Zero-Hours Contracts – Not So Evil After All?

Zero hoursThe CIPD zero-hours contract report was published this week and has sparked yet more debate in the press. The report is designed to address the issue that the ‘facts’ about zero-hours were in the main anecdotal and its aim, according to Peter Cheese, Chief Executive, CIPD, was to ‘gain insight into how employers actually use zero-hours contracts and how zero-hours contract workers typically view having no set minimum contracted hours as well as inform the debate about the proportionate response to address legitimate concerns where poor practice exists.’ The CIPD defines a zero-hours contract as ‘an agreement between two parties that one may be asked to perform work for another but there is no minimum set contracted hours. The contract will provide what pay the individual will get if he or she does work and will deal with circumstances in which work may be offered and possibly turned down’.

The findings from the report indicate that the earlier controversy around zero-hours contracts is in the main unfounded and the majority benefit both employer and employee.

The report suggests that in tough economic times employers have to find ways of responding flexibly to changes in demand without increasing labour costs. This leads to greater pressure on organisations  to design more flexible employment and working practices. Whilst, on the other hand, employees increasingly value and even expect greater flexibility over how and where they work in order to manage caring responsibilities, undertake further study, improve their work–life balance, or to move from full-time work as they enter flexibly into retirement.

With this need for today’s organisations to be more agile to remain competitive and the changing needs of employees to work more flexibly to achieve a work-life balance – zero hours contracts do appear to meet the needs of a small percentage of the working population; just 3.1% according to the latest CIPD estimate based on aggregated data from the summer and autumn 2013 Labour Market Outlook (LMO) surveys conducted in partnership with Success Factors.  

Here are some key statistics gleaned from the report:

  • The most common reason for using zero-hours contracts cited by employers is that these arrangements provide them with the flexibility to manage fluctuations in business demand.
  • Almost half of employers, who use them, say they provide flexibility for individuals.
  • Just 25% of workers report they are dissatisfied with having no minimum contracted hours.
  • Almost two-thirds of employers surveyed that use zero-hours contracts (61%) report that zero-hours staff are not contractually obliged to accept work and are free to turn it down.
  • Most zero-hours contract workers (52%) don’t want to work more hours than they typically receive in an average week, however, 38% would like more hours.
  • Only about a third of employers that employ zero-hours workers say they have a contractual provision or policy outlining their approach to arranging work with zero-hours workers or cancelling work that had been offered.
  • 46% of zero-hours contract workers say they either receive no notice at all (40%) or they find out at the start of a shift that work is no longer available (6%).
  • 60% of zero-hours workers report they are allowed to work for another employer when their primary employer has no work available (17% don’t know if they can)
  • 64% of employers who use zero-hours workers report that hourly rates for these staff are about the same as an employee doing the same role on a permanent contract. However, less than four in ten zero-hours contract respondents think their pay is the same as comparable permanent members of staff on contracted hours doing similar jobs.
  • Almost two-thirds of employers (64%) classify zero-hours staff as employees, whereas only just less than a fifth (19%) describes them as workers.
  • On average 65% of zero-hours workers say they are satisfied with their work–life balance compared with 58% of all employees.
  • Just over half of zero-hours contract workers would recommend their organisation as an employer compared with 56% of all employees.

On the whole the report offers a mainly positive view of zero-hours contracts. It would appear they fulfil a small, but necessary role in a workplace that increasingly requires more flexibility for both employers and employees. And as long as organisations understand their responsibilities and operate a fair system it would seem, interestingly, that employee engagement and loyalty amongst employees who work them is actually slightly higher than their contracted colleagues.

For organisations who want to know more about how to manage zero-hours contracts the CIPD has published some guidelines that you can download here.

Contents of the guide

  • Introduction
  • What is a zero-hours contract? 
  • Employment status: the big three 
  • Summary of legal rights and protections 
  • The pros and cons of status 
  • How to decide what contract to use 
  • Difficult issues: exclusivity, holiday pay, National Minimum Wage, Statutory Sick Pay
  • Summary
  • Appendix: Case law examples

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