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25 February 2015

Are zero-hours contracts here to stay?

The number of zero-hours contracts is growing, and it may be that they are a permanent fixture

By Conor D'Arcy

In many ways, the growth of zero-hours contracts has symbolised the UK’s labour market since the downturn began: contributing to both stronger than expected employment figures but also rising job insecurity. One of the big question marks though has been whether they are solely a symptom of the recession and would start to disappear as the recovery strengthened, or if they are here to stay. New figures released by the ONS today suggest the evidence for the latter just got stronger.

The data come from two sources: one is based on the responses of employees with the other from employer surveys. The employee figures show 697,000 people reported being on a zero-hours contract in the final three months of 2014, up nearly a fifth from the corresponding period in 2013 (586,000). The total number from the employer survey is much higher, standing at 1.8 million ZHCs in August 2014 compared with 1.4 million in January 2014.

What explains the discrepancy? The employer data give the number of zero-hours contracts that provided any work in the previous fortnight rather than people on zero-hours contracts. The higher tally is likely to reflect the fact that many individuals have multiple ZHCs. An important note of caution on these contract figures is that looking at the January and August figures is not comparing like with like because of seasonal variation.

Increases in previous updates of these figures have been put down in part to growing awareness among employees of the existence of zero-hours contracts; prior to growing political and media interest, many zero-hour employees were unaware that they had such a contract. This may have caused the employee-reported number to rise even if the number of people on zero-hours contracts remained the same. The same factor may still be at play but, given that zero-hours contracts hit the headlines in 2013, public awareness is likely to have risen significantly before the latest figures were published.

So, bearing in mind those caveats, the fact that both the employee- and employer-reported figures have grown in the last year sharpens the sense that the rise of zero-hours contracts is not solely a recession-related phenomenon. The increase is particularly striking given positive signs elsewhere. Unemployment fell from 7.4 per cent to 5.8 per cent between Q4 2013 and Q4 2014. Other forms of atypical employment – such as self-employed or involuntarily temporary work – have begun to fall in recent months too as full-time positions have grown strongly. This supports the findings of a recent CIPD survey that almost half of employers who used ZHCs said they were part of their long-term strategy, three times as many as those planning to phase them out in the following 12 months. And though we know zero-hours contracts can and do suit some employees, one in three (34 per cent) zero-hours contract workers say they would like more hours compared with 13 per cent of other employees as well as facing other difficulties. Three-quarters of the growth in the recent figures has been among those aged 35-64, not just students and pensioners who are often cited as benefiting from the flexibility.

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The Resolution Foundation has made proposals to deal with the worst abuses of zero-hours contracts but argues against a complete ban because some employees like zero-hours contracts, they give flexibility to employers, and there is a risk of intervening unnecessarily to tackle a problem which the recovery would take care of itself. The first two points still stand. On the latter, it’s still early days but as the picture from the data becomes clearer and their numbers continue to grow, the case for further policy action, beyond simply banning exclusivity clauses, becomes more compelling.

Conor D’Arcy is a policy analyst at the Resolution Foundation. He tweets as @conortdarcy.