using zero hours contracts successfully or do you think they no longer have a place?

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  1. Zero hours contracts bring out the worst in some employers. We seem to be slipping back to a Victorian view of labour, with no security of income and no protections. Good employers manage their labour needs, particularly seasonal sectors which have been doing it for many years. Now, we’re seeing less scrupulous employers who are using this method to avoid paying decent wages and employee benefits. It’s interesting that it’s happening at the unskilled end of the labour market, where people are more vulnerable to this kind of exploitation. It’s hardly conducive to training and motivating a loyal workforce. Naming and shaming the large companies that do this might help, as would providing employment protection such as sick pay and redundancy. This is economic lunacy.

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