The Controversial Zero-Hour Contract in 2021

In a continuation of our mini-series on flexible working, we decided to take a look at zero-hour contracts. These contracts received massive backlash back in 2013 when it was revealed McDonalds, Sports Direct, and even Buckingham Palace employed a large percentage of their employees with them, with it being revealed almost a million people in the UK were on some form of zero-hour contract.

They have come back under the spotlight with the Zero Hours Justice campaign – spearheaded by Richer Sounds CEO Julian Richer, and Ian Hodson of BFAWU (the Bakers, Food and Allied Workers Union) – making a push for banning them in 2020. In response to Zero Hours Justice’s campaign, we’ve decided to take a look zero-hour contracts in general and answer a few questions about them that have returned to the fore.

What are zero-hour contracts?

Zero-hour contracts are legally defined in the Employment Act of 1996 (Part 2A, Section 27b) as a type of contract where an employer has no obligation to offer work to an employee – hence ‘zero hours’, as in, ‘zero guaranteed hours of work’ – but at the same time, there is no obligation for the employee to take hours offered. This differs from annualised contracts (which we have written about before) where employees may have to remain on call and accept the hours offered when on reserve but will be guaranteed a specific amount of work over the course of a year and a specific amount of pay for that work. It is also not strictly casual work, where the workers are temporary or freelance staff (though it can be.)

How many people are working in zero-hour contracts?

According to the Office of National Statistics (ONS), at the peak of the pre-pandemic, more than a million people were on some kind of zero-hour contract – that dropped to 857,000 with the general drop in employment due to COVID-19.

When comparing the average hours per week employees were working to the number of people on zero-hour contracts, it’s evident that in the early days of the pandemic, people were simply not given hours to work, then let go as the pandemic progressed – first hours worked dropped dramatically, then recovered as the number of employees in zero-hour contracts plummeted.

However, the numbers of hours worked per employee hasn’t recovered entirely. As of March 2021, zero-hour contract employees are still working an average of 20% less hours than before the pandemic hit. Until the pandemic is over and statistics not affected by furlough and lockdowns come out, it’s difficult to say what the trajectory of zero-hour contracts will be. [1]

Why are zero-hour contracts controversial?

Zero-hour contracts are considered controversial because, in short, they are seen to put the power in the employment relationships firmly in the hands of employers, with little recourse for employees who feel negatively impacted by their contracts. Zero Hours Justice outlines six reasons employees are negatively impacted;

1. Irregular and unguaranteed outcome makes finding housing difficult, because private sector landlords can refuse to rent and social housing is very limited.
2. They face greater uncertainty and stress about their working hours.
3. Bank-loans and mortgages require a guaranteed income, cutting zero-hour workers off from credit and borrowing.
4. They are less likely to receive employment rights like sick-pay and holiday pay (Amazon infamously refused to tell workers they were owed holiday and sick-pay).
5. Mental health is much poorer amongst workers due to feeling more vulnerable.
6. They are much less likely to be able to access benefits they are entitled to.

In short; zero-hours workers are more vulnerable. More than that, they are often lower-paid – whilst the rates of pay per hour are the same, ONS statistics show that workers only work an average of 20 hours a week, compared to a full-time 37.5 hours. The CIPD (Chartered Institute of Personnel and Development) report on zero-hour contracts in 2013 found a third of private sector workers and a majority of public sector workers wanted more hours per week, and the TUC found that at least half of workers wanted more hours.

There is also the issue of who is more likely to be a zero-hour worker – according to the Trades Union Congress, it’s BAME (Black, Asian, and other Minority Ethnic) workers. BAME women, in particular, are twice as likely to be on zero-hour contracts. The TUC writes; “Racial discrimination in the world of work traps BME workers into low waged and insecure occupations – BME workers have been over-represented in jobs with higher Covid-19 death rates. And they have borne the brunt of the economic downturn that has accompanied coronavirus.”

It also claims 2 in 5 BAME workers faced retaliation for turning down hours, almost twice as often as white workers. What this demonstrates is that zero-hour contracts are helping to reinforce structural gaps between white and BAME workers in job security and pay.

When are zero-hour contracts appropriate?

The GOV.uk website provides guidelines on when it thinks that zero-hour contracts are appropriate. Despite their use in some large corporations as the employment method for the bulk of their staff, the government actually recommends against using them in this manner; they state, “Zero hours contracts are rarely appropriate to run the core business” and “They should not be considered as an alternative to proper business planning and should not be used as a permanent arrangement if it is not justifiable.”

Whilst they acknowledge that there are some industries where staffing needs will be unpredictable, they also go on to state that “Many businesses provide a regular service or product and have a broadly predictable timetable or output and so permanent or fixed hour contracts can be more appropriate.”

In short, the government advice on zero-hour contracts seems to be that though there are some narrow applications where they are useful, broadly speaking, they shouldn’t be used – and especially not in the manner they are currently being used today by large businesses.

So what are those narrow applications?

For one, they recommend zero-hour contracts for new ventures, such as a new business, store location, or testing a new service.  For example, a hairdresser thinking about expanding into a general beauty business might hire nail salon artists on an ad-hoc basis before deciding to provide the service, to see if their clientele will use it and make the cost of the nail salon artist justifiable.

Or a juice bar looking to open a new location in the nearby shopping centre might hire staff for a probationary period to see if the new juice bar’s location is profitable, and if so, to adjust the timetable on the fly to take advantage of the shopping centre’s peak times.

They also recommend zero-hour contracts for special events like weddings, or as part of seasonal work like at the Christmas period. We’ve discussed one way to tackle seasonal work here, in our post about annualised contracts – but we also recognise that occasionally even these may not be enough to cope with a surge in demand whilst also taking care of your current employees or may not be appropriate for your business.

The final recommendation is for work in specialised and high-priority fields to cope with unexpected illnesses. A pharmacy may only have one head pharmacist qualified to dispense some types of controlled medication, and their illness could cause injury to one of their customers if they aren’t able to dispense their medication in a timely manner.

Consider, for instance, methadone, used to treat opioid addiction. Acute withdrawal from opiates is extremely painful, and because methadone is such a tightly controlled substance, the pharmacist sometimes must dispense a single dose and watch the patient take it. In this case, having a pharmacist they can call upon to deal with highly controlled medications when the lead pharmacist is sick is one option to solve that problem and prevent harm.

They also suggest multiple alternatives, including hiring agency staff, offering overtime, and hiring part-time workers.

What does ‘good practice’ for zero-hour contracts look like?

Whilst organisations like TUC and the Zero Hours Justice group want to bring a ban in for zero-hour contracts completely, other organisations such as CIPD recommend those employers that do use them conform to ‘good practices’ to ensure that the health and wellbeing of workers is maintained.

The CIPD has a series of recommendations for employers looking to put workers on zero hours contracts. They are;

• Employers should only be using zero-hour contracts when it suits both parties, not just the employer. If being on a zero-hour contract doesn’t suit the individual, then alternative arrangements should be made.
• They should consider whether zero-hour contracts are right for their business in the first place. As discussed above, if other flexible options are available, like annualised hours, it’s in the best interests of everyone involved to consider those options first.
• As of April 2020, all workers and employees are entitled to have a written copy of the terms and conditions of their employment.
• Worker’s status in the company needs to be reflective of their relationship with the company. There is a legal distinction between workers and employees, and should a worker begin to resemble an employee (or visa-versa), then it’s fair to update their contract to bring them in line.
• Line managers should be trained in how to deal with zero-hour workers.
• Zero-hour workers should have similar skill and career development opportunities to permanent staff.
• Reasonable compensation should be provided if pre-arranged work is cancelled – travel expenses and an hour’s pay is recommended by CIPD, but they also point out some employers pay for the entire shift even if it isn’t needed when staff members turn up (as compensation to the employee and a countermeasure to prevent such rug-pulling behaviour).
• Zero-hour contract workers deserve comparable rates of pay.
• All workers and employees should benefit from the same workplace protections.
• As of 2015, any clause which tries to prevent zero-hour contract workers from signing on with other employers are unenforceable – they maintain a right to have employment relationships with other companies.

These are just a few of the best practices you can implement to make work for zero-hour contract workers feel more secure in their employment with you.

What does the future look like for zero-hour contracts?

In the near future? It’s not likely we’ll see a shift anytime soon. Whilst the coronavirus pandemic certainly resulted in a reduction in the amount of people in zero-hour contracts, the trend is slowly reversing and it’s likely we’ll return to the pre-pandemic levels of a million zero-hour contract workers within a few years.

Prominent members of the current government have also previously written about how much they like zero-hour contracts, such as current Leader of the House of Commons, MP Jacob-Rees Mogg, who has written in the Telegraph praising them as being good for employers, which makes legislative change unlikely without massive pressure.

That’s not to say no changes will occur at all – Zero Hours Justice are still going strong, having won several battles to help workers during the Coronavirus Pandemic, including against Ikea and multiple borough councils. It’s possible their campaign will bear some fruit, or that the recommendations made by the Trade Union Council will be taken on board. It’s a tumultuous time, and lots of things could change. But for the moment, they seem to be here to stay.

What do you think? Feel free to join the conversation with us on LinkedIn, Facebook, Twitter or Instagram and tell us your thoughts. Or join our monthly newsletter, to keep informed of all the updates from the HR and You team.

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Footnotes

[1] These statistics were taken from the Office of National Statistics, as available on their website. This combines data from Series-280721 (Quarterly Unemployment Rate) and EMP17-May 2021 (Data about Zero-Hour Contracts from the Labour Force Survey).  The ONS explicitly acknowledges two minor flaws with the continuity of these data sets. The first is that the COVID-19 epidemic may have resulted in inaccurate reflections of nationality, ethnicity, disability and country of origin due to weighting issues, but acknowledges these are likely minor. It also acknowledges a break in the data between October ’19 and March ’20 due to a change in methodology. We do not believe that this affects the conclusions drawn about the overall trends discussed, but for transparency’s sake, we wanted to include these notes in our article.

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