Zero hours contracts reach record levels

Warehouse Image copyright Getty Images

The number of people on controversial zero hours contracts has reached a record high of 910,000.

New figures based on an analysis of Office for National Statistics data reveal that 105,000 more people were on contracts that do not guarantee work in 2016 compared with the same period in 2015.

That's an increase of nearly 14%, and 30% higher than 2014.

In 2005, there were just 100,000 people on zero hours contracts (ZHCs).

But although the new figures are a record, they also reveal a sharp slowing in the rate of increase in the last six months of 2016.

"It's notable that the increase of 0.8% in the second half of 2016 compares to a 7.7% rise over the same period in 2015," said Conor D'Arcy, policy analyst at the Resolution Foundation, which undertook the analysis of the ONS's Labour Force Survey.

"Ever since ZHCs hit the headlines the numbers have increased sharply every six months. The latest figures bring this run to an end."

That decline in the rate of increase for such contracts - which have been criticised for being forced on lower paid workers - could be down to three reasons.

First, as the levels of employment reach record highs, people looking for work can be more demanding about the type on contracts they sign.

The number of people on zero hours contracts rose rapidly after the financial crisis as employers sought to cut costs and be more flexible and employees were more concerned about losing their jobs.

Second, as the UK approaches full employment, the number of new jobs being created - whether full time or zero hours - is slowing.

The third reason appears to be business reputation.

Image copyright PA
Image caption Sports Direct came under fire over its "Dickensian working practices"

After controversies over zero hours contracts at companies such as Sports Direct, a number of businesses have either stopped using them or reduced their use.

Homebase, the DIY chain, scrapped zero hours contracts earlier this year.

And JD Wetherspoon, which runs pubs, offered thousands of staff on ZHCs the chance to move onto contracts which guarantee hours.

Exploitative?

Although zero hours contracts have been controversial, many say they provide flexibility to people such as students, parents and those with other caring responsibilities.

The employee - who still receives employment rights such as annual leave - does not have to accept work offered.

"We shouldn't dismiss all ZHCs as exploitative," Mr D'Arcy said.

"Over the past year, approaching half of the increase has been among workers aged 55-64.

"For many of these workers, ZHCs could offer a flexible transition from full-time work to retirement, allowing them to top up their incomes.

"Neither are they all low-paid positions: one in six ZHC workers are in the three highest-paying occupation groups."

Bottom line

But the government is concerned that "precarious working" is undermining the tax base as people on zero hours contracts are generally less well paid and more reliant on in-work benefits.

"Workers on ZHCs appear to face a significant pay penalty - typically earning £1,000 less annually than similar workers - as well as being more likely to be underemployed," Mr D'Arcy said.

"From a living standards perspective, both are troubling."

Image copyright Getty Images
Image caption Some workers in the gig economy say they welcome flexibility over the hours they work.

The government is likely to make the issue of zero hours contracts and the gig economy - where people take on "self-employed" work for companies like Uber - a key issue in the Budget next week.

Both have been blamed for undermining the way the present tax system works.

The Treasury is likely to announce further steps towards "balancing" the amount of tax paid by the self-employed and those on short term or zero hours contracts, so that they pay similar levels of tax to those in full-time, guaranteed employment.

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