Use of zero hours contracts is stalling

Workers employed on a zero hours contract in their main job (thousands)
Resolution Foundation analysis of Labour Force Survey data, ONS

The number of people working under zero hours contracts appears to have slowed significantly in 2016, according to fresh analysis of labour market data.

In the second half of 2016, the number of people on a zero hours contract increased by only 0.8%, compared with the first half the year. In contrast, the rate of increase between the second half of 2015 and the first half of 2016 was 12.3%.

This is the first time that zero hours contracts have not grown substantially faster than overall employment rate since they initially entered the public debate in 2013.

Nevertheless, the number of people on zero hours contracts hit a record high of 910,000 in the last three months of 2016 according to the Resolution Foundation, the thinktank carrying out the analysis.

Conor D’Arcy, policy analyst at Resolution, said: “While the growth in these contracts has continued, beneath the surface there are signs of change, with a marked slowing of their uptake in the last six months of 2016.

“This is about more than just the general slowdown in employment growth, with a bigger drop visible in the growth of zero hours contracts. The negative publicity these contracts have attracted may well have played a role in their slowdown, as firms rethink their use.”

The analysis suggests three reasons why the use of zero hours contract may have slowed:

  • With the employment rate at a record high and the threat of reduced immigration from the EU, employers may be finding it harder to fill roles without guaranteeing work.
  • Employers are avoiding the reputational damage associated with zero hours contracts – no one wants to be the “next Sports Direct”.
  • Previous rapid increases, which were partly driven by raised awareness of zero hours contracts – this may have reached its limit, with most zero hours contract workers now aware of the contract they are on.

D’Arcy added: “The challenge now is to ensure that these still-popular contracts are reserved for cases of genuine desired flexibility for worker and employer.”

Analysts also showed that 46% of the net increase in zero hours contracts last year was among workers aged 55-64. For some of these workers, zero hours contracts may offer a flexible transition from full-time work to retirement, allowing them to top up their income.

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