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Zero hours contracts: what’s the answer?

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Employers say they are essential and should remain.  Workers’ organisations say they are harmful and should be banned.  Zero hours contracts have, in recent times, attracted a lot of media attention and the debate as to whether they should be banned continues.

New Zealand has just voted to ban zero hours contracts and is the first country to do so.  This has raised a question in the UK as to whether we should follow suit with some campaigners suggesting that New Zealand’s decision to impose a ban proves it can be done.

My concern in relation to zero hours contracts is what the alternative is if they are banned in the UK?  Equally, if zero hours contracts remain what can be done to ensure fairness in their use and to limit exploitation of workers?

Implications of a ban

If zero hours contracts are banned, I am not entirely convinced that the perceived problems they cause will fall away.  I say this because prohibiting a contract that does not guarantee a minimum number of hours does not positively force or even encourage an employer to take on employees working a minimum number of hours.  In reality it may only prove to encourage the use of contracts offering a small number of fixed hours, as currently operated by Cineworld who reportedly use “four hour” contracts as do their competitors.  This would not solve the problem of insecurity for workers which is the main argument used by those arguing for a ban.

One suggestion is that workers should become entitled to a “permanent” contract if they work regular hours on a zero hours contract for a certain period.  The reality for many employers, particularly if they are seen as being exploitative, is that they would ensure there is no regular pattern such that the provision would not bite.  Whilst there may be a hope of a fixed hours contract in the future it could be that more uncertainty is created instead of less.

I have recently advised a client who was setting up a new venture which came about somewhat accidentally.  The client had a need for labour but, genuinely had no proper way to estimate the requirement for labour or his ability to pay for it, at least until he got up and running.  As a result the client opted to offer zero hours contracts at least to begin with.  If this was not an option and there was an obligation to commit to fixed hours, there would have immediately been a fixed cost the client would have been required to meet with no certainty that the venture would have succeeded to meet that cost.  This same issue must also apply to growing businesses and the removal of an option to use zero hours contracts must lead to a potential for less employment rather than increased, secure employment.

Keeping zero hours contracts

For me, the problems created by zero hours contracts are not caused by the contracts themselves but by the employer using them.  There have been numerous reports of large retailers using zero hours contracts in an exploitative manner.  Other large employers using zero hours contracts include fast food retailers who report that staff are happy with such contracts perhaps in part due to the fact that rotas are organised two weeks in advance.

The ban on exclusivity clauses in zero hours contracts was certainly a positive development and one which could be, relatively easily, managed and enforced as the case may be.  I have not seen reports of employers claiming that removing their entitlement to keep workers on standby without any guarantee of work is unfair; quite the opposite is true.

It may be that one practical step, if zero hours contracts are retained, is to offer guidance as to their use and to encourage best practice (such as the planning of rotas).  Whilst I cannot say that offering guidance would mean that employers will adopt best practice, it is a step in the right direction.  My point, as above, is that simply banning a zero hours contract will not prevent exploitation in the manner suggested but there is a real risk of harm to small businesses and those who genuinely want to work flexibly or for a limited number of hours each week.