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Zero hours contracts may be at a “record high”, but have they already reached their peak?

03 March 2017

Figures published today based on data from the Office for National Statistics reveal that 105,000 more people were on zero hours contracts in 2016, compared with the year before. The number of people on such contracts has since reached a record of 910,000, compared with only 100,000 in 2005.

But although the numbers have reached an all-time high, there has been a distinct slowing in the rate of increase during the last six months of 2016, which may be a sign that the march of the zero hours contract is coming to an end. Adverse publicity, a loosening jobs market for employees, and recently introduced government controls on ‘exclusivity clauses’ in zero hours contracts, are all probably to blame.

What are zero hours contracts?

A zero hours contract is an agreement under which there are no guaranteed hours of work and the individual, also known as a casual worker, is only paid for work carried out.

Why are they used?

Their purpose is to give employers flexibility when workloads genuinely fluctuate. The arrangement allows the employer to avoid excessive staffing costs during quieter periods and to have a ready pool of workers when there is a short-term increase in work.

Are they legal?

Yes, they have been used legitimately by employers for many years, often in the hospitality and retail industries where workloads are seasonal.

Why all the controversy?

Studies suggest there has been a sharp increase in the use of zero hours contracts over recent years. Some high profile employers, such as Amazon, Sports Direct and Buckingham Palace, have been found to use them extensively. However some employers such as Homebase and JD Wetherspoon have started moving away from them.

The concerns raised about zero hours contracts are that:

  • some employers are using them as a means to deny workers basic employment rights.
  • some contracts have included exclusivity provisions requiring the worker to accept any work offered to them, the implication being that the worker has to sit and wait for work, which may not materialise, and turn down other work in order to do so. The government has prohibited such clauses and banned employers from treating workers badly if they turn down work.
  • they make it difficult for individuals to manage their finances and personal lives, such as securing mortgages and arranging childcare.

The counter-arguments put forward are that:

  • their use has prevented higher levels of unemployment by enabling employers to align workloads with staffing costs.
  • individuals will normally be deemed to be ‘workers’ and therefore entitled to certain protections by law, such as holiday and sick pay. In addition, where the contract includes an exclusivity clause, they are also likely to be ‘employees’ and enjoy the additional protections that status brings.
  • they are good for individuals who do not want to commit to a certain level of work, such as students, carers and parents.

What will the government do next?

The government is expected to use next week’s Budget to address the issues of zero hours contracts and the gig economy – where people perform “self-employed” work for companies like Deliveroo and Uber. Both practices are seen as undermining the way the present tax system works, so the Treasury is likely to try to “balance” the amount of tax paid by the self-employed and those on short term or zero hours contracts, so that they pay similar levels of tax to those in full-time, guaranteed employment.

Matthew heads our employment law team. He handles the full range of contentious and non-contentious employment law issues for clients. His particular specialisms include complex staff restructurings and employment issues concerning business transfers. Matthew is recommended by independent legal directory Chambers and Partners which describes him as ‘solutions-focused’ and ‘a solid and respected practitioner noted for his technical abilities’. He trained and worked at a City of London law firm.

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Matthew Clayton MA LLM (Cantab), CIPP/E
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