Flexibility or insecurity? The rise of the zero hours contract

Zero hours contracts – whereby workers agree to be available for work but have no guaranteed hours and are not obliged to accept any hours offered – account for a very small proportion of UK employment (around 1%). They are not a new phenomenon, but a recent surge in numbers has generated a lot of anxiety over their use and the potential impact on workers.

The debate is divided, and this is not helped by a weak evidence base. Are zero hours contracts exploitative arrangements which provide insecure employment at the whim of employers? Or are they what we need to give employers enough flexibility to keep employing people despite a weak economy? Should we be worried about their proliferation? The level of uncertainty has prompted Vince Cable to announce a government enquiry and at The Work Foundation we are exploring some of the issues with an expert panel representing unions, employers and both the coalition and shadow government.

Zero hours contracts are not inherently bad things. This kind of flexible working arrangement will suit some workers well, particularly those not reliant on a regular and secure stream of income. Examples include students seeking casual work (around a quarter of those working on zero hours contracts are full-time students), some parents and carers and older workers who may want to take fewer hours as they begin to exit the labour market. Zero hours contracts can also have their benefits for employers – enabling them to adjust quickly to changes in demand. Some argue that the rise of these and similar less stable contracts has been helping the UK labour market to stave off higher levels of unemployment during the recent downturn.

Yet for others, zero hours contracts are far from ideal. A sizeable minority of zero hours workers want a different job (around 18%, compared with 7% of all employees), or to work longer hours (just over 25%) – this applies both in sectors traditionally associated with zero hours contracts (e.g social care) and to a growing number of ‘knowledge workers’ taking up zero hours contracts in professional roles (e.g. in education).

Moreover, in common with other forms of insecure employment there is a real danger that the more vulnerable in the labour market working on zero hours contracts are particularly at risk. For those in low paid positions, a sudden loss of income from a reduction in hours can be disastrous – especially worrying here are reports that many people don’t know they are on a zero hours contract until their hours are cut.

By this point, they are unable to do anything about it. There have also been reports of employers using the hours they give their workers as tools for punishment and control – whilst there is no legal obligation to take the hours offered, a workers’ availability or willingness to take up work when called upon may impact upon the amount of hours he or she is subsequently offered, and thus the choice that zero hours contracts should provide is likely to be somewhat undermined. Here, whether or not a zero hours contract works both for worker and employer in large part seems contingent on good and mutually conducive relationships with those giving out the hours.

There is a lot we don’t know about zero hours contracts. Why are they on the rise? Will this continue? Should we be worried? How do we ensure that the flexibility they promote benefits both the employer and the worker? The evidence base is weak and needs to be improved. But we know that they will impact in different ways depending on sectors, skill levels and other factors. As with other forms of flexible employment, for some they can work well, but for others not so much or not at all. While an outright ban is not the solution, safeguards for those vulnerable to the sharp end of zero hours contract practices must be put in place.