Employment Issues / In the News

Zero hours contracts: a 2015 general election hot potato

1221952_51477459In the run-up to the UK General Election, last month I wrote a feature for Real Business which is reproduced below.  Following last week’s first TV ‘debate’ which saw both David Cameron and Ed Miliband declare they could not work under zero hours contracts, it is likley that both parties manifestos will address this thorny question.

Zero hours contract: a 2015 general election hot topic

New statistics show that up to 1.8m people in the UK are now employed without guaranteed hours of work. Zero-hours contracts have been a political – as well as legal –hot potato for the past few years.

Headline-grabbing stories about employees being treated unfairly, denied bonuses and dismissed at the whim of penny-pinching employers have aroused lively dinner table debate. With the release of these startling new statistics, early indications are that this will be a key manifesto battleground as we near the general election.

The name “zero-hours” contacts is in itself misleading. Although it is not currently defined in legislation, it is generally understood to be an employment contract between an employer and a worker whereby the employer is not obliged to provide the worker with any minimum working hours of work, and the worker is not obliged to accept any hours that are offered.

This lack of obligation, typically an essential element of an employment contract, has led to uncertainty and allegations of exploitation, particularly given many of these contracts tie the individual to the organisation under an “exclusivity” clause.

Criticism has been directed at organisations who routinely use such contracts, half of which are in the hospitality and catering sector, and that they affect the most vulnerable workers in what are already the lowest paid jobs.

Only using employees when they are needed is attractive to any business, but it leads to a lack of security for both parties and it is the employees who typically feel most aggrieved.

However, zero-hours contracts can work to serve the interests of both employer and worker if and when used properly.

Cultural shift

Across the UK, figures released by the Office for National Statistics estimate that up to 1.8m workers are now employed under zero-hours deals. This is a gargantuan increase from the 134,000 thought to be employed in such a way in 2006 and a 27 per cent increase from the 1.4m estimated in 2013.

In the last year or so, zero-hours contracts have dominated the business and mainstream news. Reports of a £10m claim by nearly 300 workers at Sports Direct earlier this year have made the way people are employed a manifesto point.

In that case, which is still making its way through the tribunal system, Sports Direct employees have claimed that they were excluded from a bonus scheme that paid out approximately £160m worth of shares to 2,000 “permanent” workers in 2013. The sports megastore had already been known for its generous profit sharing scheme, but with a suspected 90 per cent of staff employed on zero-hours contracts, the majority were unlikely to benefit from the financial success that they have contributed to.

Much of the criticism levelled at Sports Direct has been down to the lack of transparency, which has opened up opportunities for misunderstandings in the contractual relationship.

What does this mean for businesses?

Some employers have been accused of penalising employees who refuse work or raise employment concerns by reducing or refusing hours of work. Any suggestion or temptation to use the threat of reduced hours as a management tool should be avoided.

In future, any business which is tempted to abuse its power in relation to zero-hours employees is likely to find themselves penalised. Following widespread consultation, the Small Business, Enterprise and Employment Bill is now passing through the political pipeline and is expected to come into force later this year. The government plans to make exclusivity clauses in zero-hours contracts unenforceable and to introduce sector specific codes of conduct to regulate the use of such agreements and the terms on which work should be offered and cancelled. The bill will also give the government power to introduce further provisions, including conferring certain rights on zero hours workers and imposing financial penalties on employers.

Will the general election change anything?

In his position as business secretary, Vince Cable launched the initial review and consultation which has shaped the current bill. He has stated that he would ensure employers know their responsibilities and individuals their rights. This has been backed up by the prime minister, who has focused on the “exclusivity” of any such arrangements.

Labour, on the other hand, has taken a more attacking stance, promising that it would be “cracking down” on rogue employers and restricting the use of zero-hours contracts. It goes further in plans to introduce new laws so that zero-hours employees who work regular hours will be entitled to regular contracts and compensation for those on zero-hours contracts who have their shifts cancelled at short notice.

What now?

Employers will avoid controversy by being fair to employees and treating those who are not guaranteed minimum hours as they would other employees. Agreeing and explaining the terms of any agreement from the start and detailing what will and will not be expected from both sides should neutralise any criticism of exploitation and exclusivity clauses must be carefully considered.

Ensuring that you have the right people on the right contracts will not only boost productivity and staff morale, it will also encourage loyalty and commitment from what is expected to be an increasingly mobile workforce.

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