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Zero-hours contracts have their place in the labour market

5 August 2013

One million people on zero hours contracts, scream the media – quoting figures released today by the Chartered Institute of Personnel and Development. This is at odds with recent ONS figures that put the number on these contracts closer to 200,000.

Zero-hours contracts have been around for many years in the retail and hospitality industries, where demand fluctuates from month to month and even day to day. Their use has spread recently to other sectors including healthcare (with up to 100,000 such contracts, including last year as many as 800 consultants), education and public services. In response to the media storm, the Department for Business, Innovation and Skills is conducting a review.

Why has the use of these contracts grown? It is easy to see them as the result of unscrupulous employers trying to squeeze out extra profits at the expense of workers. Unions have been quick to point to hard cases where individuals are unhappy with their arrangements. However, today’s CIPD findings confirm that the large majority of people working on zero-hours contracts are happy to do so. Their use also isn’t confined to the private sector. 34per cent of employers in the voluntary sector and 24 per cent of ones in the private sector use them compared to just 17 per cent of private sector employers.

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These contracts offer opportunities to many people who would otherwise find it difficult to take regular work at fixed times: think of students and single parents. They are normally free to take shifts, or refuse them, on a day-to-day basis as their availability fluctuates. Other people on zero-hour contracts include those available for occasional extra work in addition to their main job, and semi-retired individuals who want to work occasionally but not on a fixed weekly basis.

The growth of zero-hours contracts has been a product of making agency work and other forms of non-permanent contract more costly for employers. There will always be a need for variable hours and seasonal workers. Banning zero-hours contracts and trying to force people onto permanent contracts is not the answer; it would be detrimental to both employers and employees. More worryingly, we would likely see much more of this kind of work done cash-in-hand in the shadow economy.

Zero-hours contracts are not ideal, and not for everyone. They make little sense for many employers in sectors where workloads are consistent and predictable.

It is, though, important to offer job opportunities to some groups who are unable to work regular hours and for young people. The growth of these contracts has helped to keep levels of joblessness down at a time when many other European countries with less flexible labour markets have seen staggering levels of unemployment. While Vince Cable’s review may be useful in giving us a clearer picture of what is going on, he should not allow emotions to run too high. An outright ban of zero-hours contracts would do more harm than good.

Len Shackleton is a Fellow at the Institute for Economic Affairs

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Show comments
  • Lo

    Daniel Maris, you’re right, this country is broken. it’s been broken for a long time.

  • Lo

    Easy for you to say all that, but perhaps you are not currently trying to get onto the property ladder. My partner is a full-time secondary teacher and I am currently a supply teacher in primary schools. No mortgage lender will lend to us, due to the unpredictable nature of my job. If I were on a permanent contract, which I have been trying to secure for the last 2 years, we would instantly qualify for a very decent mortgage. We even have the deposit ready!

    I obtained a decent degree at a top-five university and then achieved excellent marks in my postgraduate qualification at a leading university for Education Studies. I then went on to gain over a year’s experience as a long-term supply teacher in a school and what have I got to show for it? A zero hours contract on a reduced agency fee wage, which is £40 a day less than I would earn as a Newly Qualified Teacher. Oh and that’s when I can get work; most days I’m sat by the phone waiting, as schools have clamped down on their use of qualified supply teachers in favour of unqualified, cheaper staff or internal TAs. Did I mention we don’t get paid in school holidays? Most months we’re lucky if we can avoid dipping into our savings to pay the rent and bills.

    I think it’s outrageous that we have people defending these contracts, as most of the time it is young people paying the price. I don’t think many people would genuinely rather have a zero-hours contract than a permanent position of the same salary.

    I agree that we do need to zero hours contracts available for those who are seeking permanent positions and I think they offer an opportunity for employers and employees to test each other out. That said, I think after people have been on zero hours contracts for a certain amount of time they should be guaranteed a permanent position (providing they are a diligent worker, of course). There should simply be enough permanent positions to ensure that we don’t have millions of people who are either unemployed or underemployed. There currently aren’t enough jobs and it NEEDS to CHANGE!

    Employers are effectively forcing people to sacrifice their careers; people have no choice but to accept a zero hours contract if they want to pay the bills and keep a roof over their heads.

  • ssimpson

    I am on a Zero hour contract as a tutor at a college. I only get paid for actual teaching hours, there is some holiday pay, prep time built into the pay rate, but I put in hours of work that I am not paid for. CPD training/end of course evaluate (which takes full days) I do not earn a penny. from the end of August until the end of October I do not earn a penny. It is impossible to budget and plan and causes a lot of stress, my husband is also a tutor on zero hours contract, so finding it impossible to have a structured life, putting in loads of work for very little wages, after 6 years of study!!!!

  • DanCM

    Typo alert – “34per cent of employers in the voluntary sector and 24 per cent of ones in the private sector use them compared to just 17 per cent of private sector employers” – please amend

  • Smithersjones2013

    Not only that but they can provide an avenue into work for people when for whatever reason (e.g. they have been out of work for a long time) which would not be anywhere near as possible through conventional employment. They allow people to demonstrate their abilities to potential employers. They put the otherwise unemployed in the employment shop window when otherwise they may well probably just be left on the shelf. It was the route my partner found her way back into full time employment.

    Not only that they allow low income/profit and non profit organisations (e.g. charities) to efficiently organise their human resources without having to provide permanent cover in the event of unexpected personnel shortages (e.g. sickness etc). If there was no such thing as agency staff then its likely a good number of small to medium enterprises and small charities (e.g. in the care industry) would go under because they could no longer fulfil their legislative requirements. The wider implications of losing agency staff and other zero hours contracted workers would likely have a widescale detrimental effect on society

    Of all recent bouts of hysteria from the usual witless classes this is amongst the most ill-informed and absurd.

  • FF42

    I think Len Shackleton is missing the point. We’re not talking about casual work where the employee can take or refuse jobs that are offered to them. The issue is where employees are contracted to be available for work, when they are not guaranteed to be paid. It doesn’t even need to be actually zero hours. It’s the requirement to be available without being paid for it.

    This is the offending clause in a sample contract I found on the Internet:

    You will be expected to be available for work within these hours, although the organisation cannot guarantee the number of hours of work that will be offered.

    A friend of mine is caught on this dilemma. As a recently graduated teacher trainee, finding a permanent teaching post is very difficult. She can either make herself available full time for supply teaching jobs that may or may not transpire. Or she can get a full time job in a shop.

    • HookesLaw

      Exactly … ‘supply’. Supply teachers have been around for ages. As have other ‘supply’ professions.

  • Newsfox

    There is obviously pretty serious exploitation going on. In particular, I hear stories of people being pressured into not looking for anything else and being classed as ‘having a job’ by the benefits people when they might not nearn for days and weeks.
    I did a ‘zero hours’ job years ago and for my weird cricumstances at the time it was fine. But in that job, if you were half decent there was always full time work.
    You cannot expect people to go months without working while classing them as ’employed’ or work just maybe six odd days a month.
    But, as we say in Scotland, what a great way to gemme the stats!

  • Tom Tom

    Len Shackleton joined Buckingham in September 2011 as Professor of
    Economics. He was previously Dean of the Royal Docks Business School at
    the University of East London and prior to that was Dean of the
    Westminster Business School. He has also taught at Queen Mary,
    University of London and worked as an economist in the Civil Service.
    His research interests are primarily in labour economics. He has worked
    with many think tanks, most closely with the Institute of Economic
    Affairs, where he is an Economics Fellow. Professor Shackleton has over a
    hundred publications to his name and is a frequent commentator on TV
    and radio.

    • Charles Hedges

      Many thanks: it is not evident that a faculty member of the University of Buckingham has the interests of the underpaid and exploited as a primary concern.

      • Daniel Maris

        No I think they are probably more concerned about the quality of the sherry on offer in the senior common room.

  • Tom Tom

    Zero Hours Contracts are a Restraint of Trade and assymmetric because one party is forced to “be available” yet refuse “other work” so it is a nice dodge for Job Centres to claim workers are “placed” yet unable to draw income because the employer is not paying for the “call option”. It should be illegal to have a contract where no consideration changes hands. It is a bizarre distortion of Contract and undermines commercial relationships

  • Dogsnob

    Tell us Len, how your zero-hours contract affects your life?

    • TonyB58

      Very good question. I bet Len, like all the other advocates of these hateful contracts is one of those people who would never dream or have to accept one themselves. Such terms are conditions of employment are of course only for the “little people” in our free-market society.
      Returning to Len I suspect he has never enjoyed the “flexibility” and “advantages” of a of zero hour contract. My memory of him is as a long-haired, denim clad young economics lecturer at the Central London Polytechnic back in the early 1980s. At that time the very worst terms of employment he would have enjoyed would be those of a visiting lecturer. He would have a fixed allocation of teaching hours for the academic year, (9-months). Of course academic courses in those days lasted around 9 months, we didn’t then have nasty, dummed down US style semesters in those days, so no “zero-hour” contract here!

  • Troika21

    We can ban Zero Hours whilst keeping Key Hours contracts (that guarantee a certain minimum of hours). Two hours each week (say) is not going to be too taxing on employers/employees, is it?

    And if banning them is too strong for some, then we can at least regulate them better: ensuring that employees can take other contracts, and prohibiting employers from penalising them for doing so or being unavailable, etc.

    ZHC are the prospect of work, not work itself, this sort of thing is exactly what helps create an under-class.

    Whilst the post paints a rosy picture of ZHCs, I doubt many on them have access to (long-term) credit or savings. Just a method of shifting the cost of employing people onto the welfare system.

    • Smithersjones2013

      Exclusive Zero Hour contracts and all that encompasses should be banned but thats about it. Denying people a way of climbing back onto the employment ladder has got to be a bad thing for both potential employees and employers.

  • HookesLaw

    I presume you mean 24% in the ‘public’ sector.

    In terms of numbers we should bear in mind the 1 million is a big number. Its extrapolated from a survey (of 1000 employers) the robustness of which no one has a clue about.

    Meantime we hear that surveys of services activity are showing a big boost. Pointing to a significant Q3 growth figure. No wonder Cable wants to put a block on jobs growth.

    • Tom Tom

      If Services are showing a “big boost” it shows Osborne has FAILED to re-balance the economy.

  • HookesLaw

    The usual useless headlines from an illiterate press based on fatuous research.
    The truth does not matter only the opportunity to scream a headline.

    But fear not
    The press are our saviours and should be beyond and above legal independent regulation.
    Sleep easy all you usual suspects fearful of the evils of censorship. Feed your ignorance in peace.

    • Tom Tom

      Someone at Disqus in California has your number and no doubt filed it in Utah

  • TonyB58

    Funny. I put a post on a couple of hours ago, soon after Noa, and it seems to have now disappeared. Have I been “moderated”?

  • Daniel Maris

    Does anyone really think that zero hours contracts result in good standards of care in care homes and other establishments?

    What is wrong this country – why are we pursuing all these insane policies: mass immigration, zero hours contracts, raising the pension age while young people are denied work, selling 3 out of 4 houses in central London to people from overseas…the list is endless!

    • Dan Grover

      That private individuals choose to accept zero-hour contracts isn’t a mark that “we are pursuing” it as a policy; It’s what happens when people have the freedom to choose. Would you rather they didn’t have this choice?

      • FF42

        In general I would agree with giving employees a choice. The problem with zero hours contracts is that they are the opposite of what Len Shackleton claims: they create inflexibility. They specifically prevent people from seeking paid employment because unscrupulous employers require availability without giving any comitment in return

        • Dan Grover

          Which is a valid problem but it doesn’t go against what Len was saying – he essentially said that they’re good for some people, not all. And that’s true even when you consider the issue you raise; Not everyone needs notice, and not everyone wants standard shifts. One thing that a lot of people seem not to realise is that almost all zero-hour contracts enable the employees to say no. My brother, for example, used to work in the Ikea warehouse in Croydon on a contract like this, and for him it was perfect; He got offered work quite frequently and he was free to say yes or no depending on if he was doing anything else and how much he needed the money. It definitely is a good system for *some* people.

          • FF42

            I don’t think Professor Shackleton understands the zero hours contract. He states: They are normally free to take shifts, or refuse them, on a day-to-day basis as their availability fluctuates. Under a zero hours contract an employee’s availability doesn’t fluctuate, nor is he free to take or refuse shifts. He has to be fully available and turn down other work offered to him during his contracted hours.

            • Dan Grover

              That’s certainly not the case universally; I know plenty of people working jobs where they have no promise of work but where they are free to turn down shifts when they do get the offer.

              • FF42

                I have no problem with that. There is I think a gray area where employers ask for a degree of flexibility in exchange for an expectation of a decent amount of work. It’s where employers block employees from seeking other work at no cost to themselves that I object to. By the way, I am an employer. I believe in give and take.

                • Daniel Maris

                  Good, we could become a successful country if every employer had your fair-minded attitude.

            • Daniel Maris

              Precisely, he hasn’t got a clue what he’s talking about.

          • Daniel Maris

            I am sure that lowering the working age to allow children to work would be good for *some* people. It’s a non-argument.

            The issue is what sort of society you want to live in. We should be looking to create a society where work is incentivised, where people can plan for the future and where they can have a reasonable expectation of a decent lifestyle if they work reasonably hard.

            It shouldn’t be about arranging things to suit your brother’s lifestyle. He obviously didn’t need much money if he could afford to go for days on end without pay. Perhaps Mummy and Daddy were providing free accommodation?

            • Dan Grover

              Well dealing with your least relevant point, yes, “Mummy and Daddy” were providing free accommodation since he was 17 and still at school. It was a perfect job then, as it allowed him to work on his days when he wasn’t needed at school but could also take weeks off at a time when he had to revise. Bravo, zero hour contracts!

              But as a more general comment, your post is all a bit worrying because the phrase “what sort of society do you want to live in” is almost always followed by a list of things that must, necessarily therefore, be banned. Invoking child-work as a counter-argument on the grounds that, well, *some* people would like that too is the non-argument akin to “Yeah, you know who else was a vegetarian? HITLER!” Unless your position is “everything we do must benefit everyone”, then the fact that child labour shares that one facet with zero-hour contracts is irrelevant.

              All those things you mention in your “what sort of society do we want” are laudible goals but the point has never been that zero-hour contracts are great for everyone, it’s that they’re great for some people. Even using the largest of the figures in the article above, they account for around 3% of the workforce. Is this really a problem that needs the strong arm of the state to rectify?

        • Smithersjones2013

          Rubbish. You would put many organisations (numerous of them being charities) out of business if they were forced to meet their legislative resourcing requirements without agency staff. My partner got her permanent job from working in organisations as agency staff. Within a year a number of organisations were encouraging her to apply for full time jobs with them.

          The shortfalls in agency work are no different to the shortfalls in any sort of employment. The unscrupulous will exploit them. The problem is not the facility of agency work , which allows much good work to be done as well, but the fact there are unscrupulous people in this world. Now if you want to put your mind to ridding the world of unscrupulous people then good luck with that but I’ll not be holding my breath for your proposals!

      • Daniel Maris

        Yes – just as I like them not having a choice about minimal holiday entitlement,upper limits on working hours or putting children to work in factories.

    • Smithersjones2013

      Does anyone really think that zero hours contracts result in good standards of care in care homes and other establishments?

      I don’t think you could have misinterpreted this issue more totally if you tried. Talk about getting the wrong end of the stick!. Agency staff have little or no employment protection (which is what the usual suspects are having a hissy fit about) and as such if the client is dissatisfied with them they just call the agent and they are gone. If more than one or two clients complain then the agency will just not bother with using them anymore. People tend to work harder and more diligently if it is their only source of income. Consequently just as agency work can provide an avenue into employment if the agencies won’t employ you then all that is left is a life on benefits (and if people want that they can live on benefits all their life without having to suffer agency work). Many agency staff have a far greater motivation to perform well than permanent staff simply because they cannot afford to make mistakes. Agency staff will perform to the standard they are directed to at least to the same level as permanent staff (who have numerous employmenty protections) if not perform better.

      On the wider level as I pointed out above many small competent organisations would go under if they had to fully resource for all unexpected staff absences (basically you would be increasing their personnel overheads by anything between a quarter and a third). Now which is better, Having an adequate standard of care or no organisation to provide that care at all (with the inherent additional burden that would put on public resources)?

      • Dogsnob

        So the best route we can take is to scrap all permanent positions of employment and switch fully to the zero-hours culture? Why would we not?

        • Daniel Maris

          Perhaps Smithersjones, if he’s in gainful employment, would like to volunteer for a zero hours contract with his employer…or maybe such an eventuality would not affect him.

      • Daniel Maris

        More nonsense – if it was the law that zero hours contracts were banned then that would be the new level playing field on which companies played.

        No, I don’t accept any of that. Agency staff can just walk away from problems. Zero hours contracts is part of a minimal service approach to care rather than a vocation and excellence approach. Agency staffing by people with poor English language skills links in to the Government’s mass immigration policy. If you want mass immigration support zero hours contracts and agency staffing.

  • Daniel Maris

    Zero hours contracts for work are a big disincentive to work if that’s all people can get. Why not go on benefits? At least you’ll have a steady income and know where you are.

    • Smithersjones2013

      Because working as agency staff you can earn a considerable amount more than £56.80 a week. People who do agency work WANT TO WORK. They want to earn a living. Not all of the population are bone idol benefit scroungers. SHish some people really do take the Daily Mail far too seriously….

      • Daniel Maris

        I am thinking particularly of women, often single parents. They are getting housing benefit, free nursery care, free school meals, income support and child benefit – plus lots of little perks thorugh being unemployed. You’re thinking of immigrants and illegal immigrants living in sheds with beds who will take any work going – you want to flood the country with immigrants prepared to work for low wages, with no security.

  • MK

    Zero-hour contracts seem like a useful tool for some sectors, but locking staff in to an exclusive zero-hour contract without any commitment to provide work is very wrong.

    Where were the unions on this? an issue with no ambiguity that they should be all over – it’s almost like representing employees isn’t very important to them.

    VC needs to not drag heels and get a fast fix in place – along with tar-pitting pay-day lenders. Demonstrate some leadership.

    • Martin Adamson

      Trades Unions permanently sold out the working class when they signed up for support for the European Union and mass immigration. The kind of agricultural jobs that I used to earn reasonable money doing 30 years ago (working shifts, weekends and overtime) are all now strictly minimum wage or below.

  • Noa

    “…However, today’s CIPD findings confirm that the large majority of people working on zero-hours contracts are happy to do so…”

    Really? Do you not think that they might prefer a guaranteed minimum number of hours, but have no choice other than to take what is offered?

    Try putting the boot on the other foot. Should Economiists be put on zero hours contracts? Should journalists?
    Other solutions to our unemployment problems offer themselves; for example, lets remove the surplus foreign labour from our market until all our indigenous workers can serve you your latte, sir.

    • Alexsandr

      why do we all have to work a strict 40 hour week. For many people and businesses flexibility is great.

      And people who dont like it -well find a job with a fixed hours contract.

      • TonyB58

        You are very lucky to be in a position to be so relaxed about this. It’s so easy to pick and choose 40-hours jobs in today’s British economy isn’t it.

      • Noa

        Did I argue for a 40 hour minimum contract?

        Zero hours equals zero pay. That is so ridiculously one sided and unfair that it constitutes an agreement to starvation.

  • anyfool

    While Vince Cable’s review may be useful in giving us a clearer picture of what is going on, he should not allow emotions to run too high
    This means that Zero hours is dead to all intents and purposes, it will just be a matter of time before the corpse stiffens.

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