Zero hour contracts – a love or hate relationship

With a lot of negative press emerging about zero hour contracts, what do entrepreneurs and business leaders really think about the practice?

The zero hour contract debate seems to have heavily divided opinion, with some saying that it is exploitative, while others say it gives employers the flexibility to react to market economics.

What is for sure is that their use is more prevalent than many may have thought a few weeks ago. Chief utiliser of the contract, which allows employers to effectively dictate how much staff can work per week, appears to be Mike Ashley’s Sports Direct business.

The retailer reportedly has 90 per cent of its workers on the system, some 20,000 part-time staff. Its decision to employ such a tactic has been met with derision – but what is the real industry opinion on the matter?

I put the question out and had some very interesting responses land in my inbox. Andrew Laurillard, owner of the Giggling Squid chain of Thai restaurants, says that the zero hour contracts give flexibility to staff as well as managers in scheduling rotas, and bring the reality of managing a restaurant into a legal framework.

‘Zero hours don’t mean staff get zero hours work. If employers don’t give staff regular hours with competitive pay, they will simply get a job somewhere else,’ he says.

‘The real issue is not the zero hours contract, but the excessively high taxation reducing take home pay.’

Richard Smith, head of product development at business services firm Croner, sits on the fence with his stance. 

‘In Croner’s experience, there can be both good and bad zero hours contracts. However, an increased use by UK businesses reflects a desire to avoid over-strict employment laws,’ he believes.

‘It is also a way of matching employment costs with revenues, which is a direct impact of commercial arrangements with customers.’

It is no surprise that champion of industry and serial business commentator Charlie Mullins has a firm opinion on the issue. The entrepreneur, who set up Pimlico Plumbers, is not one of the employers who are using the practice.

‘I’m a big believer in offering permanent employment contracts. I give my staff a permanent position so they know where they stand and they know I’m investing in their future.

‘Businesses need to wake up and see that an insecure workforce is an unhappy one and what appears to first be an attractive proposition, may, in fact, lead to their business crashing on the rocks in the future.’

On the legal side, Lucy McLynn, partner at law firm Bates Wells Braithwaite, informs us that employees under zero hours contracts are entitled to statutory holiday pay – contrary to recent reports.

‘The position of zero hours employees is therefore in many respects materially better than that of casual workerss – although casuals do of course have the freedom to decline work and take up work elsewhere, which zero hours employees can only do with their employer’s permission,’ McLynn explains.

Zero contract hours are, largely, being used in sectors which do have fluctuations in terms of demand – providing businesses with the flexibility to either bring in staff to cope with a busy period, or cut back when times are slower.

Despite Vince Cable’s pledge to examine the practice, I don’t think we’ve heard the last of zero contract hours. On the surface, it appears that they are far too popular to purge.

Zero hour contracts ‘demonised’ but in need of improvement, says CIPD

Those employed under zero hour contracts are as happy when it comes to job satisfaction as the average UK employee, new research suggest.

There are approximately one million people being employed under zero hour contracts, a figure which represents 3.1 per cent of the UK workforce.

In a study compiled by the Chartered Institute of Personnel and Development (CIPD), the industry body finds that, when compared to the average British staff member, zero hour workers are just as satisfied with their job and are actually happier with their work-life balance.

Zero hour contracts mean that staff agree to be available for work as and when required, but no particular number of hours or times of work are specified. They rose to prominence through cases such as Sports Direct, which reportedly has 90 per cent of its workers on the system some 20,000 part-time staff.

The CIPD says that its survey reveals a trend of zero hour contracts being used for the ‘right reasons’, with people on the system managed ‘in the right way’.

Peter Cheese, CEO of the CIPD, believes that the use of zero hour contracts in Britain has been ‘underestimated, oversimplified and unfairly demonised’.

‘However, we also recognise that there is a need to improve poor practice in the use of zero hour contracts, for example the lack of notice many zero hour staff receive when work is cancelled,’ he adds.

‘If this is unavoidable then employers should at least provide some level of compensation. In addition, it seems that many employers and zero hour staff are unaware of the employment rights people on these types of working arrangements may be entitled to.’

More on zero-hours contracts:

Cheese stipulates that future emphasis should go on improving management practice and enforcing existing regulation first, as apposed to implementing new legislation.

The survey, which spoke to 2,500 workers, finds that one in five zero hour staff reveal that they are sometimes (17 per cent) or always (3 per cent) penalised if they are not free to work. 

Some 40 per cent of zero hour workers receive no notice, while 6 per cent find out at the beginning of an expected shift, that work has been cancelled.

However, employers say that the employment practice allows them to be flexible in response to peaks and troughs in demand.

Hunter Ruthven

Hunter Ruthven

Hunter was the Editor for from 2012 to 2014, before moving on to Caspian Media Ltd to be Editor of Real Business.

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