What Dave, Vince and Ed don’t tell you about zero-hours contracts

Zero-hours contracts have existed for decades, so why are they suddenly a hot topic? Instead we need policies that tackle the wider problems of employer control and working-time insecurity.

Brendan Burchell Alex J Wood
14 April 2015

David Cameron visits Colchester Plus in Colchester. Flickr/The Prime Minister's Office. Some rights reserved.

The election campaign has been dominated by the topic of zero-hours contracts. Yet, our political leaders have been a source of much confusion (sometimes deliberate, sometimes because they themselves are confused) with regards to understanding both this problem and its solution. 

Zero-hours contracts are ‘employee contracts that do not guarantee a minimum number of hours.’ Interestingly, such employment has existed for decades; in fact 20 years ago Tony Blair promised to end zero-hours contracts. Strangely though they have only become the focus of major media and political interest in the last 18 months, following a July 2013, newspaper exposé on a major retailer which was found to be employing 90% of their 23,000-workers in this way. 

Given the recent rise in prominence of zero-hours contracts, we might expect that the number of people employed on them to have rocketed in recent years. The Office for National Statistics now estimates that around 6% of employment is through zero-hours contracts; this represents around 1.8 million people – around the same number as currently unemployed. The Labour Force Survey shows that their prevalence doubled between 2004 and 2012 (data after 2012 can't be accurately compared due to the much greater recognition of zero-hours contracts amongst respondents). However, there is evidence to suggest that this may not be much higher than in the late Nineties – let alone the early Nineties when there were similarly high levels of underemployment but for which there is no data. Therefore, why have they only become such a hot topic now? And why weren’t they central issues of previous elections held in recessions when zero-hours contracts were probably also at elevated levels? 

The reality is that we have no accurate way to measure the number of people on zero-hours contracts. For example, if someone is employed on a zero-hours contract and they have not been given any hours for three weeks, should this still be counted as zero-hours employment, or should they instead be counted as unemployed?

This is not to deny that we are dealing with a phenomenon that is causing misery to individuals and families on an industrial scale. The heart of the matter is that zero-hours contracts are emblematic of a much more general phenomenon. The discussion surrounding zero-hours employment has clearly touched upon something which many people can relate to. 

However, the definition of zero-hours contracts is too narrowly focussed. The key issue is not that they offer no hours, but that they offer no security of hours. This zero security causes people anxiety, stress and problems with life/work balance. How can you plan your childcare or social life if you do not know when and how often you will be working? And if paid hourly, how can you ever be sure of whether you will be able to pay your bills or provide food for your family? The crux of the problem is that these contracts are a form of employer-controlled flexible scheduling and a large body of research demonstrates that this plays havoc with employees’ well-being, health and work/life balance. 

Yet, zero-hours contracts are only one specific form of this much wider employment practice used by employers and managers to keep a tight link between fluctuations in demand and labour costs by varying the number and timing of employees’ work hours. In fact analysis of the 2005 and 2010 waves of the European Working Conditions Survey shows that employer-controlled flexible scheduling has increased in the UK by seven percentage points to 24%. This is the biggest increase in Western Europe and means that around 7 million people in the UK experience employer controlled alterations to their schedules! To make things worse, workers often have little notice of these changes. 

Cameron argues that zero-hours contracts suit some people, such as students. And it is true that some people don’t mind being on a zero-hours contract, particularly if they or their household have other sources of income. But in-depth research into experiences of zero-hours contracts clearly shows that “enjoying the flexibility” of a zero-hours contract is a myth for many workers. This is especially true for those at bottom of the occupational ladder, who have little bargaining power. In reality, it is the employers who have all of the flexibility to offer or withhold work when it suits them. Employees are usually afraid to refuse work when it is offered to them because they fear that they will be punished by not having work offered to them in the forthcoming weeks and months.

If this is the problem, then what is the solution? When David Cameron admitted to Jeremy Paxman that he ‘couldn’t live on an exclusive zero-hours contract’ this was widely understood as an admission that he couldn’t live on a zero-hours contract. But an exclusive zero-hours contract is a specific form of zero-hours employment in which the employee is contractually forbidden from working for another employer.

On the 26 March the Small Business, Enterprise and Employment Act 2015 became law and banned this practise. Therefore, Cameron was actually saying that he couldn’t live on a type of zero-hours contract which his government had already outlawed. His stated perspective is that zero-hours contracts no longer constitute a problem. With exclusivity banned, the flexibility they provide is presumed to be beneficial to both employers and employees and thus the Government’s job is done.

Vince Cable, the Lib Dem Business Secretary, publicly agrees with Cameron (whilst in private he no doubt realises that this is nonsense). What makes this type of employment so insidious is not its contractual nature, but rather that workers feel blackmailed into working because they fear that refusing to work will cause their manager to retaliate by offering them reduced hours in the future. It might be illegal to contractually ban a zero-hours employee from having a second job but there is no way to stop a manager subtly punishing a worker by cutting their hours or increasing the unpredictability of their schedule.

Moreover, it is not clear why Cameron and Cable identify exclusivity as being the major issue when research shows that the real problem is insecurity. The coalition Government essentially stifled debate by limiting their consultation to this one issue. With exclusivity banned, do they really think that all zero-hour workers will get second and third jobs, which will be able to provide them with greater income stability? Even if they do, they will still suffer the stress and anxiety of not being able to plan their family and social lives and will have the additional stress of trying to balance the unpredictable demands of zero-hours employment with a second job. 

Cameron and Cable claim that the flexibility of zero-hours contracts works for both employers and employees. But research shows that this will only be true if employees have control over scheduling; low-paid workers are likely to have little control. Politicians should be seeking to protect the most vulnerable workers through policies which increase their control over scheduling, so that their lives are no longer at the whim of their employer’s demands.

Meanwhile, Labour leader Ed Miliband has made headlines by claiming that he wants to ‘end the epidemic of zero-hours contracts.’ Although Miliband clearly recognises the damaging consequences of insecure scheduling on people’s lives, it is far less clear how his proposal would help. Actually, there is reason to believe that it would make the situation worse. Miliband proposes that all zero-hours workers who have worked regular hours for 12 weeks should then have a legal right to a contract which reflects these regular hours. But there are number of problems with this proposal:

Firstly, as made clear by the Employment Appeals Tribunal ruling on Pulse Healthcare Ltd v Carewatch Care Services Ltd & Ors (2012) it is already the case that, legally, contracts of employment must reflect the true agreement of employment. So if employees are expected to consistently work regular hours then their contract legally reflects this regardless of what the written contract states. So this proposal is only formalising the existing situation and bringing written contracts into line with the legal contract. 

Secondly, an important reason why zero-hours contracts are used is that they enable employers to schedule workers irregularly, in order to match fluctuations in demand. Therefore, very few workers employed in this way are likely to work regular shift patterns over a twelve-week period. It has been widely reported that Miliband’s policy would end 90% of zero-hours contracts, but this is surely erroneous as Miliband himself claims that it is the unpredictability of these working arrangements which makes them a problem. 

Thirdly, a simple way for employers to avoid these regulations would be to ensure that workers do not have a regular shift pattern and thus the policy would actually exacerbate the irregularity and unpredictability of zero-hours employment and thus increase the suffering of workers employed on them.

Finally, employers could also avoid them through moving zero-hours workers on to contracts with such minimal regular hours that workers are forced to accept unpredictable overtime in order to make ends meet. This is already a major practice of one of the UK’s largest employers, where workers are frequently employed on contracts of just four and a half hours a week but also work large amounts of overtime – paid at the same rate.

What is needed instead are policies which not only deal with the specific problems associated with zero-hours contracts, but which tackle the wider problems that stem from the much broader growth of employer-controlled flexible scheduling and working-time insecurity. 

Unfortunately, Cameron’s and Cable’s unwillingness to introduce any regulation that will tie employers, and Miliband’s narrow understanding about the reality of employers’ unfettered control of hours and schedules in any job (not just zero-hours contracts) leaves all the main parties with flawed policies to deal with these forms of flexible employment which are a source of misery to millions of people in the UK today.

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