When flexibility can be make or break for your business, ‘zero hours’ contracts can look rather inviting. But can one party really benefit without the other losing out?
So-called ‘zero hours’ contracts have dominated the headlines over the last few months. In part, the increased attention has been prompted by figures released by the Office for National Statistics (ONS) revealing that the number of individuals working under these terms has more than doubled in the last ten years, reaching some 200,000 individuals. Zero hours contracts are on the rise and, while it seems unlikely that they will ever make up a majority of the UK’s employment agreements, the trend is drawing a not unreasonable amount of attention.
Zero hours contracts are a working agreement in which the employer doesn’t have to guarantee an employee any fixed hours of work. They are far from a new phenomenon and first began to rear their heads in previous times of economic turmoil. “They first really grew up in the 1980s and early 1990s,” explains Sarah Veale, head of the equality and employment rights department of the Trades Union Congress (TUC). “But then when the economy recovered, they didn’t completely disappear.” And it seems our recent financial woes have returned them to full strength.
Regardless of your opinion of zero hours contracts, they do provide some clear benefits. “For SMEs, zero hours contracts offer two potential forms of enhanced flexibility and reduced risk,” comments Ian Brinkley, director at Lancaster University’s work policy think-tank The Work Foundation. The first benefit is the fact that it reduces the legislative obligations a business faces – individuals under zero hours contracts are classed as workers, rather than employees, and as a result are protected by fewer employment rights.
But it is the second factor that is presently receiving the lion’s share of the attention in the media. Flexibility holds an almost fetishistic fascination in current business dialogue and zero hours contracts are the epitome of flexible employment agreements. “When work flows are erratic and uncertain, zero hours contracts can offer a closer match between work and worker availability and reduce the wage bill,” Brinkley explains.
So far, so good. But, inevitably, a no-guarantees agreement can cut both ways. “Generally, as an employer, you are not obliged to offer work to workers on zero hours contracts – but nor are they obliged to accept any work you offer,” says John Palmer, helpline knowledge manager at employment relations expert the Advisory, Conciliation and Arbitration Service (ACAS). This means that an imprudent employer could find itself without support when it needs it most.
These forms of contracts also raise a question mark over staff engagement as the employer/employee relationship takes time and investment to develop. “If you’re not prepared to invest in somebody, in properly training and engaging them, then they’re going to be unengaged,” says Veale.
In Brinkley’s eyes, these cases can mean that attempts to make savings through minimal contracts can actually become self-defeating. “If most people are in zero hours contracts out of necessity rather than choice, then they will leave them as soon as something better comes up – implying high turnover and the constant search for replacements with new contracts, which can be costly,” he explains.
Of course, all of this is tiptoeing around the Jumbo-esque, political elephant in the room. One of the most heated debates around zero hours contracts – and the reason the ONS figures have made such a splash – is down to the ethical ramifications of contracts that guarantee little in terms of security or hours.
Arguably, the uncertainty of whether you’ll be working on any given day is preferable to the uncertainty represented by long-term unemployment – but that doesn’t mean everyone can agree to such unreliable terms. “There are particular issues that we picked up on,” remarks Veale. An example the TUC has identified is that of parents. Getting a last-minute call from an employer to come in to work wouldn’t allow a parent to make childcare arrangements, effectively prohibiting them from taking the hours. “Discrimination is built into this way of working, which employers aren’t necessarily doing on purpose, but it does de facto exclude certain types of workers.”
Another area that could prove to be a legal quagmire for businesses is how they draw the line between when an employee is on or off the clock. Particularly with zero hours contracts increasingly being introduced in health and social care, there may be a temptation to class on-site staff as being off the clock when not engaged in active work. “If the worker is required to be on-call at the place of work such time is likely to count as ‘working time’ under the Working Time Regulations,” explains ACAS’s Palmer. “It’s against the law to ask ... employees to ‘clock off’ during quiet periods but still remain on the premises.”
This isn’t to say that these contracts are inherently unfair; reputable employers can make excellent use of them in areas where casual working arrangements are more appropriate. “If you’re a student, there would be more give and take,” says Veale. “‘It doesn’t really matter because you’re living on your loan and it’s additional revenue, not a permanent arrangement.”
Additionally, there is a cross-over with highly skilled, freelance-style roles, where a zero commitment contract can provide access to a talent pool as and when required. “They can be a way of accessing more specialised and technical services where the demand from the firm is irregular,” says Brinkley. However, this relationship is slightly more even-handed as contractees will be in high demand and will be under less pressure to take on any request.
Ultimately, zero hours contracts are a tool that can be used to patch and fix unpredictable workflow. But viewing them as a long-term alternative to a traditional workforce can cost an enterprise much more than they gain. “Enterprises should be careful,” says Veale. “People have quite long memories and if an organisation acquires a reputation for being a bad employer it can do a lot of harm.”