Do we need a crackdown on zero-hours contracts?

David Kingman asks whether Britain needs to impose tougher regulations on employers who use zero-hours contractsTeen Girl Serves Fast Food

Zero-hours contracts have recently become a major talking-point in Britain. For many people, the use of these type of deals – under which an employer offers employees work as and when they need them, with no guarantee of regular hours – have to come to symbolise all that is wrong with Britain’s post-crisis labour market, where a recovery in the overall levels of employment masks a continuing deterioration in pay and conditions for many workers.

Ed Miliband, the Labour Party leader, has recently brought the issue to the top of the political agenda by announcing new plans to crackdown on zero-hours contracts if he wins power at the next general election. If he succeeds in attracting enough attention to the issue then the other parties will be forced to respond with policies of their own.

Given that zero-hours contracts disproportionately affect younger workers who are at the beginning of their careers – as IF emphasised in our recent response to the public consultation on zero-hours contracts – it is worth looking at Miliband’s proposals to see what they offer. Will they help young people who are existing precariously in the labour market? And do we need to crackdown on zero-hours contracts at all?

“Worst abuses of the system”

According to the BBC (see above link), Labour’s plan is to introduce new rules on the use of zero-hours contracts which should tame the “worst abuses of the system”. Their proposed policies would include:

– People on zero-hours contracts would no longer be obliged to be available outside contracted hours (some employers currently keep their zero-hours workers “on call” 24/7 in case new offers of work arrive)

– Exclusivity arrangements would be outlawed, so zero-hours employees would be free to accept offers of work from other employers

– Zero-hours employees would have a right to compensation when shifts are cancelled suddenly

– Zero-hours employees should receive “clarity” from their employer about the terms and conditions of their employment, including their rights (research suggests that many zero-hours workers do not know their employment status)

– After six months with the same employer, zero-hours employees would have the right to request a fixed minimum amount of work

– After twelve months with the same employer, zero-hours employees would have an automatic right to a fixed-hours contract

In theory, these measures – which were based on a review of zero-hours contracts carried out on behalf of Labour by Norman Pickavance, the former HR director at Morrisons – would give greater security to workers who find it difficult to make ends meet on a zero-hours contract, without costing the employer too much in the way of flexibility.

Businesses will be allowed to opt out of the requirements to provide workers with greater security after they’ve been with them for six or twelve months if they can demonstrate that it would be unfeasible to employ people on such a basis (for example, if their workload is tightly related to peaks and troughs in demand). Workers will also be allowed to opt out of receiving their new rights if they are satisfied with their workload under the present system – an acknowledgement that some workers find a zero-hours contract perfectly acceptable, especially if they need the added flexibility that they can provide.

Of course, a lot will depend on how these new rules are implemented in practice, particularly with regard to the legal definitions of different types of working arrangements. Exactly what makes a zero-hours contract in the eyes of the law is currently ill-defined, and there is a danger that bosses may be tempted to come up with new types of arrangement to get around whatever regulations come into force.

There is also the problem of whether workers – especially younger ones – will be willing to stand up for their rights when they are dealing with their employer. Yet it seems likely that these regulations may do some good in an area where the balance of power currently seems to be heavily tilted in favour of the employers, rather than the workers.

Is this enough?

Perhaps the bigger question which we need to ask is whether simply addressing the issue of zero-hours contracts is going far enough when it comes to dealing with the increased sense of insecurity in Britain’s jobs market.

Ian Brinkley, of the Work Foundation, summed this up in their response to Labour’s policies when they were announced:

“Overall, Labour’s proposal is unlikely to do much, if any, harm to aggregate employment…They will discourage the current use and future growth of these particular forms of employment, especially where people are doing them because they have no choice. But I strongly suspect they will have much less impact on casualization, insecurity and poor employment practices at the bottom end of the labour market than supporters of the measure might hope.”

Although zero-hours contract have become of the most visible forms of labour market casualization thanks to the level of media coverage they have received, it is worth remembering that they are currently believed to affect relatively few workers; the latest ONS estimates suggest there are only around 1.4 million zero-hours contracts in a labour force which employs over 30 million people.

Other labour market trends – falling real pay, forced self-employment, only being able to get part-time work, or having to work for free through internships – are thought to affect many more young workers, yet they have featured much less in our public debates. Tackling the abuses of zero-hours contracts should be only a part of a broader strategy to address a range of structural problems within Britain’s labour market.