Why Worry About Zero Hours Contracts?

Zero hours contracts are a 21st century phenomenon.  Emerging in the mid- 2000s, they offer the employer and employee considerable flexibility and as such have become part of the employment landscape. 

New figures show that around one in 30 workers in Wales has a contract of employment with no guaranteed hours of work, approximately 43,000 people.  Put into context, this is nearly twice the number employed in agriculture and fishing.

The advantages of zero hours contracts to employers are obvious: they can respond quickly to variations in demand or to other unforeseen events, they have a pool of experienced employees to draw on, and costs are typically lower than agency staff.

The flexibility of zero hours contracts can also be appealing to some workers, as they can organize their paid work around other commitments.  According to a recent Chartered Institute of Personnel and Development survey, people on zero hours contracts are more likely than other workers to report a good work-life balance and that their job has a positive effect on their physical and mental wellbeing.

So should we worry about zero hours contracts?

The answer is a firm yes.  There are considerable downsides to the arrangement for workers. As well as lower average pay (even allowing for differences in age, experience and type of job) and lower overall job satisfaction, the flexibility offered is often illusory.   The CIPD survey found that nearly half of employers of zero-hours workers do not compensate workers for shifts that are cancelled with less than 24 hours’ notice, and just over half give workers the right to turn down work in practice.

This one-sided flexibility brings with it considerable economic insecurity.  Workers live with not knowing how much they will earn from one week to the next – can they pay their rent, do a weekly shop or repair their car?  If they receive social security benefits, their financial uncertainty is amplified by the adjustments made to Universal Credit to take account of fluctuations in earnings.

The uncertainty also affects zero hours workers’ everyday life – they do not know if they can pick up their children from school, attend a parents’ evening or play in the five-a-side football match. It’s not surprising that, according to the Office for National Statistics, more than a quarter of zero hours workers would like more hours while one in six would like a new or additional job.

Zero hours contracts are very common indeed amongst workers in some jobs.  In caring, leisure and other service occupations, one in five (20.3%) has a zero hours contract while in so-called elementary occupations, nearly four out of ten (37%) have one.  These occupations are often paid at or barely above the minimum wage, which, combined with uncertain hours, creates very high levels of economic insecurity.

New legislation (the Workers (Predictable Terms and Conditions) Act 2023), due to come into force in the autumn, allows workers to request a predictable work pattern.  The legislation should help to tackle the problem of shifts being cancelled without compensation and unpaid hours of work by giving workers some certainty.  However, the legislation is based on individual workers making a request and employers agreeing to it – or not.

A survey by the government conciliation service ACAS found that 61% of zero hours workers were not aware of their basic employment rights, such as minimum wages, paid holiday, rest breaks, protection from discrimination and to receive a pay slip.  When so few zero hours workers are unaware of their rights already, it remains to be seen how many will take up the opportunity to request a predictable work pattern.

The legislation is undoubtedly a step in the right direction, but much more needs to be done to strike a better balance between economic flexibility for the employer and economic security for the worker.

Zero hours contracts will be featured in the Bevan Foundation’s forthcoming State of Wales briefing on work in Wales.