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Zero-Hour Contracts: Time for Reform?

Zero-Hour Contracts: Time for Reform?

According to the Office of National Statistics, a record number of workers, particularly those aged 16-24, have been employed under a zero-hour contract since the economic downturn. These types of contract have received widespread publicity in recent weeks after it was revealed that 20,000 of 23,000 Sports Direct employees are on zero-hour contracts and that even Buckingham Palace uses them. So what are these contracts and why are they on the rise?

A zero-hour contract is an employment contract under which an employer is under no obligation to provide an employee with minimum hours.

A zero-hour contract is an employment contract under which an employer is under no obligation to provide an employee with minimum hours. In other words, there are no guaranteed certain hours for the employee to work. They are especially popular within the fast food and retail industries with chains such as McDonalds and Subway both using them.

They are also becoming increasingly popular within the private sector as The Chartered Institute of Personnel and Development (CIPD) estimates that 17 per cent of private sector employers use them. Trade Unions and employment rights campaigners have discovered that the contracts are increasingly being used for a range of vital services, from college lecturers to care home workers, dinner ladies and nurses. Even charities, including one associated with Princess Diana, have adopted zero-hour contracts for staff as they struggle to cope with reduced government grants and public donations. The contracts in the voluntary and public sector are viewed as a direct result of spending cuts introduced by the Government to resolve the debts inherited from Labour.

Why are they on the rise?

These contracts are on the rise for a number of reasons, mainly as a result of the advantages they bring to both the employer and the employee. For the employer it allows flexibility so that they can respond to market needs. However, it also provides flexibility for the employee as they have the reassurance that they are not committed to working fixed hours. Employees are able to work alongside studying and combine their work with childcare with the freedom of knowing that they are legally allowed to turn down the offer of additional hours.

Zero-hour contracts also allow employers to keep costs down as the employer can avoid over-staffing during quiet hours. Having staff employed under zero-hour contracts means that employers can react efficiently to the needs of the business. They effectively have a bank of employees on reserve at all times.

Simply, if you do not work the hours you do not get paid.

Despite these positives, it can be a daunting experience for an employee working under a zero-hour contract. It does not offer the stability that a contract of guaranteed hours does and, therefore, can be somewhat unreliable. Simply, if you do not work the hours you do not get paid. An employee under a zero-hour contract would have the worry of whether they could afford to pay their monthly living costs without the guarantee of hours.

Although there are some worrying aspects for an employee working under a zero-hour contract, it can also have the power to encourage employees to work harder in order to ensure that they are always the first to be offered additional shifts. This increases productivity for the employer and may lead to more rewarding opportunities for employees.

Despite this, the contracts have left workers at the beck and call of employers, oblivious as to when they will be needed to work and struggling to pay their living costs. The detrimental effects of the practice has prompted the Government to take action.

Government reaction

The government announced an immediate review of the controversial employment terms which zero-hour contracts bring after it emerged that they were being used for approximately 1 million workers in the UK. This figure is four times the 250,000 estimated by the Office for National Statistics.

Zero-hour contracts cannot be abused in a way that avoids an employer’s responsibilities to its employees.

A poll of more than 1,000 employers by the CIPD revealed the scale of the practice. This has prompted Deputy Prime Minister Nick Clegg to express his concern at the insecurity they create. Mark Beatson, chief economist at CIPD, expressed that zero-hour contracts are being used for roles previously filled by casual or agency staff, saving the employer paying a fee to a third party.

The CIPD has since launched an investigation into the use of zero-hour contracts and have indicated that there needs to be a closer look at what is meant by them. Areas to be investigated further include the different forms that zero-hour contracts take, and clearer guidance on what good and bad practice in their use looks like. Zero-hour contracts, when used appropriately and ethically, can provide great flexibility for both employers and employees and has the potential to create more flexible working opportunities throughout the UK. This could then allow parents, students and carers alike to combine their work and home lives effectively.

The CIPD agrees that there are many advantages to such contracts, however they also propose that they are disadvantageous in failing to provide more certainty in working hours and earnings for those employees that need it. The CIPD indicate that they need to ensure that full support for employees and their rights are not being compromised through such arrangements. Zero-hour contracts cannot be abused in a way that avoids an employer’s responsibilities to its employees.

Overall, there may be a place for zero-hour contracts in tough times of economic downturn, but recent research suggests the majority of people are negatively affected and a reform in their current use is overwhelming.

Paige Jones is an intern at The Student Lawyer. She soon to be a second year Law student at University of Portsmouth. Her legal interests include commercial law

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