What are zero-hours contracts and what are the pros and cons?

In general terms, a zero-hours contract is a form of employment where the employer is under no obligation to offer work or a guarantee of minimum hours and the individual is under no obligation to accept any work offered.

Kate Elliot, Senior Ethical Researcher

Most zero-hours contracts result in staff being classified as ‘workers’, providing some key rights and protections but not the full set conferred by ‘employee’ status.  Under the National Minimum Wage Regulations 1999, for example, zero-hours workers must be paid the national minimum wage for any time they’re required to be in the workplace, even if it results in no work being offered. However, workers are not necessarily entitled to additional rights such as maternity and paternity pay, minimum notice periods or sick pay.

Figures published by the Office for National Statistics indicated that 901,000 UK workers were employed on zero-hours contracts in their main job in the last quarter of 2017. This represents just under 3% of all people in employment.

Advantages of zero-hours contracts

As with the gig economy, the primary advantage to employers and workers is flexibility.

Employers can respond quickly and effectively to unforeseen business fluctuations, financial setbacks or long-term absences, and hiring zero-hours workers can reduce agency costs. Additionally, zero-hour contracts suit industries like catering, leisure and retail that experience significant seasonal variations in demand.

For individuals, the freedom to accept or reject an offer of work provides the opportunity to fit work around their existing commitments. Some workers also view their zero-hours status within an organisation as a first step towards a more permanent role, or as a way to gain skills and experience without an ongoing commitment to the employer.

Disadvantages of zero-hours contracts

Trade union groups argue that, without an extension of full employee rights, the current state of zero-hours contracts constitutes insecure work and facilitates worker exploitation.

As work opportunities can be offered and withdrawn at short notice, individuals may find it difficult to organise their time or budget effectively. Incidents of employers ‘blacklisting’ individual workers who turn down shifts by offering fewer opportunities or less desirable hours undermine the benefits of choice and flexibility and highlight worker vulnerability in a ‘no obligation’ arrangement.

A 2017 poll of zero-hours workers by the Trades Union Congress (TUC) found that 73% had been offered work with less than 24 hours’ notice while 51% had experienced cancellations within the same timeframe.

The same TUC poll found that 38% of zero-hours workers would struggle to cope with an unexpected bill of £500, indicating that many do not have savings to draw on, nor are they able to rely on others in their household for financial support.  Zero-hours workers may therefore be particularly vulnerable to fluctuations in working hours and income.

Outlook

Legislation to combat these insecurities is evolving as awareness grows. For example, in 2015 the UK made exclusivity clauses in zero-hours contracts unenforceable, meaning that individuals cannot be prevented from seeking work with multiple employers.

Recent government responses to the findings of the Taylor Review have also recognised the need to clarify employment status terminology, agreeing to investigate the potential for a higher national minimum wage rate for those on zero-hours contracts, and offering to consult on the transition of zero-hours contracts to full contracts after an extended period of work.

 

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