Tougher review needed on zero-hours contracts

Arvind Hickman , 08 Jul 2013


The Government should launch a more thorough investigation into the growing use of zero-hours contracts and consider tightening regulation or developing a code of conduct to protect worker’s rights, panelists at The Work Federation conference said last week.

It is estimated that more than 200,000 workers - 0.7% of the workforce - are on zero-hours contracts and its use has steadily increased since 89,000 contracts in 2004.

Critics of zero-hours contracts bemoan the insecurity it provides workers and the perception that employers have too much power. There has been anecdotal evidence that vulnerable workers are being stripped of basic employment rights.

Regulation vs Voluntary Code

Panelists were divided over the best way to safeguard employees on zero-hours contracts. Some called for tougher regulation and others promoted a voluntary code.

Stephen Lloyd, the Liberal Democrat MP for Eastbourne and Willingdon, warned against regulation but believes a code could help promote better employer practice.

"I do think there is a case, if the evidence [zero-hours contracts are being abused] stacks up, for the Government to come up with a good code of practice because potentially it looks like it could be expanding exponentially in certain areas like the NHS, universities and the care sectors. I think it will help employers," he said.

Nicola Smith, the head of economic and social affairs at the TUC, said voluntary codes do not work.

"The challenge is finding a regulatory environment that will wipe out bad practice. We don't have the balance right on that at the moment," Smith said.

Recruitment and Employment Confederation chief executive Kevin Green warned against regulation because it could have unintended consequences.

"Before anyone starts to think about regulation, I would request we have a proper review, look at the data and identify what the issue is. If there is bad practice, let's try and resolve that in a voluntary way," he said.

"The problem with regulatory steps and legislation is that you often get unintended consequences and there is no doubt that people will [continue] to play the system."

A soft review

Last month, business secretary Vince Cable launched a review of zero-hour contracts, which will involve informal talks with unions, research organisations and employers' groups, but panelists believe it does not go far enough.

All panelists agreed that in its current form, the review was too lightweight and would not provide the Government with the hard data it needed to reform the system.

Ian Brinkley, a Work Foundation director, said the Government should consider a review similar in nature, but perhaps not scale, to the 2010 Hutton fair pay review of the public sector.

"We have a BIS review that is going on but I don't think it is really a review but rather a set of informal conversations with some of the key stakeholders. I would like to suggest we think about something more ambitious," he said.

Wirral South MP Alison McGovern said any review should also analyse the psychological effect zero-hours contracts can have on workers.

"This is not just a question of the numbers or economics, it is also a question about what it does to people. I don't think the indignity of this power imbalance [between worker and employee] is OK," she said.

The lowdown on zero-hours contracts

200,000 workers on zero-hours contracts.

They are most popular in hotels and restaurants, heath-care, education, community services and the retail sectors.

Nearly a quarter are full-time students.

70% are in permanent jobs.

80% are not looking for another job.

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Tougher review needed on zero-hours contracts

Sarah Empson, B P Collins LLP 17 Jul 2013

The recent publicity that has arisen from zero hours contracts would suggest that this type of contract is not working for everyone and in fact there are many more zero hour contracts in place than thought. However it is important to note that zero hour contracts can be effective. Many companies find that they fit in well with their culture and often employees receive a fixed pattern of work. However as the publicity suggests, many individuals feel that they are being held ‘hostage’ or feel vulnerable with this arrangement, with many employees afraid to turn down work in case they are ‘removed’ from rotas. Some may feel that they have no option but to accept these zero hour contracts, although many find it difficult to make childcare arrangements around shifts offered at the last moment. One of the implications of these contracts is that employees do not receive redundancy pay when work runs out, because employers say that the contract has not been terminated, the absence of work not being inconsistent with a zero hours contract. Arguably some protection should be put in place to ensure that individuals are not being abused by these contracts. For example, ensuring that the hourly rate and pay is comparable to those on permanent or full time contracts. Additionally, some mechanism to determine whether an employee should be entitled to redundancy pay after a certain period would be of benefit. This would support both employees and employers if an unfair dismissal claim was made. Another area of abuse suggests that employees are required to remain on premises or on call when employed under these contracts without pay. The Government has called for evidence as to how zero hours contracts are working in practice but whether any action will be taken thereafter remains to be seen. In general, Government policy appears to be aimed at removing red tape and reducing employment rights rather than increasing them. Although these contracts are not currently unlawful, businesses should watch this space as to how the Government responds in practice to the evidence collated. The best way to ensure you are meeting legal requirements is to take advice from someone who will invest time in understanding your business priorities and aims and ensure that contracts are fit for purpose. Sarah Empson Associate, Employment B P Collins LLP

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