The qualifying period for unfair dismissal was recently extended to two years, while the Government intends to introduce a 12-month pay cap on the compensatory award for unfair dismissal, as well as fees of up to £1,200 for employees bringing unfair dismissal claims.
This general watering-down of employment rights, ostensibly to boost job and economic growth, has clearly benefited employers.
And while Government policy is providing a helping hand, employers are also making the most of the employment law tools at their disposal: one such being the zero hours contract.
Zero hours contracts were once only the preserve of retailers. Given the seasonality of shopping habits, there was a clear need for a higher level of resources during peak times like Christmas and a much lower level in the down times. It therefore made sense to use a contract that provided retailers with the flexibility to offer workers varying levels of hours that could respond to the ebb and flow of trade. Thus, zero hour contracts came to prominence.
These contracts offer businesses flexibility and, some argue, a competitive edge. Indeed, recent statistics suggest that other industries may be following suit and adopting them. The Office for National Statistics (ONS) recently published figures from its Labour Force Survey that show a significant increase in the use of zero hours contracts. In 2012, the number reached 200,000 - a rise of just under 50,000 in a matter of one year. Unsurprisingly, the increase is particularly evident among those under 50.
It is perhaps no surprise that while the retail sector continues to rely on such contracts, sectors such as health, education and the media are also increasingly going down this route. Freedom of Information requests made by the Financial Times showed there are now almost 100,000 zero hours contracts in NHS hospitals, up 24% in the past two years.
So what's the reason for the shift? The financial benefits are obvious. Traditional zero hours contracts allow companies to engage individuals as workers, rather than employees, on an "as required" basis, with no guarantee of work, and impose an obligation on workers to be available if and when required. Though they have long been commonplace in retail, many criticize their use as unbalanced and exploitative. On the other hand, employees engaged on zero hours employment contracts still have all the normal employment protections, but employers can still make substantial costs savings by only paying for work actually done.
Interestingly, the ONS also published details of the hours actually worked under such contracts, which shows a substantial drop from 31 hours per week in 1997 to 21 hours per week in 2012. The increased use of zero hours contracts, coupled with the reduction in hours worked under such contracts, may actually help explain two important economic indicators: namely the lack of a major rise in unemployment, despite the poor macro environment, and the absence of an increase in productivity.
As many businesses continue to struggle, the obvious financial benefits are of increasing importance. Many employers see it as a good way of cutting costs and controlling headcount, all while ensuring at least some of their staff are engaged. The rise of zero hours contracts is the latest evidence that power is firmly with the employers, giving them the ability to be flexible in the face of tough economic times.
But it's not necessarily all bad news for employees - for many, zero hours contracts present them with a flexibility that means they can juggle several jobs at one time, which is becoming especially important for some individuals. Certainly, at least for quite a while longer, it seems that zero will be a hero for business.
Ann Bevitt is a partner at law firm Morrison and Foerster
