What are zero-hours contracts?

  • 30 April 2014
  • From the section Business
Zero-hours contracts have become increasingly popular in the UK

New figures released by the Office for National Statistics show nearly half of big companies in the UK use a total of 1.4 million zero-hours contracts, but why are they controversial and why do employers use them?

What are zero-hours contracts?

Zero-hours contracts, or casual contracts, allow employers to hire staff with no guarantee of work.

They mean employees work only when they are needed by employers, often at short notice. Their pay depends on how often they work.

Some zero-hours contracts oblige workers to take the shifts they are offered; others do not.

Sick pay is often not included, although holiday pay should be, in line with working time regulations.

Who is on them?

Figures from the Office for National Statistics (ONS), based on a survey of workers, found 583,000 people were on zero-hours contracts. That represents about 2% of the UK workforce.

A separate ONS survey of employers has estimated there are 1.4 million contracts with no guaranteed number of hours.

The ONS said the difference between the two figures was partly because one worker could hold more than one contract. It also said employers may be more aware of formal contractual arrangements than their employees.

Meanwhile, a survey of employers by the Chartered Institute of Personnel and Development put the number of zero-hours contracts at more than one million, with one in five employers having at least one employee on zero-hours.

It found that a third of voluntary sector organisations used zero-hours contracts, along with a quarter of public sector employers and 17% of private sector firms.

High street examples include Sports Direct, which employs 20,000 of its 23,000 workforce on zero-hours contracts.

Pub chain JD Wetherspoon has 80% of its staff on zero-hours contracts.

Cinema company Cineworld, a number of London councils, and Buckingham Palace are also among those using the contracts.

How are people employed infographic showing breakdown by fulltime, parttime and zero hours workers

Why are they controversial?

There is concern that zero-hours contracts do not offer enough financial stability and security.

Some workers on zero-hours contracts are not being given enough hours. The CIPD research found that 16% of zero-hours workers said their employer often failed to provide them with sufficient hours each week.

Employees on zero-hours contracts also do not have the same employment rights as those on traditional contracts, and critics are concerned that the contracts are being used to avoid employer responsibilities to employees.

The CIPD warned that employers may also take advantage of zero-hours contracts by using them as a management tool - offering more hours to favoured employees and fewer to those less valued.

It was also concerned that mortgages and credit cards may be more difficult to obtain without the guaranteed income of a traditional employment contract.

Dave Prentis, general secretary of the Unison union, points out that the popularity of zero-hours contracts calls into question the government's unemployment figures. The suggestion is that zero-hours contracts mean people are counted as employed, when they are actually receiving insufficient hours and pay.

Business Secretary Vince Cable has said there is some evidence of workers being exploited. But he has ruled out a ban on the contracts, saying the flexibility involved can work for employees as well as employers.

JD Wetherspoon
Pub chain JD Wetherspoon uses zero-hours contracts

Why do employers use them?

Employers say zero-hours contracts allow them to take on staff in response to fluctuating demand for their services, in sectors such as tourism and hospitality.

Employers also say that many workers appreciate the flexibility a zero-hours contract gives them. Some 38% of workers in the CIPD research described themselves as employed full-time, working 30 hours or more a week, despite being on zero-hours.

Michael Burd, joint head of employment at the law firm Lewis Silkin, says the majority of employers use zero-hour contracts not to avoid giving employees their rights but to avoid paying fixed overheads and giving them flexibility over their workforce.

He points out that this flexibility is envied by employers in struggling economies such as Spain and Greece, where potential costs may dissuade employers from taking on staff.

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