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We should reform zero-hours contracts, not ban them

Abuse needs to be addressed, but we must maintain flexibility for employers and workers.

We must maintain flexibility for employers and workers.
Close to 600,000 workers or 2 per cent of the workforce are employed on a zero-hours contract. Photograph: Getty Images.

There is still much that we don’t fully know about zero-hours contracts – contracts that do not guarantee any hours of work. Estimates about the number of people working on zero-hours contracts vary significantly and the jury is out as to whether their use is cyclical (driven by years of economic downturn), structural (a permanent feature of the labour market) or both. But there is already enough evidence of misuse to create a strong case for action on certain fronts to improve security for workers, while rejecting an outright ban. Our new report, Zeroing In, puts forward a set of recommendations for the reform of zero-hours contracts, including, but going beyond, a ban on exclusivity clauses already suggested by the government.

The latest estimate from the Office for National Statistics is that close to 600,000 workers or 2 per cent of the workforce are employed on a zero-hours contract. Health and social care, hospitality and administration account for over 50 per cent of these workers. Zero-hours contracts are intended to offer flexibility to employers and workers. Employers can quickly change their staffing levels at no cost and workers can work when they choose, helping to balance family and other commitments. However, in reality, a quarter of those on zero-hours contracts work a fixed pattern of hours each week; a third of employers expect workers to be available for work at all times; and four out of ten zero-hours workers would like to work  more. Flexibility for employers too often comes at the expense of workers.

To address this imbalance, anyone who has been employed on a zero-hours contract for at least a year and works a relatively consistent pattern of hours should have the right to a fixed-hours contract, if they choose. Under these circumstances, zero-hours contracts are not being used to respond to changes in demand. Workers are simply being denied employment rights to which they are entitled, such as Statutory Sick Pay and paternity and maternity leave. Introducing this right after 12 months rather than 12 weeks, as has been suggested, recognises that employers need time to plan how best to use their staff.

We should also extend the right to a set of employment terms to all workers not just employees. This would help to address the fact that anecdotally many people who take up a zero-hours contract do not know they have no guaranteed hours  until their hours are cut and are frequently not aware of their entitlements. In addition, Acas should work with business representatives and unions to set out a good practice guide to increase employer awareness of how to use zero-hours contracts fairly and more funding should be available for enforcement to proactively clamp down on employers who misuse these zero-hours contracts.

This is a deliberately cautious approach, seeking to address abuse, while maintaining flexibility for employers. As the recovery strengthens and the data on zero-hours contracts becomes clearer, we will need to keep the situation under review. If improvements are not forthcoming, a stronger, more statutory approach could be justified.