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Joanna Cowie

SA Law LLP

Senior Associate

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A ban on zero hours contracts? Not quite.

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There has been much debate recently surrounding the controversial issue of zero hours contracts. Last month it was reported that their use had been grossly under-estimated, and it is now believed that around one million workers work under such contracts. Unite union claims that the number of workers is in fact much higher, at around 5.5 million.

The issue has raised its head once more this week with Labour leader, Ed Miliband, announcing his party’s plans to crack down on the use of such contracts at the recent Trades Union Conference. 

Firstly, enough with the hysteria: these proposals do not create a “ban” on zero hours contracts, as erroneously reported in some factions of the press. Rather, they go some way to address the concerns which have been raised in the context of zero hours contracts. 

Certainly, it does appear sensible that if employers wish to retain a flexible staff base, that this flexibility is reciprocated thus giving workers the right to refuse shifts offered to them and to allow them the freedom to work for other businesses.

However, these announcements could nonetheless worry employers were flexibility in their work force is a requirement – notably the retail or tourism industry which by their very nature have peaks and troughs. It is also likely to worry organisations in the care and health sectors who might require a bank of staff to fill in the gaps during busy periods. 

In making his speech, Miliband acknowledged that such flexibility is important for employers. However, he warned that flexibility must not come at the cost of “exploitation” – a term very much open to interpretation.

Concern over the use of zero hours contracts stems from the uncertainty that is inherent in such contracts.  Workers on such contracts are faced with fluctuating income levels, which in turn creates difficulty in planning and budgeting and also causes problems when making mortgage and credit applications.

That is not to say that many workers do not appreciate the flexibility which comes with zero hours contracts, such as those with child care responsibilities, students or older people who might want to work the occasional shift.

Realising this, Ed Miliband did acknowledge that there were circumstances where such contracts could be useful.  For example, where doctors and supply teachers fill a gap as a result of staff illness or for young people as a step into the workplace.

Miliband proposed three measures to address some of the perceived concerns surrounding zero hours contracts.  Firstly, banning employers from insisting zero hours staff are available even when there is no guarantee of work. Secondly, to end contracts that require zero hours workers to work exclusively for one business, and thirdly, to ban the misuse of contracts where employees are actually working regular hours, over a sustained period of time, but without the same rights or benefits as full-time workers.

Finally, Labour proposed that those who work on a zero hours contract for a single employer for more than 12 weeks be given the automatic right to a full-time contract, based on the average time they have worked during the preceding 12 weeks.

Furthermore, the proposal to ban the use of such contracts where the worker is in effect working regular hours, over a sustained period, is a rational proposal.  Indeed, an individual’s employment status is largely established on the basis of what they do in practice, rather than what is stated on a contract.  So, if a worker is engaged on a regular basis for a prolonged period of time then, it is likely in accordance with employment law principles, that the individual has gained sufficient status to be entitled to their statutory employment rights in any event. 

This proposal could go some way to limiting claims that employers might face regarding incorrect employment status and reduce potentially hefty back payments they might be required to pay out for incorrect payments of notice, redundancy or holiday pay.

That is not to say that the proposals are all without controversy.  The proposal to give staff who work a regular basis over a period of 12 weeks, the automatic right to a full-time contract based on an average of their hours over the previous 12 weeks, is likely to cause the most upheaval within businesses.  It will be interesting to see the shape of such proposals and the practical measures which might surround this.  Indeed, there is a concern that this proposal might work contrary to the proposals and might mean that organisations, in order to retain flexibility, increase their pool of bank workers so as not to offer any particular individual consistent shifts.  

On the whole, these proposals do go some way to regulate the use of zero hours contracts and thus offer protection for workers, whilst at the same time allowing organisations to retain flexibility, which is particularly attractive to businesses in a recovering economy. 

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Joanna Cowie

Senior Associate

Read more from Joanna Cowie
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