Why abolishing zero hour contracts really would throw the baby out with the bathwater

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April 2, 2015 by Paul Goldsmith

Once again the issue of zero hour contracts came to the fore this week as Labour announced restrictions on their exploitative use and the SNP’s Deputy Leader in the Commons, Stewart Hosie – said that the party would vote to abolish zero hour contracts should they hold the balance of power (as is quite possible) after the May 7th election. Just the name of these contracts sends a shiver down many peoples’ spine, which is why it seems so simple to abolish them. But abolishing them, or not being careful enough in dealing with their more exploitative aspects – could cause far more problems than they solve. There is a reason why 15% of employees on zero hour contracts have chosen to be on them. There is also a reason why many students choose to be on them. Abolishing them really is throwing the baby out with the bathwater.

First of all – it’s worth explaining what zero hour contracts are. They allow companies to hire staff with no guarantee of work. They are needed because the law requires all staff to have a contract. Employees work only when employers need them, often at short notice,  and don’t get paid if they are not needed. Sick pay is often not included, but holiday pay is, in accord with working time regulations.

They are controversial for a variety of reasons. They offer less financial stablility – with 16% of zero-hour contract workers saying they don’t get enough hours to live on. Critics are also concerned that employers use them to avoid some responsibilities to employees – employees on them don’t have the same rights as full-time employees. It has been said that employers offer more hours to favoured employees. It has also been pointed out that employees can avoid paying national insurance if they hire an employee for below a certain amount of hours a week, making it cost-efficient to split one person’s normal working hours into three people.

The more exploitative contracts demand exclusivity – in that an employee on one can’t work for anyone else, even if they are getting no hours. Some zero-hour contracts can demand an employees comes in at short notice compulsorily, or they are fined. OR they give the employer the right to cancel a shift at short notice too – which is unfair on a worker who has turned down work for other organisations as they had a shift scheduled. These exploitative provisions can and should be dealt with. But it is important to note that they are a failure of employment practice, not of zero hours contracts themselves.

Labour are saying they will make it possible for someone on a zero hour contract but who has had regular hours for three months gets the right to get a full contract. They are also saying they want to address the exclusivity clauses and lack of compensation when shifts are cancelled. But neither party will commit to banning them – and there is an important reason for that.

A survey of employees has found that around 700,000 employees are on zero-hour contracts. Interestingly though – a survey by the ONS of employers suggests the number could be as high as 1.4m (which suggests part of the next Government’s plan should be to check if employees know what is in their contract!). This, by the way, goes part way to explaining why Labour’s claim that the number of people on zero hr contracts has grown by a multiple of three since 2010. The ONS says that hasn’t happened, it’s just that quite a few people, as Labour has raised awareness of zero hours contracts, have realised they are on one. That they didn’t know suggests they were getting the hours they wanted anyway, as so 66% of those asked about them.

The first clue as to why zero hour contracts are not always a bad thing can be found in who uses them. A third of voluntary sector organisations use then, a quarter of public sector employers use them, and 17% of private sector firms, with Sports Direct, Cineworld and JD Wetherspoons being particularly prominent amongst those. Campaigners like to highlight the big, bad private sector firms – but they are NOT the main users. There has to be a reason why a higher proportion of voluntary sector and public sector firms use them.

That reason is flexibility and cost management. We would expect our voluntary sector organisations and public sector organisations to be wary of waste, and zero hour contracts can mean they can manage their workforce to meet demand. It means that they can hire more people when they need to, allowing those people also to work for others. This is what private sector firms can do too. Now, you can argue that people aren’t waste, and if the employment figures are being massaged to suggest that it is up when many people are underemployed, that is not a good advert for them.

So we turn instead to why some employees request them. This video looks at someone who has done so. He is one of the 15% of those on zero hour contracts who themselves want the flexibility to decide when and when not to work. He is a Dad of two who wanted to combine family commitments with his work, found he couldn’t do so on a normal full-time contract, but could do so on a zero-hour contract. So he asked for one. His contract means he can turn down a shift if he can’t or doesn’t want to do it. It suits him and his life and it obviously suits his company or they wouldn’t do it. He can also do work for other companies if he wants to. He does find it annoying when companies cancel shifts at short notice – but surely there can be provisions legislated for that compensates the worker for that? Students also like zero-hour contracts as they can get good part-time work for companies who need them – particularly in catering and hospitality – to help fund their course and lifestyle at university. Again, regular hours may not suit them, and zero-hour contracts do.

Labour, always quick to put politics ahead of policy, called zero hours contracts an “epidemic” yesterday. At the moment only 2% of workers are on them, so it certainly isn’t an epidemic yet. There was a 19% growth in their use over the past year, but some have argued some of that was due to employees hearing about them as an option and asking to go on one, and, as I said before, realising they were on one. I have no problem with Labour protecting workers’ rights, it is as it should be, but they should not go too far and end up destroying jobs.

It would be good if they could show at least a tiny bit of empathy for those who set up and run businesses, particularly small traders with irregular demand for their goods and services who can stay in business because of the option of zero hour contracts. Remember, over 80% of all businesses in this country have 5 employees or fewer. But then again, where would a group of people who have done nothing but politics in their lives get that empathy from? These small business traders are far from the 1% Labour says this policy is targeting, but are an example of the baby that would get thrown out with the bath water if they are not careful.

My point is not that zero-hour contracts are great. I will not claim that I could live on an exploitative one (note, David Cameron said last week he couldn’t live on an ‘exclusive’ zero hour contract, but the word in speech marks has been conveniently removed when his words are reported). But that doesn’t mean they are wrong or evil. They need to be regulated and not exploited. But not having them at all could mean that those 1,000,000 people on them may not have a job at all. Is that what the SNP want?

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