Sue Weekes asks if zero hours contracts are a smart way for employers to keep up with fluctuating demand, or an exploitation of desperate workers
The term ‘zero hours contract’ was largely unknown to the wider public until the subject starting hitting the headlines this summer. The Chartered Institute of Personnel & Development’s (CIPD) 2013 Labour Market Outlook reported that as many as one million people could be on the controversial contracts, four times higher than previously suggested. One fifth of employers said they were employing at least one person on such a contract, meaning the individual has no guarantee of any minimum hours. They only work when the employer requires them to do so and are paid only for those hours. In many cases they will receive none of the benefits of other workers such as sick and holiday pay.
Retail chain Sports Direct was one of the companies that found itself in the spotlight when it was claimed that it employs its 20,000 part-time workforce on zero hours contracts. The online operation, SportsDirect.com, is now facing a legal challenge from law firm Leigh Day with the support of the campaigning organisation 38 Degrees against use of such contracts. The Employment Tribunal claim has been brought by Zahera Gabriel-Abraham, a part-time sales assistant who believes regardless of her casual worker label, it entitles her to be treated no less favourably that the retailer’s full-time staff.
Zero hours contracts were used after the recession in the 1990s to help employers reduce costs and Alan Chalmers, partner at the law firm DLA Piper, says it shouldn’t be a surprise that they are on the rise given the current economic conditions. “Now more and more sectors including health, education and IT are signing up to them,” he says, adding that another factor contributing to their increased use is the introduction of the Agency Workers Regulations 2010, which have made it less attractive to employ agency staff.
While zero hours contracts have been presented in a negative light, some workers welcome their flexibility, especially if they have caring or other responsibilities. While a long way from ideal, they would rather be on a zero hours contract than have no work at all. “Yes, it keeps employees on a knife's edge but we still have to recognise it's better than nothing,” says Charlie Lawson, national director of BNI, the UK's largest SME networking organisation.
Yes, it keeps employees on a knife's edge but we still have to recognise it's better than nothing
Without doubt zero hours contracts are weighted heavily in favour of employers, but organisations need to be aware that while it may help them control their wage bill, there are potential downsides. In the absence of a traditional employment contract, can an employer expect the same levels of engagement and loyalty? And how will this then impact performance?
Kate Russell, managing director of the HR training and employment law firm, RussellHR Consulting, doesn’t approve of zero hours contracts and suspects some employees who find themselves on one will feel somewhat “ill-used”. “Grumpy employees with a sense of resentment will not work out well,” she says. If, however, there is no option for the employer other than to put a person on such a contract, HR must ensure that line managers
make the person feel part of the organisation and the team rather than just a pair of “legs”, says Russell. “Then there’s no reason why there shouldn‘t be engagement,” she says. “Communicate and consult, include them and keep them in the loop. Train them, give them development opportunities, treat them courteously and remember that they’re human beings, not robots.”
Casual working, which gives total flexibility to both employees and employers, is often touted by some as a preferred option to zero hours contracts. While Sports Direct part-timers are termed casual workers, the reality is rather different, according to Elizabeth George, the barrister acting for Ms Gabriel-Abraham in the upcoming Employment Tribunal. Casual workers have the flexibility of being able to choose when they work but George contends that in her client’s case, there is “no practical difference” between the obligations put on her and those placed on full-time staff: “Without that choice you are not a casual worker, you are just a worker with no job security.”
Lawson says looking ahead, employers need to find alternative options to reduce the numbers of employees in this “limbo-style” employment situation and believes casual working could provide a solution. “This means there isn't mutual obligation either side, so the employee can agree to work if they want to and is available, but do not ultimately have to,” he says. “Working with 13,000 small businesses we also know this approach allows workers and bosses to build stronger relationships based on trust because of this flexibility.”
Russell agrees that casual working can be a preferred option for both sides. “If the worker is casual who works when he/she wants to work, it will suit both parties and the employee is likely to feel as though he/she is working on more of a level playing field,” she says, citing one of her clients, a large events company, as an example of good practice when managing casual workers. “They are constantly recruiting a large pool of casuals and these workers choose which events they want to work,” she says. “They are trained across a variety of skills, given uniforms and included in the development processes, if they wish to be. Some join the company and climb the career ladder; it’s available if they want it."