Some zero hours contracts are good for employees as well as employers

Most zero hours contracts are exploitative and heavily weighted in favour of employers. The media are reporting that today Ed Miliband will use his speech to the TUC  to outline his proposals for cleaning up this murky practice.

Miliband wants to outlaw contracts which offer no guarantee of work, but which do not allow the employee to work for anyone else. He also believes that anyone who works regularly for one employer should be moved on to a proper contract, which will, of course, include holidays and other statutory benefits.

He is right, of course, and I am rather ashamed that Liberal Democrats have not led on this.

There is much confusion over how many people are on zero hours contracts in the UK.  According to a House of Commons briefing (pdf) the Office of National Statistics claims that around a 250,000 employees may be affected, while The Chartered Institute of Personnel and Development puts the estimate at around one million. Unite has now published research (pdf) which seems to indicate that 5.5 million people may be on zero hours contracts. It is not clear that all these organisations are working to the same definition. The Office of National Statistics will be carrying out specific research into this in future.

To return to my headline – some zero hours contracts work to everyone’s satisfaction.

For example, schools use supply teachers to fill in for absent staff. They often like to build up a small team of teaching professionals whom they can call at very short notice when a permanent teacher is taken ill. By drawing from this pool the schools can ensure that the substitute teachers are familiar with the school’s practices, and the children are taught by people that they have come to recognise.  Teachers may offer themselves on supply to several different schools and are free to accept or turn down any request. Many take on this work because it can be fitted around other commitments, such as occasional caring duties. I have known artists who do occasional supply teaching in order to bring in some additional income, even though they do not want the commitment of regular work.

Similar schemes are often operated by hospitals, local authorities and care homes when they draw on their own banks of nurses, midwives, social workers and carers to cover for staff absences.

A problem sometimes arises when the employer has staff vacancies which is it having difficulty in filling. I can see the advantage of calling on bank staff temporarily to cover posts, but the danger arises when such arrangements become semi-permanent. There should be a point at which such contracts should be converted into ones with clear specified hours, even if only for a temporary period.

We need to find a solution that protects workers who are being exploited as well as those who are enjoying the flexibility offered by some types of contract.

* Mary Reid is a contributing editor on Lib Dem Voice. She was a councillor in Kingston upon Thames, where she is still very active with the local party, and is the Hon President of Kingston Lib Dems.

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39 Comments

  • Well I knew from the first word this was going to be kack. “Most” contracts are exploitive? 84% of people on zero hours contracts are happy with the arrangements. Doesn’t sound like they’re being exploited to me, they sound like a life saver for thousands of people who for whatever reason desperately need flexible working.

  • richard heathcote 10th Sep '13 - 9:55am

    depends who are asked for these polls to get your figure of 84% if its someones main and only source of income its not very good to be unsure of how many hours work you will get in any given week. I also think this is ripe for exploitation if you need 50 people to operate your business you could potentially have 100 people on zero hours contracts and rotate between who you offer work to in any given week removes the need to offer proper contracts or workers rights for that matter. In the past i did order picking for a large supermarket chain and it was bloody awful.

  • Milliband is totally right, where a zero hour’s contract with a zero or minimal annual retainer prevents someone from working for someone else it is exploitative. To me such contracts should legally be required to pay at least the national living wage as their annual retainer in addition to being paid an hourly rate of not less than the national minimum wage..

    We should remember what is the purpose of a zero hours contract. In effect the only reason to have a zero hours contract is to create a pool of skilled temporary staff who are knowledgeable about your business and hence are able to step in and be effective with minimal notice and orientation assistance.

    Hence it is totally appropriate for businesses to incur similar engagement costs with these staff as they would incur if they engaged temporary staff through an agency; in-addition to their training/orientation outlays.

    I’m not sure that the example of schools is a good one, as really the problem schools have are more around funding and all the associated overheads that they now have to deal with. By having someone “on staff”, CRB checks, Insurance etc. are simpler. At my school we don’t issue zero contracts, but do issue fixed term very low hour contracts – to ensure that all ‘supply’ staff periodically attend to be seen in the classroom (and hence be recognised by the children) and to attend ‘staff training’ (either as ‘staff’ or to provide classroom cover). In fact due to the various overheads, last year we started to issue very low hours contracts to people/parents organising regular after school activities, to reduce their costs and hence the amounts parents were being asked to contribute.

    I suspect that similar considerations apply to hospitals, care homes etc. where there is a duty of care and a requirement for staff to be vetted.

    I see no real problem if bank/temporary staff become “semi-permanent”, just as long as the monies the bank/temporary staff receive are broadly equivalent to what they would receive as temp’s in the open market.

  • “He is right, of course, and I am rather ashamed that Liberal Democrats have not led on this.”

    We have led on this. Vince Cable has already set up an inquiry to look at ways of reforming zero hours contracts.

    Miliband is as usual simply jumping on a bandwagon WE STARTED.

    I am ashamed that there are Liberal Democrats who don’t know that we are in the lead here.

  • @ Roland

    Not you as well.

    Miliband is right in focusing on something the Liberal Democrats have already identified as something that needs reforming.

    This is yet another area where we have simply failed to communicate what we are doing.

  • @RC
    We should be (publicly) glad that Milliband is talking the LibDem talk, now the LibDem’s need to publicly lead him to the walk…

    But I take your point that Milliband is receiving credit and publicity for a subject the LibDems raised a while back. It just shows how quickly we forget as new issues arise and ‘old’ issues get piled up [Aside: in some respects this observation is pertinent to John Whitehouse’s article about HS2 and LibDem policy, namely we forgot what we agreed to in a strategy document.]

  • There is s place for zero hours contracts.

    We use them for our placement students on completion of their placements (which are paid and arranged via a standard fixed term contract) . This allows them to offer us time around their university work which they find both pays more than, and is more relevant than, other available “student” type employment. They tend to offer more time at the start, and less towards the end of each semester. We also use them for some of our professional staff who do not want to have a fixed arrangement. For example we have some recently retired staff members who are happy to do some sickness and holiday cover if it suits them.

  • A Social Liberal 10th Sep '13 - 12:16pm

    There are differences between supply work (and I include bank work in this) and zero hours contracts. As I understand it, when you are waiting for work to come your way in a supply situation you can claim JSA as you are only employed for the hours you work. With zero hours contract you are deemed to be working even when you are not given hours and so have no recourse to benefits.

  • A Social Liberal 10th Sep '13 - 12:20pm

    Steve

    Students cannot claim JSA and have other means of funding themselves when not being called to work. Do you have them on a full time contract and have clauses to prevent them working elsewhere?

  • Eddie Sammon 10th Sep '13 - 12:48pm

    There should not be any additional legislation on zero hours contracts. We should be writing solid laws, not doing what gets the most short-term praise. To elaborate:

    If you ban zero hours contracts then they will just be replaced by one hour contracts.

    If exclusivity is the problem that legislate against that, but that would cause a whole host of problems itself.

    I think the better solution is to get rid of welfare sanctions so fewer people are forced to accept rubbish contracts. There are other solutions, but I think it should be fairly easy for us to agree that welfare sanctions are about the myth that the poor are lazy and need to be whipped into work. We should have nothing to do with it.

  • Not restrictions at all… It merely allows them to be paid for just the hours they work and to ensure that work does not affect studies. We used a part time contract for the first student we employed after he returned to Uni and it never worked for either party.

    As you say for students a there is no impact on benefits. I would deplore their use to avoid giving someone a permanent contract. The main benefit to us is that we have a track record of re-employing around 50% of our students and it keeps them in the “family” during their final year of studies. This often means giving them non urgent tasks and probably losing out financially. That said I weigh that against recruitment costs and feel it worthwhile. In fact as there would be no break in employment it improves their rights. We also provide options for them to carry out their final year project on our behalf which we also pay them for separately.

    With the retired staff members it is far cleaner then having self employed status. For example if they only work for us the revenue would challenge the validity of being “self employed”. Most do it as they remian interested in the field and to top up their pensions. The other option used in our industry is using the vehicle of a limited company. This again can be messy as it brings IR35 into play and leads to accountancy expenses.

    To be honest it seems fairly simple to me to restrict the use of zero hours contracts allowing genuine reasons to be retained and the less scrupulous employers to be reined in…

  • @Eddie, I largely agree, however, if the contract contains an exclusivity clause that effectively prevents the employee from taking on other work around the zero/minimal hours then the contract isn’t a zero/minimal hours contract and hence it is right and proper that the employer be required to pay a retainer accordingly.

  • Eddie Sammon 10th Sep '13 - 2:26pm

    Roland, I agree the exclusivity with no pay doesn’t sound very good, but if we banned that practice people could just pay really tiny retainers to get around it. The government could set a national or regional retainer rate, but that would arguably reduce employment, or the growth rate of employment, and harm businesses too.

    My main point is that I think the two issues of zero hours and exclusivity need to be dealt with separately and I think the real cause of low pay is desperation for work, rather than the under regulation of employment contracts.

    I have a radical belief that all employees should in fact be self-employed contractors, I dislike the employee-employer divide, which I think is illogical, and making employment contracts more stringent would strengthen this divide, actually increase risk for the employer and therefore reduce pay over the long-term. Therefore exasperating the class conflict.

  • @Eddie “I have a radical belief that all employees should in fact be self-employed contractors”

    I’ve always thought that we were – the only real difference being who wrote the cheques to HMRC…

  • Eddie Sammon 10th Sep '13 - 4:57pm

    We have not “allowed Labour to gain the political advantage on this” because the present proposals can be torn to shreds, would be bad for the economy and bad for wages.

    We need to get away from this childish, mainly Westminster bubble based, playground style politics that thinks it is all about short term headline grabbing and gaining “political advantage”, rather than governing the country. This is the same short-term attitude that we criticised the banks for.

    I know any article or headline written criticising zero hour contracts is all about publicity and not serious politics because any measure to counter them can be solved by moving to one hour contracts. This would come to anyone who would have given the idea a minute’s thought without panicking about the short-term headlines.

    I know my message sounds harsh, but I think it is the best way of getting across my frustration with the whole attitude around “tackling zero-hour contracts” and other manifestations of the obsession with the short-term news-cycle.

  • Eddie Sammon 10th Sep '13 - 5:02pm

    Yes Roland, I am glad you see where I am coming from.

  • Zero hour contracts
    Link to wiki… h ttp://en.wikipedia.org/wiki/Zero-hour_contract

    More than 30,000 care workers in the West Midlands are on zero-hours contracts, ministers have admitted… That is just disgraceful and just how widespread is this around the country.

    The true figures of ZHC are going to be horrific, there are some well known companies who have very high ZHC for the workforce. The wiki link lists companies who are using ZHC pretty much for the whole workforce which should not happen.

    Personally I think they should be banned altogether, but if that happened we would see a massive jump in unemployment as people who have been on ZHC and not working show up again.

    ONS are wrong way, way out

  • Peter Watson 10th Sep '13 - 5:53pm

    It seems to me that there is more agreement than disagreement here. One side argues that zero hour contracts can be good for employees and one side argues that zero hours contracts can be bad for employees, and both sides are correct. But there are certainly very severe risks for employees. For those in the workplace who are more easily replaceable, zero-hour contracts represent a potential threat to their employment rights and security. Who needs to unfairly dismiss an employee, possibly on the grounds of race, religion, gender, sexuality, when one can simply stop giving them any paid hours?

    Labour could successfully steal a march over Lib Dems on this issue. Posts here suggest that some Lib Dems are supportive of zero hour contracts, and Cable’s commissioning of a report appears non-committal. Labour are able to play on people’s lack of employment security. When the report eventually comes out, probably recommending a few sensible safeguards, it could look like a Labour victory.

  • Peter Watson 10th Sep '13 - 6:01pm

    We have had the flexibility of casual labour and self-employed contractors for many many years.
    What exactly do zero-hour contracts bring that is new? Is there more to it than a means for employers to evade aspects of employment legislation?

  • Eddie Sammon 10th Sep '13 - 6:23pm

    Peter, I think it is because it is illegal in most cases to have someone working for you as “self-employed” if you are the only person they are working for. Because this is illegal, the solution is “zero-hour employment”.

    The only solution that I can see to the self-employed / zero-hour employment problem is to give all companies the option of hiring workers on a self-employed basis. People will cry about exploitation, but the source of this is not the company, but the individual’s financial situation, which is why this also needs to be looked at alongside the benefits system.

  • A Social Liberal 10th Sep '13 - 7:00pm

    Eddie

    If one hour contracts become prevelent then they will part time contracts. That means employees will have a cast in stone guarantee that they will be working for one hour and they can go looking for other cast iron contracts that will give them further work. Because at the moment with ZHC they can’t

  • A Social Liberal 10th Sep '13 - 7:03pm

    That should of course read ” . . . they will be part time . . . . .”

  • Peter Watson 10th Sep '13 - 7:41pm

    @Eddie Sammon “I think it is because it is illegal in most cases to have someone working for you as “self-employed” if you are the only person they are working for.”
    There are plenty of “self-employed people” with only a single employer/client/customer, and employers do have (and exercise) the option to hire people on this basis. Indeed, IR35 was set-up to make many of them pay more tax in what was perceived as “disguised employment” in many cases. The Daily Mail would have us believe that this form of employment is a terrible thing when it is people avoiding paying tax while working for the BBC or in Whitehall, but a necessary thing that evil IR35 restricts when it is people working as contractors everywhere else. Go figure!

    Being self-employed or a contractor is great for those of us who feel indispensable or marketable and works well in many areas, but for many employees the loss of employment rights in such a scenario would be terrible. Sick pay, maternity leave, paid holiday, health and safety, company pensions, protection from unfair dismissal, etc. are all things we take for granted now, but how difficult would it be to maintain these if everybody was “self-employed” or on a zero-hour contract. I work with contractors (and have been one), choosing to exchange job security and these benefits for a good hourly rate, but I would not want that to be the default form of employment for everybody. If it were, then we would probably see workers compensating for weak individual positions by turning to trade unions for stronger collective negotiation and then the wheel would turn full circle back to where we are!

  • Graham Evans 10th Sep '13 - 8:19pm

    The distinction between “employed” and “self-employed” is a matter of fact, not of contract. There is a well established list of characteristics which are used to decide whether a person is employed or self-employed, and working for/with only one employer is just one of the factors taken into account. The principal difference between employees and the self-employed at a financial level relates to the payment of national insurance (which currently affects entitlement to state benefits, including state pension). In addition certain expenses incurred by the self-employed are tax-deductible (.e.g. travel to work) but similar expenses incurred by the employed are not. In general HMRC tries to crack down on self-employment because its use usually results in a loss of revenue to the Exchequer.

  • Eddie Sammon 10th Sep '13 - 8:32pm

    Social Liberal, if exclusivity without pay is the problem then that is what needs to be tackled. I am thinking about the wording of any new pieces of legislation and if it included words to the effect of: “employment exclusivity without pay for people on zero-hour contracts is illegal”, then it has already created a loophole (1 hour contracts). However if exclusivity without pay is banned completely then I don’t see any loopholes, but then I don’t see how that is related to zero-hour contracts. I am not an expert in employment law so feel free to attack the specifics.

    Peter Watson, I seem to have a different experience of employment law to you, but I am not an expert. From my experience there are many thousands of people working on a self-employed basis that legally should be employed, but HMRC seem poor at enforcing this. I will have to read-up on this soon.

    I agree that many people prefer the security of employment, which is why in my radical dream-world I wouldn’t ban employment, I would just want people to have the option of whether or not they are self-employed. I know some would be pushed into it, but I think it is the best of a bad situation. This is not about a right-wing fantasy, it is because when I was employed I hated being felt as though I was inferior and couldn’t wait to leave and if I were to ever hire someone I wouldn’t want them to feel the same.

    I know it is hard to comment on legislation when we aren’t all experts, I just wanted to say that I get the impression that people want to do something about zero-hour contracts so they can say they have done something, but they aren’t sure, and sometimes don’t seem to care, what should actually be done about them. I’m sure I sometimes do the same in other areas, so I don’t mean to preach too much!

  • Eddie Sammon 10th Sep '13 - 8:37pm

    Yes Graham the difference between an employee and self-employed is a matter of legal fact (although there are plenty of grey cases), I’m just saying ideologically I don’t see a difference because we are all selling our labour. This is moving away from the debate, but I think it is important to do as I have done as as Peter did, which is to ask why these contracts exist in the first place.

  • “In general HMRC tries to crack down on self-employment because its use usually results in a loss of revenue to the Exchequer.”

    In my experience HMRC’s interest in self-employed is dependent upon sector and whether they are “seriously” in business and hence whether money is simply disappearing from the system, but HMRC effectively closed a tax evasion “loophole” by making the employer liable for the taxes not paid by the self-employed, hence why many employers prefer to contraxct with limited companies. Otherwise HMRC have a relatively benign attitude to the self-employed as they effectively pay the same taxes as the employed. However, HMRC are very interested in small companies with effectively a single director and employee, particularly where the main business is contracting/professional services. The creation of IR35 is just one of HMRC’s attempts to clamp down on what they perceive as tax evasion…

  • Eddie Sammon 10th Sep '13 - 9:34pm

    Roland, I just have to reply to this comment: “However, HMRC are very interested in small companies with effectively a single director and employee, particularly where the main business is contracting/professional services. The creation of IR35 is just one of HMRC’s attempts to clamp down on what they perceive as tax evasion…

    This would describe my company quite well, but because I work for multiple different businesses and running a genuine business I am completely legal. As a financial adviser people have asked me about setting up a company and contracting themselves to their employer in order to save tax and I’ve told them to stay away from it. As you say, it needs to be a genuine business and can’t just be set up for the purposes of tax avoidance. Again, this is all relevant to employment contracts and shows how it is all interlinked.

  • @Peter
    Yes there are key differences between employment and self-employment and as you note people are different and cope differently to employment risk and money. Certainly getting a lump of money dropped into the bank account each month is a lot easier than the ups-and-downs of self-employment (either sole-trader or Ltd) and the financial juggling that sometimes needs to happen to keep things running smoothly…

    I think the key issue with ZHC is exclusivity, which should carry a price directly related to the exclusivity demanded. Remember “garden leave” is effectively a ZHC for senior executives and we know that they don’t get peanuts for agreeing to this.

  • Peter Watson 10th Sep '13 - 10:10pm

    @Roland “I think the key issue with ZHC is exclusivity”
    I agree entirely, and was shocked to read above that exclusivity was a feature of zero hour contracts.

    Preventing exclusivity seems like one of the obvious recommendations that could come from Cable’s report, and an easy stick with which Milliband can hit such employment contracts in the meantime. Following on from initiatives like allowing employees to trade away rights for a handful of shares, this risks confirming Labour as being on the side of ordinary working people and leaving Lib Dems looking like stereotypical tories. If we do end up making changes to zero hour contracts it would look like we are following Labour rather than leading.

  • A libdem idea, it just sums up the influence in the coalition that the ldp have, this may have been a libdem idea but its no doubt been filed under ‘shut up, say and do nothing until we give you an order’; at least the lp get this type of stuff into the mainstream media and dare I say it, on this site.

  • Julian Tisi 11th Sep '13 - 9:05am

    When I left university I worked as a waiter for a while on a zero hour contract. I was effectively only working for one employer but I was free to accept or reject work as it came – indeed, they knew that I was going for interviews for other jobs. I’d hate to see this sort of arrangement outlawed as had the hotel in question been forced to put me on their books I doubt they would have done and I would have had no work at all. It was a recession back then and I was grateful for the work.

    On the other hand, I’d heard stories of how the previous boss would tell someone who asked not to work on a particular day that they needn’t come back for any further work for a month. It’s this sort of unscrupulous practice that needs outlawing – the challenge is how to do it while retaining some degree of flexibility.

    The plan (which Lib Dems have suggested and Miliband has now nicked / followed / supported (delete as appropriate) to “outlaw contracts which offer no guarantee of work, but which do not allow the employee to work for anyone else” sounds to me the right sort of balance.

  • Surely nobody forces someone to accept a zero hours contract? If a company wants to offer the position and a person is willing to accept then why should it be outlawed? We cannot know everyone’s personal circumstances, as many have said they might be carers, or they might be retired and just like to earn a little additional income now and then.

    I agree that they should be regulated, and not allowing the employee to take parallel employment appears wrong to me – however should the employee be in that position they could always resign?

    I think the debate around this has been led by people whom all have full time jobs so can’t comprehend a situation where they would take such a position – that doesn’t mean that many people aren’t really happy with it.

  • Peter Watson 11th Sep '13 - 3:11pm

    @Matthew Lambert “I think the debate around this has been led by people whom all have full time jobs so can’t comprehend a situation where they would take such a position”
    To be honest, I think that the debate has been led by people with good job security (or confidence that the next job will be easily arranged) who cannot comprehend being at the mercy of unscrupulous bosses.

  • Robert Wootton 11th Sep '13 - 8:57pm

    The only people I can hink of who choose to work without any guarantee of the number of hours and days that they work are the self employed. Plumbers, electricians etc. Managers of the large national and international companies should surely have the expertise to calculate the number of man hours required each week by their business. Employees on a zero hours contract should be paid a callout charge of 7 hours pay for each day they are called out to work. If this measure was a legal requirement, the scandal of zero hours contracts would end in weeks.

  • @Robert

    Well yes that used to be called manpower planning…… once companies are allowed to treat their staff as if they were just like the bricks in the factory wall that sort of thing is just terribly old fashioned. Look at the latest unemployment figures being trumpeted by Osbourne as ‘proof’ that his plans are working, and then look at the figures for part time working and think again.

  • There is no such thing as a zero hours “employee” they are all classed as “workers”, I should know, I’m one of them.
    This means they never gain basic employee rights and protections, maternity leave, unfair dismissal etc etc.
    Nor do they get company benefits, share schemes pension plans (before you all start shouting, this won’t change, zero hours staff will only ever get a NEST not access to the company scheme) or vehicle schemes etc etc, because they are not “employees”
    People who seriously think we actually like this situation rather than a proper job are delusional.
    At least Mr Cable has said something about it, personally I think the status of “worker” should be the target, not the contract, make us all proper employees and the contracts will loose a lot of their value.
    If nothing is done then we all end up on zero hours contracts, even lib dems.

  • Scarlett O'Hara 26th Sep '13 - 7:39pm

    I have worked as a supply teacher. There is seldom any work and I have been expected to call in availability every day. This telephone call had to take place after 7am and before 7.15am. This tells the agency I am ready to work that day. As the work is not offered very often and I still need to be ready to go out the door within 15 mins of getting a call, which can be at any time up until lunch time, it is totally soul destroying to be doing that kind of work. As has been pointed out, not only did it tie up my day it also meant I couldn’t work elsewhere because then I wouldn’t be available for supply work. Some people can work with that, those who have other income. When I was doing this work I would also claim JSA and have to complete numerous forms so that I could claim benefits when I wasn’t working. It cost me keeping a car on the road and petrol to get to the schools when I did work. These costs were considerably more than the £5 JSA currently allows. £25 per week is a bit more like it as is the fact with UC the number of hours worked isn’t capped. I was constantly stuck between the number of hours worked and the amount I earned in trying to stay on JSA rather than begin the whole process again.. It was a nightmare and did not often mean that I was better off working. I am not the best with figures and I did want to keep myself teaching as much as possible. But I can tell you when I realised that in fact I was in the same ball park as ZHC I was very annoyed but at the same time pleased to see that my struggles were not now going unnoticed. My agent told me when I complained that I was ‘frustrated”. Which is a joke and totally shows you how unsympathetic the big companies are. The agent never suggested anything to improve my situation, ever. They just hounded me for CRB’s and references and rushing me, badgering me, when they had a booking. It was hideous. I no longer make myself available for supply teaching and will leave it to those with a pension/private income. Supply teaching was greatly affected by classroom assistants a few years back, taking the work from us. And to say that any school has a cosy arrangement, as suggested above, where they get a pool of teachers, ready and willing to work at a moment’s notice is nonsense in my experience. Supply teachers are in competition with each other and are marked severely on their appearance, time keeping, delivery of lessons, preparedness to switch at a moment’s notice to another subject and lots more. Appraised by everyone they meet in their school day. It may also suit newly qualified teachers as they are desperate to teach and may indeed benefit from a wide ranging experience. However, for me it was slavery.

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