CIPD Voice: Issue 30

Zero-hours contracts are the pantomime villains of today’s flexible/insecure labour market. Abolition of “abusive” zero-hours contracts is at, or near, the top of every union wish list seemingly irrespective of the problem said wish list aims to tackle.
Furthermore, voters seem to think the same way. According to a sample of the adult population surveyed by YouGov in March, 64% thought “zero-hours contracts are normally a bad thing – they don’t provide any security and allow employers to exploit their workers” and 57% thought they should be abolished with just 21% disagreeing. Although, it’s interesting to note that opinion wasn’t so clear-cut among 18-24 year-olds, who are most likely to actually be employed on a zero-hours contract.
CIPD has always taken a more measured approach towards these contracts, recognising that they can work well for both parties. We think the latest evidence – which we are currently putting together – continues to support our more pragmatic position.
Zero-hours contracts aren’t a growing problem
Despite predictions to the contrary, numbers on zero-hours contracts haven’t really taken off in the last few years. If anything, the last few months have seen numbers fall. Our latest survey of employers, carried out as part of the Spring Labour Market Outlook, showed that less than one-fifth of employers used these contracts - mainly in the hospitality sector, and mainly for roles such as bar staff and waiters/waitresses - to cope with staff absences and peaks and troughs in demand. As a result, about 3% of employees are employed on zero-hours contracts. Such contracts may now have become part of the furniture, but they occupy small and distinct niches in the labour market.
Zero-hours contracts aren’t all bad
The debate too often focuses on the extremes. Whereas the reality is more mixed;  they work well for some people and not so well for others.  Zero-hours contracts probably work best for people like students – after all, one-fifth of working students have a zero-hours contract.  And they probably work worst for those with fixed, regular out-goings, which is probably why they are so rare among 25-54 year olds.
The overall quality of jobs for people on zero hours arrangements  is on most measures lower than for other workers, as shown in the chart below, which uses data from our Good Work Index.

Good Work Index for zero-hours contract workers 2018-2021
Average (mean) scores
Excluding self-employed, owner-managers and people in a business partnership
Scores are for each of the seven dimensions of the CIPD Good Work Index.  Each dimension is scored from zero to one, with higher values representing better work.
Source: 2018-2021 Good Work Index surveys.
Unsurprisingly, the average zero-hours contract suffers in terms of job security, and these contracts tend to offer less than other jobs in terms of pay and other benefits and in career opportunities. However, zero-hours jobs score higher on work-life balance and marginally so on health and wellbeingThis is because most zero-hours jobs tend to involve part-time hours and because zero-hours jobs “spill over” less into the rest of employees’ lives, the result being less workload pressure and less stress. There seems to be a trade-off here.  If zero-hours contracts mean people aren’t paid unless they do work, zero-hours contracts also mean unpaid hours are less likely to be “polluted” by work-related concerns.
Arguably, zero-hours contracts aren’t the problem
Criticism of zero-hours contracts tends to focus on the uncertainty over hours worked (and hence pay) that they involve. And zero-hours workers are more likely to say their weekly hours tend to vary than other employees. However, zero-hours workers are only a fraction of those with insecure hours and pay. Indeed, seven-eighths of employees who say their pay tends to vary do not have a zero-hours contract. The majority of these insecure workers are in permanent, open-ended employment.
And it’s not as if zero-hours contracts aren’t regulated
As well as the zero-hours specific ban on exclusivity clauses, people with zero-hours contracts are covered by standard employment law. Three-quarters (76%) of employers who use zero-hour contracts say they treat them as employees, even if demonstrating continuity of service can be an issue. Few use them to try and cut labour costs.
That’s not to say everything is perfect …
A minority of employers who use these contracts seem to misuse the give-and-take inherent in them – something the Taylor review called “one-sided flexibility”.
For example, 76% of employers said their zero-hours contracts allowed employees to turn down work if they wanted. However, only 57% said they were free to turn work down in practice.  Our survey also highlighted similar (longstanding) issues around notification of shifts and compensation for shifts cancelled at short notice.

What about legislation?

 The Government had set out in its December 2019 Queen’s Speech a commitment to legislate in a new Employment Bill to provide employees who work variable hours (including both those on zero-hours contracts and agency workers) the right to request a more predictable and stable contract. As recently as June this year it reinforced its commitment to the measures set out in its Employment bill although the timing of this remains uncertain,
This change to the law would be supported by the CIPD as it would reinforce to more employers that the flexibility in variable hours working arrangements should wherever possible suit both the organisation and individual.
CIPD’s view is that it is in employers’ interest to use these contracts responsibly and ensure there is genuine two-way flexibility. Our guidance on employing atypical workers provides some pointers, such as regular reviews of both employment status and the suitability of specific contracts.
Mark Beatson

Mark Beatson, Chief Economist

Mark's role includes leading the CIPD’s respected labour market analysis and commentary, while also strengthening the CIPD’s ability to lead thinking and influence policy making across the whole spectrum of people management and workplace issues.

Prior to joining the CIPD, Mark was an economic consultant and for over 20 years worked as an economist in the Civil Service, latterly at Chief Economist/Director level, in a range of Government departments including the Department for Business Innovation and Skills (BIS), the Department for Innovation, Universities and Skills (DIUS), the Department of Trade and Industry (DTI) and HM Treasury.