Zero hours contracts: pros and cons

zero hours

The Queen’s Speech in May revealed the Government’s plans to tackle “abuse” of zero hours contracts by businesses. The move seems to be influenced by growing political pressure in the last parliamentary year before the 2015 general election.

However, to suggest that zero hours contracts are widely abused by businesses is misleading. Only 2% of the UK workforce is engaged on a zero hours’ basis and, according to a recent study by the CIPD, zero hours workers have equal job satisfaction to their employed counterparts.

Although a clearer legal framework might be useful, a zero hours’ relationship is often effective and mutually beneficial for both businesses and individuals.

Flexibility versus uncertainty

A zero hours’ contract enables a business to engage an individual on a flexible, as-and-when basis. Under such an agreement, there is no obligation to offer work or to pay an individual when they are not working. Also, certain employment law obligations will not apply. This is often called a “casual work” arrangement. Businesses can meet peaks in workload, and cover employee absences and holidays at short notice, by engaging casual workers. In this regard, casual working arrangements undoubtedly help businesses to maintain efficiency and productivity.

Engaging casual workers can also enable businesses to adapt employee working hours or shift patterns with minimal disruption and administration. This is because the terms of work offered to a casual worker can generally vary from offer to offer, and from worker to worker.

In contrast, to vary an employee’s terms and conditions of employment would require consultation with, and consent from, the employee to do so. This process, in turn, requires time and resources and can often become contentious.

Admittedly, although there are many obvious business benefits, zero hours contracts can create some uncertainty and reduce control over employee working hours and attendance levels. For businesses, there is no guarantee that offers of work will be accepted by casual workers, potentially making it difficult to coordinate staff.

There is also an argument that consistency and quality of work can suffer when engaging casual workers instead of employing people “full time”, as casual workers may be unfamiliar with the business’ services, products and culture. However, the same issues would no doubt arise with newly recruited employees.

From a casual worker’s perspective, there may be uncertainty over whether or not any work will be offered. Offers of work may be irregular and create financial insecurity. It may also be difficult for casual workers to accommodate offers of work at very short notice, or to find alternative work where an assignment is cancelled.

However, despite these issues, zero hours contracts enable individuals to secure work where opportunities may otherwise be scarce. They also enable individuals to have greater control over their working arrangements. The worker can choose the hours that they work, which can help maintain a positive balance between work and personal life.

Zero hours arrangements are often ideal for those wanting to work around their personal commitments, or just top-up their income on days and times convenient to them. For businesses, high-quality workers can be attracted and retained on the basis of this “flexibility factor” alone.

No need for a complete crack down

The flexibility and cost benefits of casual working are vital to the success of businesses, particularly in the retail, hospitality and care sectors where there can be significant peaks and troughs in demand. It is for this reason that over-regulation of zero hour contracts would not be a good way forward.

However, the Government could reassure individuals that casual working can be a positive thing by improving clarity on what it means for individuals. This could be combined with regulations to ensure that businesses do not seek to prevent individuals from working elsewhere. In any event, zero hours contracts which seek to impose exclusivity appear to be quite rare.

Finally, businesses and individuals should bear in mind that despite labelling a contract as “zero hours”, employment status and legal rights will normally be determined by what happens in practice.

As is often the case, if an individual is regularly offered work by any one business, they essentially become obliged to accept it and a regular pattern of work develops. It is therefore likely that the individual is an employee of that business rather than a casual worker and that employment law obligations will apply.

Victoria Clark

About Victoria Clark

Victoria Clark is an associate in the employment team at Clarion
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