Is it fair to use zero-hours workers when expanding your business?

New report suggests 1.8 million firms used them last summer: but are controversial zero-hours contracts fair for the workers employed on them?

There is no doubt that when looking for labour quickly zero-hours contracts are very useful for small businesses. When going through fast growth small employers do often need a transient workforce that will enable them to take on specific projects or service new clients at short notice.

But is it fair on the workers brought in to hire them on zero-hours terms? As one would expect the unions, and also the Labour leadership, have strongly opposed them since their prevalence was first highlighted back in 2012. Just last week GMB general-secretary Paul Kenny said the practice has meant “too many workers go to work fearful about exercising their basic rights”.

But others have defended their use. The Confederation of British Industry (CBI) responded to the recent figures by defending zero-hours contracts – claiming that the flexibility they offer gives “an important source of job creation that supports business growth and employees who need to manage different responsibilities”.

The Federation of Small Business (FSB) has mixed views on the use of zero-hours contracts. Figures quoted by the national chairman John Allan state that only 7% of smaller businesses use the contracts, which still equates to around 360,000 firms. But Allan’s main concern is that sub-clauses such as the infamous “exclusivity clause” shouldn’t be abused.

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“As a general rule, the FSB believes workers on zero hour contracts should not be prevented from finding other work,” he said.

But one thing that small businesses would argue – especially those in a fast-growth trajectory, is that they don’t always need to tie employees down to long-term agreements. In this way they might be seen to use zero-hours contracts in the “right” way.

One of the biggest complaints of opponents of zero-hours contracts is that they can tie workers into long-term arrangements in which they can only work for one employer but have no guaranteed income or set minimum number of hours. This is normally a criticism aimed squarely at large companies such as McDonald’s, many of whose employees work at the company for years but are not put on permanent contracts.

If a company is growing quickly and workers are needed on a short-term basis to meet unpredictable demand, there is certainly an argument for using zero-hours contracts for the flexibility they offer both for the employer and the worker. And despite some negative rhetoric, there is certainly evidence to suggest less rigid arrangements do work for some workers.

Figures released by the CBI last year suggest that 80% of workers on zero-hours contracts are not looking to do more work. Additionally more than half (58%) see them as a vital potential stepping-stone from unemployment to full-time work.

Only around 9% of workers on zero-hours contracts are prevented from working for another organisation even if their primary employer has no work for them, according to the CIPD. But there are many others who are discouraged from doing so or risk losing a large proportion of future hours if they actively seek work elsewhere.

This is the area of the law that all parties are looking to tighten up from the General Election onwards. Clearly having en employee on the books who does not have any work available but is also not allowed to work elsewhere is not fair. Any high-growth companies looking to hire people on these terms should be aware of that and ensure this isn’t the case. The damage to both reputation and staff attraction/retention could be very significant for a small business that is looking to grow through recruitment in the coming years.

When growing a business hiring a flexible workforce is clearly going to be essential at certain junctures. And if that is on zero-hours terms there are few who would object to this in the short-term. But affording staff the same flexibility the zero-hours terms give to the business is key when putting these arrangements in place. Failure to do so could land small business owners in trouble.

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