What's so bad about zero-hours contracts?

The issue of zero-hours contracts hit the headlines this week with business groups on one side citing flexible working opportunities and workers’ unions on the other calling to ban them.

At the start of the week the Chartered Institute of Personnel and Development (CIPD) put out data from a survey which revealed there are a million workers on zero-hours contracts - four times higher than official estimates.

These employees are not guaranteed work from one week to the next, and many must be prepared to leave their homes and families to travel across the UK to work at different stores and offices at short notice.

Following the research business secretary Vince Cable said zero-hours contracts are being abused and that he was concerned there was some exploitation of staff.

However it didn’t take long for AccountingWEB members to get involved in the discussion, with the majority...

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Comments
zarathustra's picture

They wouldn't be necessary    1 thanks

zarathustra | | Permalink

If it were not for decades of gold plated employment leglislation.

As it is I think they are a good solution, and probably partly explain why UK employment figures have held up so well through the recession.

ShirleyM's picture

I think it is a sign of the current high unemployment

ShirleyM | | Permalink

People who want to work will take any job available, even if it isn't regular work it is better than nothing. If they get the opportunity of a decent job they won't choose a zero hours contract over guaranteed hours, except maybe the few who want sporadic work, and are able to work at short notice.

Once the job market picks up I expect zero hours contracts to be far fewer as they won't be able to get the good quality staff unless they offer regular work.

Zero Hours Contracts and travel time    3 thanks

IanF | | Permalink

A separate issue which gets conflated with the zero hours issue:

One of the main abuses in the care sector is where the time and cost of going from one appointment to another is born by the employee.  A normal employee would be paid for the whole day worked and travel costs would be covered.  Self employed professionals build in an allowance for travel time and costs into their charges. 

It must be difficult for an honourable employers to break ranks and deal with this as they will be undercut by the competition when selling to the buyer (often a local authority social services department).

Unfortunately this does mean a change in regulation so that employees can be treated fairly and employers who would rather be fair can be so.  The present situation is worse in principle that a lot of pre-war practices.

Zero Hours = No confidence    2 thanks

Brad | | Permalink

IanF wrote:

A separate issue which gets conflated with the zero hours issue:

One of the main abuses in the care sector is where the time and cost of going from one appointment to another is born by the employee.  A normal employee would be paid for the whole day worked and travel costs would be covered.  Self employed professionals build in an allowance for travel time and costs into their charges. 

It must be difficult for an honourable employers to break ranks and deal with this as they will be undercut by the competition when selling to the buyer (often a local authority social services department).

Unfortunately this does mean a change in regulation so that employees can be treated fairly and employers who would rather be fair can be so.  The present situation is worse in principle that a lot of pre-war practices.

This really hits the nail on the head, in the home caring industry the employee will spend nearly half of their paid time extra in traveling with no expenses being provided by the company. Secondly many people in this industry don't realise that they are able to claim this off their tax either! Or with zero hour contracts work under the thresholds of PAYE and it is in effect like being paid under minimum wage once you have taken away your petrol expenses.

 

I think the government need to tighten legislation on this as an economy revolves around confidence, and I would like to ask how many would be confident in making significant purchases (I.e car, mortgage etc) when they have not the foggiest what their wage will be from one month to the next, or even worse they get a stable 40 hours per week and decide to take out a mortgage, the hours plummet and they barely get a wage with their bills to pay for?

The zero hours contracts are way too easy to exploit.

Mutuality of obligation?

leon0001 | | Permalink

It would appear that there is no obligation for the "employer" to provide work.

No mutuality of obligation implies  failure of a fundamental employment status test.

Does this mean that any earnings under such a contract should not be subject to PAYE?

Regular Casuals

Wiganer Elaine | | Permalink

I always assumed that employers (generally small ones) used zero hours contracts to cater for those people who they used on a regular basis but were unable to guarantee a set number of hours for each week.

Both parties benefit from this arrangement in their own way.

This may not be especially useful for someone who needs a regular guaranteed income but there are a lot of people out there who function perfectly well with an irregular income eg the small business, individual, self-employed people.

I think that before there is a knee-jerk reaction against zero hours contracts per se, the government should be looking more at the employers who use them.

Zero hours contracts may also be more useful especially with the advent of Universal Credits. If a person on a zero hours contract claims Universal Credits they will have an immediate safety net when they have not been provided with any/enough working hours.

Zero Hours Contract

NYB | | Permalink

Although I am a payroll agent running my own business I have a couple of zero hour contracts which I love (it gets me out of the house). My gripe is holiday pay. One does not pay it although it is a legal requirement. I have "touched" on the subject with them but to no avail. I daren't "make waves" as I will not be offered work. For me the pleasure of the job outweighs the money but I feel sorry for some of my colleagues who put in a lot of hours - often with early starts who are losing out.

Optimise

James26 | | Permalink

You have an employee who has worked 30 hours in the week and another who has worked 12 hours in the week already.  Both on 0/12 hour contracts.  You have another 5 hours work you need that week.  Is it more tax efficient for you (the employer) to give this to the 12 or 30 hour person.

Answer the 12 hour person because they will still be under the employers NI threshold.  So they cost you less.

Obviously they can be abused.  However, it does provide flexibility and I think has helped in essence a big 'job share' arrangement to work in the retail sector so rather than have 2 people agree to work 50/50 lots of people can share the pain and just get 33/35 hours per week or similar.  The other option would be an annualised hours contract, where you agree to say give 1000 hours but they are of course harder to explain/manage than a zero hours contract.  However, both of these have got to be better socially for the country than being unemployed.

Where it is unfair I think is around items that tend to be based on contractual hours.  E.g. pensions schemes, redundancy etc.  The government could legislate in this area to specify the higher of contract hours (capped at employers stand 35/37/37.5/40 hr std full time contract) or the average hours of the last 12 months for example and this kicks in after 1/2 yrs etc.  I think maternity pay already has some of this protection in because there is a measurement period.

raybackler's picture

Flexibility is the issue

raybackler | | Permalink

Customers can give or take away large slices of work on a whim.  Employers are hampered with an employment system designed in the days when people had a job for life.  Zero hours contracts are a commercial necessity to cope with the normal ups and downs of daily business.    

Politicians just don't seem to understand how disruptive a system is that continually tries to force employment on employers who can't guarantee long term work.  Whether self-employed, working through service companies or on zero-hours contracts, these are all work arounds in the same broken system.  We have an army of civil servants trying to enforce employment on employers on the grounds that they are avoiding national insurance, when most are just trying to survive in a highly competitive environment.

Where is the government on this?

Understandably it is

Brad | | Permalink

Understandably it is advantageous to small firms who may not be able to financially support a full time member of staff, however, there is no protection for the employee.

 

For example, Employee is ill on one of the companies busy days, there is nothing the employee can do as they are ill. However the power of the employer is that they can slash their hours as a 'punishment'. I've seen this happen often in the home care industry. Your hours get taken from you and you're left with 5 hours the following week through no fault of your own.

 

I think all in all the idea is good in that it helps small firms stay competitive especially in todays economic climate but there must be more stipulations to prevent exploitation of the workers.

 

On the subject of holiday, it is common in the care industry to have an increased hourly rate, I've seen at around £7.20 per hour, and the employee is expected to save the £1.01 difference from minimum wage as their holiday entitlement. In my opinion these kind of holiday pay schemes shouldn't be allowed. It discourages employees to take their holidays knowing that they may take two weeks off and get half a wage the following month. Or it may not even be financially viable to do so. In turn your workforce is run down and fatigued and totally unfair on the employees, not to mention the harsh criticism that would be received if the wrong medication were to be given to an elderly client etc. These situations would surely be more prevalent if your workforce were reluctant to take their holidays.

Non-executive directors    1 thanks

waltere | | Permalink

If zero hours contracts are such a good idea, why don't Tesco employ their non-execs on this basis?