Zero hours contracts
Analysis from the Office of National Statistics shows that there has been a three-fold increase in the number of workers on zero-hours contracts since 2010. An ONS survey of businesses found that there are now 1.4 million zero-hours contracts in the UK, with larger businesses and those operating in the accommodation and food and admin and support services most likely to use them.
In September 2013, Ed Miliband asked Norman Pickavance, former Head of Human Resources at Morrisons, to lead an independent consultation into how to end the exploitative practices associated with these contracts. In particular, Norman was asked to consider how to ensure that workers who are actually working regular hours week-in-week out are not left on zero hours contracts without their consent.
The Pickavance report into zero-hours contracts, published on 25 April 2014, concluded that there are legitimate reasons for requiring the level of flexibility offered by zero-hours contracts, particularly to manage short seasonal peaks of work and where they suit the personal circumstances of individuals.
However, it highlighted that zero-hours contracts can create significant financial insecurity for employees due to the uncertainty about what they will earn from one week to the next. The lack of clear rules governing their appropriate use also leaves scope for abuse.
The report called for new legal rights to employees on zero hours contracts:
- The right to receive a fixed hours contract automatically when they have worked regular hours for a period of time - unless they decide to opt out
- To be protected from employers forcing them to be available at all hours, insisting they cannot work for anyone else, or cancelling shifts at short notice without compensation.
The report made a number of recommendations on how these rights should work in practice, which Norman Pickavance and the Labour Party are consulting on.
1. Ensure that workers on zero-hours contracts are not obliged to be available over and above their contracted hours
- Employees on zero-hours contracts should have legal rights so they are not obliged to make themselves available without any guarantee of work.
2. Ensure that workers on zero-hours contracts are free to work for other employers
- There are many legitimate reasons why employers may wish to require workers to work exclusively for them – such as commercial sensitivity – but employers should not be able to require this without any guarantee of work.
3. Give workers on zero-hours contracts who are working regular hours a right to a contract with fixed minimum hours
- If people are working regular hours in practice, workers should, after a certain period of time, have a right to request a contract that is other than zero hours and which provides a minimum amount of work.
- Employers would only be able to refuse this request if they are able to demonstrate that their business needs cannot be met by any other form of flexible contract – for example, seasonal work
- After a period of continuous employment, workers on zero-hours contracts who are working regular hours should be offered a fixed hours contract automatically. People working regular hours would only be able kept on a zero hour contract for more than a year if they formally opted-out of these arrangements.
- These rights should include bridging provisions to prevent unscrupulous employers from laying people off or ‘gaming’ the hours during the reference period to avoid complying.
- Norman Pickavance set out a set of recommendations on the policy details subject to further consultation with key stakeholders. He and the Labour Party have since been consulting on these proposals, and will continue to do so.
4. Give zero-hours workers a right to compensation when shifts are cancelled at short notice
- As suggested by the CBI, employees on zero-hours contracts should be entitled to compensation – 2-hours pay for example – when a shift is cancelled at short notice, as recommended by the CBI.
- How long that notice period should be should be the subject of consultation – for example a minimum of 48 hours to a week’s notice of any changes in hours could be provided when hours are reduced.
5. End the confusion surrounding rights and responsibilities
- All workers should have clarity about their employment status and terms and conditions. This could be done by amending the Employment Rights Act 1996 so that employers are required to provide basic information about terms and conditions to all workers they engage (not just employees) within two months of their start date.
- A new Code of Practice would provide clarity for employers and employees about their rights and responsibilities. The content should be developed by trade unions and employer representatives through ACAS, as is standard practice. Provisions could include advice for employers operating zero-hours contracts on when the use of zero-hours contracts may or may not be appropriate and guidance in relation to difficult issues such as holiday pay, notification periods, pensions and auto-enrolment.
- Are these contracts really a problem?
Yes – ONS data shows a three-fold increase in the number of workers on zero-hours contracts since 2010, and business surveys suggest that up to 1.4 million workers could be on contracts that offer no guaranteed hours or income.
- Aren’t there good examples of zero-hours contracts?
Yes – for example the use of zero-hours contracts is well-established for bank nurses and locum doctors in the NHS, where they can provide opportunities to gain additional experience for people who already have a full time contract with another employer. They can also provide flexibility for people who are semi-retired or students who want to do some extra work around their wider commitments. Our recommendations will not limit legitimate uses of these contracts such as this.
- How long will someone have to have been working regular hours before they have a right to receive a fixed contract?
Norman Pickavance set out a set of recommendations on the policy details subject to further consultation with key stakeholders. He and the Labour Party have since been consulting on these proposals, and will continue to do so.
- Isn’t there a risk that employers will simply sack workers on zero-hours contracts before to avoid the obligation to give those working regular hours a fixed-hours contract?
There will be legal safeguards in place to prevent this from happening. The evidence from Norman Pickavance’s review also suggests that this is unlikely due to the cost and time implications of recruiting and training someone else, simply to avoid providing a fixed term contract reflecting actual business practice.
- What if workers on zero-hours contracts are simply given a 1-hour contract when this right comes into effect?
The contract should reflect the employee’s actual average working hours. We will consult on how to ensure this is the case.
- How will you prevent people being forced to 'choose' to stay on a zero-hours-contract against their will?
Employees will have to take independent legal advice. This is well-established practice, for example in cases where employers and employees enter into a compromise agreement, and can be delivered on a group basis in cases involving multiple employees.
- What if employers simply shift to using 1 or 2 hour contracts instead of zero-hours contracts?
Norman’s review found little evidence of widespread use of 1- or 2-hour contracts, which don’t provide the same opportunities for ‘zeroing down’. While we should always keep the labour market under review, this does not appear to currently be an issue.
- How much compensation would have to be provided if shifts are cancelled?
Norman recommended 2-hours pay compensation if notice of any reduction in hours is not provided within a minimum of 48 hours to a week.
- Won’t this stop employers from offering extra hours at short notice, which some employees may need?
No, this would only apply to reductions in hours. Extra hours could still be offered provided the worker is not obliged to accept them, as above.
- What will the new Code of Practice include?
The content should be developed by trade unions and employer representatives through ACAS, as is standard practice. However Norman recommends that provisions could include advice for employers on when the use of zero-hours contracts may or may not be appropriate and guidance in relation to difficult issues such as holiday pay, notification periods, pensions and auto-enrolment.
- Is this weaker than others have said?
No, these recommendations go further than the Government, which has only proposed banning exclusivity clauses. They also go further than others such as the Resolution Foundation, which has called for a right to be put on a fixed-hours contract after 12 months for those working regular hours, triggered at the request of the employee.
 ONS analysis of the LFS shows that between 522,000 and 645,000 people report that they are on zero-hours contracts. Some of the increase may be due to greater awareness among employees of what constitutes a zero-hours contract. See: http://www.ons.gov.uk/ons/search/index.html?newquery=zero+hours+contract