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Zero-hours contracts have been unfairly demonised and oversimplified, finds new CIPD research

  • 26 Nov 2013

New guidance published to combat poor practice, but CIPD rejects calls for excessive restrictions on an approach to employment that serves many employers and employees well

The use of zero-hours contracts in the UK economy has been underestimated, oversimplified and unfairly demonised, with the positive experience of the majority of people employed on them being overlooked, according to new research from the CIPD.   A survey of more than 2,500 workers has found that zero-hours workers are just as satisfied with their job as the average UK employee, and more likely to be happy with their work-life balance than other workers.

The professional body for HR and people development has also published new guidance, in collaboration with law firm Lewis Silkin, to help tackle poor practice highlighted in the research, such as the poor level of understanding about employment rights among many employers and zero-hours workers.

The CIPD finds that where zero-hours contracts are being used for the right reasons and people on these types of arrangements are managed in the right way, they are providing flexibility that works for both organisations and individuals. Efforts to address poor practice should be focused on improving employer understanding of how to use these contracts responsibly and within the law, rather than on attempts to restrict their use through regulation.

Key findings from the CIPD research, ‘Zero-hours contracts: myth and reality’ include:

  • A survey of more than 1,000 employers has confirmed the CIPD’s initial estimate that there are approximately one million people (3.1% of the UK workforce) employed on zero-hours contracts.
  • Zero-hours workers, when compared to the average UK employee, are just as satisfied with their job (60% versus 59%), happier with their work-life balance (65% vs 58%), and less likely to think they are treated unfairly by their organisation (27% vs 29%).
  • Zero-hours workers are, on average, nearly twice as likely to be satisfied with having no minimum set contracted hours, as they are to be dissatisfied. Almost half (47%) say they are satisfied compared with around a quarter (27%) who report being dissatisfied.  The most common explanation for this is that flexible working suits their current circumstances (44% of those saying they are satisfied or very satisfied with having no minimum set contracted hours).
  • More than half (52%) of zero-hours workers say they would not like to work more hours than they do in a typical week, although just over a third (38%) say they would like more hours.
  • Eight out of ten (80%) zero-hours staff say they are never penalised for not being available for work.
  • Employers cite both sides of the flexibility equation in explaining their use of these contracts: two thirds (66%) highlight their need for the flexibility to respond to peaks and troughs in demand, but around a half (47%) of employers who use zero-hours contracts also cite the need to provide flexibility for individuals as one of the reasons informing their approach.

However, the research does identify areas of poor practice:

  • One in five zero-hours workers say they are sometimes (17%) or always (3%) penalised if they are not available for work.
  • Almost half of zero-hours workers say they receive no notice at all (40%) or find out at the beginning of an expected shift (6%) that work has been cancelled, and only about a third of employers tell us they make a contractual provision or have a formal policy outlining their approach to arranging (32%) and cancelling work (34%) for zero-hours workers.
  • One in five (21%) zero-hours workers believe their pay is lower than comparable permanent staff doing similar jobs, while one in ten employers (11%) report that this is the case. In fact, almost two-thirds (64%) of employers who use zero-hours workers report that hourly rates for these staff are about the same as an employee doing the same role on a permanent contract. Nearly a fifth (18%) report that hourly rates for zero-hours staff are higher than permanent employees (with the proportion slightly higher in the private sector).
  • Confusion among some employers and zero-hours staff over employment status and rights. For example, 42% of zero-hours staff don’t know if they have the right to take legal action if unfairly dismissed after two years service.

Peter Cheese, Chief Executive of the CIPD, said: “The use of zero-hours contracts in the UK economy has been underestimated, oversimplified and in some cases, unfairly demonised. Our research shows that the majority of people employed on these contracts are satisfied with their jobs.

“However, we also recognise that there is a need to improve poor practice in the use of zero-hours contracts, for example the lack of notice many zero-hours staff receive when work is cancelled. If this is unavoidable then employers should at least provide some level of compensation. In addition, it seems that many employers and zero-hours staff are unaware of the employment rights people on these types of working arrangements may be entitled to.

“The emphasis should be on improving management practice and enforcing existing regulation first, rather than bringing in new legislation which would be extremely hard to do without unintended consequences.  Employers that took part in the research told us that if restrictions were placed on employers’ use of zero-hours contracts, they would simply switch to another form of casual labour.  Such an approach would also penalise the majority of zero-hours workers that choose these types of working arrangements because they suit their particular circumstances.

“The good practice guidance we’re publishing today helps to address some of the issues highlighted by our research as well as setting out what employers need to do to manage zero-hours workers within the law. If we restrict the ability of employers and workers to manage their employment needs flexibly, the consequence is less likely to be more permanent, full-time jobs, and more likely to be a reduction in the number of jobs available in the economy.

“The reality of today’s globally competitive economy and increasingly complex and age diverse workforce is that flexibility is here to stay. We need to focus attention on ensuring that people are well managed, are building the right skills, are engaged and productive. Many employers have a lot more to do in all of these areas to increase our international competitiveness. Flexible working arrangements can have a positive influence on productive and engaging work environments and those who call for excessive restriction of zero-hours contracts or who rail against measures to encourage more flexible working are equally out of touch with the modern world. Zero-hours contracts combined with good management can be an effective means of matching the needs and requirements of modern business and modern working lives across a wide range of employment sectors and job roles, in organisations of all shapes and sizes.”

The CIPD report includes a number of recommendations to improve practice in the use of zero-hours contracts, including:

  • Appropriateness: careful consideration and regular review by employers of whether zero-hours contracts are appropriate for the nature of the work involved, and are offering the right balance of mutual flexibility for employer and employee.
  • Exclusivity: Unless there is a clear business reason, for example for clearly defined competitor or intellectual property reasons, employers should not restrict zero-hours staff from working for another employer when they have no work available.
  • Compensation for last-minute cancellation: where work is cancelled at short notice, travel expenses and at least one hour’s pay should be paid in compensation.
  • Pay equity: zero-hours workers should be paid at comparable rates to anyone else doing the same or similar work.
  • Manager training: line managers should be trained to ensure that the reality of the employment relationship is consistent with the contract and associated employment rights of zero-hours workers.

The guide ‘Zero-hours contracts: understanding the law’ has been jointly produced by CIPD and the law firm Lewis Silkin and is available to download here

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