Zero-hours contracts aren’t zero cost

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The continued growth of zero-hours contracts which do not guarantee a minimum number of hours of work has recently been confirmed by the Office for National Statistics. This may in part be due to the greater recognition of the term and publicity surrounding them as well as seasonal work. Also, while the 800,000+ workers with them represent just 2.5% of the employed workforce, they are not evenly distributed. 

Rather, they vary by certain worker categories, sectors and firms. First, they are more prevalent among the young, part timers and females, many of whom have more than one contract as there are 1.7 million such contracts. Second, the percentage of businesses using such contracts varies considerably by sector. In the hotel and catering industries more than 25% of employers use them compared to only 5% in the construction sector. Also, such contract use varies by firm type and size. Last year just 1.8% (72,000) of workers in retail and wholesale were on zero-hours contracts. Yet, Sports Direct alone employed nearly 20% of these, with 75% of those working in its stores on such contracts. Over 40% of firms with 250 employees or more use such contracts versus 10% of those with 10 employees or fewer.

Why should we care? Simply because these contracts are not good for managers or workers. Employers and the CBI insist such contracts are beneficial as they allow ‘flexibility’, jobs growth and many workers on them are happy. On what basis and evidence? Because they allow paying zero pounds at the end of the week? Because they are unfair employment practices where employers do not commit to any hours of work but expect employees to be available when required without compensation? Interestingly, New Zealand has recently taken positive steps to tackle aspects of zero-hours contracts although, contrary to what has been reported, its actions do not amount to an outright ban on such contracts as we usually understand them in the UK (see ‘New Zealand bans zero hours contracts? Not exactly ...’). Trades unions in the UK insist such contracts are unjust, allowing the use of cheap and casual labour to cut costs. TUC research found average weekly earnings for zero-hours workers were £188 compared to £479 for permanent employees. Many such workers struggle not only with low but fluctuating pay levels, making it hard to plan for the future and budget, leave alone even consider a mortgage.

The comments about zero-hours contracts being responsible for employment rates is naïve and totally ignores the types and quality of the jobs created. The lack of commitment inherent in these contracts also has negative implications. Such contracts provide only numerical - not functional - flexibility, with implications for productivity. Allowing this knee-jerk, lazy use of ‘disposable’ workers not only indicates a lack of employer commitment, thinking and long-term planning and strategy - which is reflected back with a lack of worker motivation - but also encourages ‘whipsawing’ in a ‘race to the bottom’ in employment terms and conditions. Numerical flexibility gives an all-too-easy way to opt out of competition via investing and productivity with more sophisticated, innovative and value-added routes, which are long term and require training and skills enhancement. Rather, it encourages going simply for the short term with zero investment and competition by ‘sweating the assets’ and ever poorer pay, conditions and costs in a downward spiral.

Furthermore, all this comes ‘home to roost’ in the lack of investment in innovative production and processes - hence UK plc’s abysmal manufacturing labour productivity level, lower than the G7 average and our European neighbours - not only the mighty economic power house of Germany but the often criticised France and Italy too.

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