Zero Hours Contracts: The end of the road?

The Government has recently launched a formal consultation on zero hours contracts. The Business Secretary Vince Cable had been leading a review on the issue for the Government since June of this year but in mid-September a decision was taken that a formal review would start towards the end of this year.

Zero hours contracts are essentially a contract between an employer and employee under which the employee is not guaranteed work and is paid only for work carried out. In essence, it allows employers to contact the individual as and when they need help.

Within the further education sector, zero hours contracts are extremely common. Indeed, a recent freedom of information request undertaken by the University and College Union (UCU) found that 53% of universities use zero hours contracts and 60% of FE colleges use them.

Zero hours contracts provide colleges with the flexibility to meet fluctuating demand. They are often referred to as variable hours contracts within the sector. The flexibility means that employees only work as and when they are needed by colleges, often at short notice, and are only paid for the hours they work.

The controversy surrounding zero hours contracts is that it is argued the type of arrangement does not offer enough financial stability and security of employment. Colleges argue that the contracts work both ways, that is, the college likes it as it enables a contractual arrangement to form to ensure that fluctuating demand is met. Further, employees like them on the basis that there is a great amount of flexibility in a zero hours contract.

The Government’s initial review has found four key concerns. First, there is no clear legal definition of what constitutes a zero hours contract, which could lead to confusion. Secondly, it was felt that employers had more of the balance of power in the relationship and that individuals may be refused further hours if at any point they decided not to take hours that they were offered. Thirdly, the Government felt that it was concerning to note that employers were asking workers for exclusivity in the zero hours contracts, that is, not working for any other employer, whilst at the same time not guaranteeing a minimum number of hours. Finally, the uncertainty in the amount of money that an individual can earn, which is clearly dependent on the number of hours worked, has caused some consternation.

Having said that, a recent survey conducted by the Chartered Institute of Personnel and Development has indicated that over half of the 456 zero hours workers in question did not want more hours and were perfectly happy with the zero hours arrangement. The Unions are clearly against zero hours contracts on the basis that whilst they believe not everyone on such a contract is exploited, the evidence suggests that job insecurity and low pay are concerns for a significant number of workers.

So what will the consultation find? At this stage it is too early to tell whether or not the Government will seek to legislate on the abolition of zero hours contracts. It is noteworthy that many other European Union countries envy the UK’s ability to be flexible in its working arrangements and flexibility is key in ensuring that the economy moves forward. If such a decision was taken to abolish them altogether then colleges would need to consider seriously how best to fill the work that those on zero hours contracts perform. This will involve a radical reorganisation of its workforce and may inevitably lead to reductions in staff numbers.

The consultation should start shortly and is on the Government’s radar. A note has already been prepared by the House of Commons Library on zero hours contracts, which shows the advantages and disadvantages of them. It will be interesting to see what the Government proposes. It is anticipated that the use of zero hours contracts will continue but the way that they are applied may be more rigorously enforced to protect employees.

Matt Kelly is a partner at Thomas Eggar, the law firm