Should zero-hours contracts be banned?

Banning something that works well for some people just because others are abusing it doesn’t make sense.

The blogger Stephen Tovey recently pointed out that zero-hours contracts can work well for both employer and employee. He’s right, of course. I’ll let you into a secret. I introduced zero-hours contracts back in the last century. Did I do it to exploit desperate workers and grind the faces of the poor? Well, not quite. These were very different times. Britain was coming out of recession and the organisation I was working for was in an area with almost no unemployment. The economy was growing at close to 4 percent.  (Yes, kids, it used to do that in the olden days.) Work was plentiful and we just couldn’t find people to take up full-time or part-time permanent roles. We tried putting the wages up but all the other employers were doing that too. There just weren’t enough people looking for permanent jobs. Zero-hours contracts was a way of trying to solve our labour shortage.

I remember not being entirely convinced that it would work but we decided to give it a go anyway. (Evidence-based management this wasn’t but we had to try something.) The unions were a bit dubious but, once we’d persuaded them that we were not trying to replace full-time workers, that getting the extra help would relieve pressure on the permanent staff and that having our own pool of casual workers would stop us having to pay fees to grasping temp agencies, they were ok with it. In the end, the new contracts were a great success. They opened up opportunities for people who would not otherwise have been able to work and gave the employer access to a whole new supply of labour. As I remember, there was very little complaint from either the managers or the staff. For the most part, zero-hours contracts seemed to work well both for employer and employee.

An interesting story, perhaps, but enough of the anecdotes. What does the data say? Well, the picture is not entirely clear. 

Some of it seems to support the view that many people are happy with zero-hours contracts. According to a study by the Work Foundation earlier this year, 80 per cent of people on zero-hours contracts are not looking for another job. Only 26 per cent of them said they wanted longer hours, which implies that around three-quarters are content with their current work pattern. To put this in perspective, the Work Foundation reckoned that 200,000 people were employed on zero hours contracts, which is only 0.7 per cent of the workforce, so we are not talking about a massive group of people.

However, more recent studies suggest that these figures might be on the low side. Research by the Resolution Foundation concluded that 200,000 was almost certainly an under-estimate and a parliamentary reply last month put the number at 307,000 in the social care sector aloneThis paper from Leeds University found that in 2012, nearly 60 per cent of care workers and around a quarter of their managers and supervisors were on zero hours contracts. It is likely, then, that the 0.7 per cent figure is a conservative estimate.

What most studies seem to agree on is that the number is rising. As the Work Foundation’s figures show, the use of zero-hours contracts broadly reflects the state of the economy. 

The numbers fall as the economy improves, there is a slight rise during the slowdown of the early 2000s and then a steep rise during and after the financial crisis. This suggests that firms are, to an extent, using zero-hours contracts to avoid making the commitment of taking on permanent staff when orders are volatile and uncertain.

Zero-hours contracts are used predominantly for unskilled or semi-skilled labour. The further you go up the income scale, the less likely you are to be on one. 

The relatively high figure for professionals looks like an anomaly but I suspect it conceals a wide variation in earnings. In the professional occupations, part-timers earn, on average, higher hourly rates than their full-time counterparts. Among some of the professionals on zero-hours contracts are probably a few very highly paid people who work when they feel like it and others who have been made redundant and have joined the growing army of desperate odd jobbers.

And this probably reflects the wider pattern. Zero-hours contracts are like part-time work, temporary work, interim contracts and self-employment. When the economy is good and there is plenty of employment, they give people more flexibility to work when and where they like. For those with highly marketable skills, income from a variety of sources or a spouse as the main earner, they enable people to pick and choose the sort of work they do.

On the other hand, when the economy is in the doldrums and the workforce under-employed, zero-hours contracts mean uncertainty and fear. For those with lower skill levels or for whom the zero hours job is the main household income, the precariousness of their situation can be terrifying.

There is evidence that, in some areas, the element of choice in the zero-hours contract has almost disappeared for the employee. The Resolution Foundation found that employees faced the threat of 'zeroing-down' – so if they refused to work then they wouldn’t be offered work in the future. The study concluded:

[I]t is clear that for the majority of those employed on zero-hours contracts this freedom and choice are more apparent than real. For those individuals who require a minimum number of working hours per week to ensure their family is financially secure or those who, confronting severe power imbalances in the workplace, fear that turning down hours as and when offered will result in future work being withdrawn, life on a zero-hours contract is one of almost permanent uncertainty.

It is for these reasons that some, like Labour’s Andy Burnham, have called for a ban on zero-hours contracts. That would be a bit premature though. It’s rather like the ban on contractors in government which was proposed last year. Banning something that works well for some people just because others are abusing it doesn’t make sense. Zero-hours contracts serve a purpose, just as interims, part-time workers and contractors do. In any case, some employment lawyers reckon that an outright ban would be difficult to implement.

There is clearly still a lot we don’t know about the extent of zero-hours contracts and how wide-ranging the abuse associated with them really is. Vince Cable’s review is therefore a good start, though some have called for a more detailed investigation.

There’s a more fundamental point here though. Zero-hours contracts are being used to exploit people for the same reasons that wages are being held down, in-work benefits have gone up and self-employment is at record levels. The economy is in the doldrums, the workforce is under-employed and the balance of power between employer and employee has swung in the employer’s favour. Like so many other aspects of the labour market, the exploitation of people on zero-hours contracts is a symptom of the wider economic collapse. Ban zero-hours contracts and the problems associated with them will probably re-appear in another form.

Flip Chart Rick is the author of the Flip Chart Fairy Tales blog, where this post originally appeared.

Domino's Pizza is one of the companies that has made widespread use of zero-hours contracts, with around 90% of its 23,000 UK staff on the contracts. Photograph: Getty Images.

Flip Chart Rick is the author of the Flip Chart Fairy Tales blog

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When will Brexit actually happen? An Article 50 timeline

Knowing the precise date of "Brexit Day" depends on the outcome of numerous untested laws

It’s the question on the lips of every Leaver - what is the date Brexit will finally happen? Article 50 is set to be triggered no later than March 2017. But reaping the changes of a full removal from the Union could take a lot longer. From rewriting legislation to negotiating the diverse interests of the European Union, Brexit is going to involve a lot of waiting.

Will it still actually happen?

There are a few things that could trip up an exit from the EU, however unlikely that might seem. The House of Lords, who have already started their voting process on Article 50 could potentially block the bill, but is more likely to threaten to block the bill in an attempt to leverage amendments - such as the position of EU citizens in the UK. Amendments that the House of Commons unilaterally failed to pass.

Julia Rampen writes about every Remainer’s dream - some sort of backdoor challenge that The People’s Challenge, a campaign group, believe exist. According to the founders, it is entirely reasonable to revoke Article 50 at the end of negotiations, if Brexit is not a done deal.

Okay, so if it does happen, when?

Prime Minister Theresa May has stated that she wants to trigger Article 50, a clause of The Lisbon Treaty in March 2017, which gives a country two years to decide the terms of the departure. This puts Brexit approximately happening in Spring 2019, providing all the negotiations are complete in that estimated time period.

But in effect, this only means Brexit will begin in Spring 2019. The results of leaving the EU, such as all the changes to laws that were once determined by the Union, will take years. As for the economic promises made by the Leave campaign, they may take even longer (if they even exist). This leaving process will begin with The Great Repeal Bill - an as of yet unpublished bill created in order to help a transition from EU laws to UK laws. This bill essentially states that the authority of EU laws will be revoked, and “where practical” will be transposed to domestic laws, able to therefore be adapted as appropriate for the UK.

A telling part of the Government's briefing on The Great Repeal bill is the quote that adapting EU laws for domestic use “may require major swathes of the statute book to be assessed to determine which laws will be able to function after Brexit day” (Brexit Day not being a national holiday of mourning, but the day the UK officially leaves the European Union). This is where the core issue lies, that in theory we could have left the EU by 2019, but in practice, the changes that will invoke won’t be in play for years.

The main ambiguity with Brexit lies in the fact that these are relatively new and untested laws. Since it was written in 2009, Article 50 has never been invoked, so the estimation of a two year negotiation period is largely a theoretical one. Various MPs such as Philip Hammond, Chancellor of the Exchequer, have noted that the process would likely exceed the two year framework - something that could be dangerous for the prosperity of the UK.