Who uses zero-hours contracts and why?

Zero-hours contract protesters
Image caption Some workers in the UK have protested against the use of zero-hours contracts

Zero-hours contracts have become a major political issue in the UK. But where did they come from and what are the arguments for and against?

Although this type of arrangement has acquired a higher public profile in the period since the financial crisis it does have a slightly longer history than that.

The Chartered Institute of Personnel and Development (CIPD) says they first entered public debate in the late 1990s.

So, what are they?

Simply an employment contract where the employer does not guarantee any hours of work at all.

There is a wide range in the number of hours that employees do, in practice, end up working. They may or may not require the individual to accept work that's offered.

Are there a lot of these contracts about?

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Trying to measure the extent of this type of arrangement is affected by some technical statistical problems, which creates uncertainty over the prevalence of zero-hours contracts at any one point in time. They also make it challenging to identify clear trends.

There are two main approaches: surveys of workers or surveys of businesses.

The former has been used by the Office for National Statistics (ONS) for more than a decade. Figures from the Labour Force Survey show the numbers of people with these contracts declining from the turn of the century before picking up again in the middle of the decade.

The figure has increased dramatically in the last couple of years. In the last three months of 2013 the number of workers was more than double what it had been a year earlier. It rose again in the equivalent period in 2014 to almost 700,000.

There is a substantial statistical health warning associated with the rise. These figures are based on what the workers themselves believe their contractual arrangements to be. On the very large increase between 2012 and 2013, the ONS said: "That appeared to be mainly due to increased recognition of 'zero-hours contracts'."

Business surveys in the UK give much larger numbers, although they record contracts rather than separate individuals. The ONS has given a figure of 1.8 million for August last year. This same survey has been done only once before at a different time of year, so, the ONS says, the two should not be directly compared.

The divergence between the employee and business surveys reflects the fact that some people have more than one zero-hours contract, and, the ONS says, employers are more likely to be aware of formal contractual arrangements.

So have zero-hours contracts proliferated in recent years in the UK? Very probably, but it is rather hard to nail it down statistically.

The Department for Business said at the end of 2013, when it launched a public consultation: "The use of zero-hours contracts has increased in the past five years."

What type of employers use zero-hours contracts?

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Image caption The food and drink industry is a big user of zero-hours contracts

According to the ONS employers' survey, two sectors account for more than half of all UK zero-hours contracts. The first is accommodation and food, which includes hotels, restaurants and catering at events. The other big user is administrative and support services. That covers a wide range of activities, including cleaning and office support. Both of these sectors had about half a million such contracts.

There's another quarter of a million in health and social care. They are also used to a significant extent in the construction and retail sectors.

The CIPD's research (in 2013) suggests voluntary sector employers are most likely to use zero-hours contracts (34% of them do so) followed by the public sector (24%) and lastly the private sector (17%).

They were more frequently found in large employers (with more than 250 employees). Among those that did use zero-hours contracts, most used them for fewer than 10% of their employees.

The TUC says: "One of the most striking developments in recent years has been the rapid expansion in the use of zero-hours contracts in the public sector and outsourced public services."

What is 'non-standard employment'?

Zero-hours contracts are a relatively new example of what the International Labour Organization (ILO) calls non-standard forms of employment - work that is not full-time, indefinite employment in a subordinate employment relationship.

The Work Foundation of Lancaster University calls it "atypical employment". Including zero-hours contracts and self employment (which is the largest category within the wider group), it puts the total at 21.9% of all employment in 2013, barely changed from 21.6% in 1996, though there was a modest fall and subsequent rebound in the intervening period.

Why use zero-hours contracts?

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Image caption Many cleaning staff are employed on a zero-hours basis

The appeal for businesses is straightforward. It enables them to match their labour costs with demand for their goods and services more readily than if all staff are on fixed hours. The Institute of Directors puts it like this in its response to the British government's consultation:

"Using zero-hours contracts is a way of offering a service - or offering a better or wider service - to consumers/customers or other businesses without adding the significant fixed costs incurred by employing people on permanent contracts, or paying overtime, or incurring costs and administrative burdens in frequently recruiting and dismissing people in line with demand. In many cases, this would make the service commercially unviable. Zero-hours contracts are therefore an essential tool for some businesses."

The CBI says that labour market flexibility, including zero-hours contracts, supported job creation during the recent post-recession recovery:

"During this period labour market flexibility allowed firms to create jobs at the first sign of demand rather than waiting for sufficient demand to justify hiring a full-time employee before taking somebody on."

Zero-hours contracts are widely said to work for some of the employees who use them. The flexibility - provided they feel they can decline offers of specific hours - may appeal to students and others with commitments they have to work around.

But others take zero-hours contracts because that's all they can get. The most recent ONS analysis shows that 34% of people on such an arrangement want to work more hours, compared with 13% of people not using these contracts.

The TUC acknowledges that the flexibility appeals to some workers, though it says that is true of only a minority. But it also says: "For many being on a zero-hour contract offers no tangible benefits but rather leads to mistreatment and abuse at work."

Is this just a UK phenomenon?

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Image caption How do other countries compare?

Hard information on the use of zero-hours contracts outside the UK is sparse.

In Europe, some research has been done by an EU agency called Eurofound, a tripartite body backed by governments, employers and unions.

It found that there is simply no data in many EU countries, in some cases because the law doesn't recognise the arrangement. Of those that do record zero-hours contracts, the UK and Austria seemed to have the highest prevalence, followed by Estonia and the Czech Republic. Several others, including Ireland, the Netherlands and Sweden had at least some.

In Finland, trade unionists are campaigning for them to be banned.

There is also a campaign in New Zealand.

Why the UK?

So why is the practice apparently more prevalent in the UK than most countries? As the data is patchy, explanations are likely to be even more speculative.

A popular candidate is the UK's relatively flexible labour market. According to the Work Foundation: "Zero-hours contracts have been seen as part of the UK's highly flexible and lightly regulated labour market."

What about other forms of insecure work internationally?

There is also an international aspect to the wider and much older phenomenon of non-standard or atypical work.

Yet another term that has at least something in common with zero-hours contracts is casual work, and that is prevalent internationally, according to the International Labour Organization.:

"Casual work is the engagement of workers on an occasional and intermittent basis, for a specific number of hours, days or weeks, in return for a wage dictated by the terms of a daily or periodic work agreement. Casual work is a prominent feature of informal waged employment in low-income developing countries."

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