Zero Hour Contracts

From today's Sentinel. Given how pernicious zero hour contracts are, I'm glad to see a mainstream Labour figure has taken up the issue.

SPARE a thought for Caverswall-based Begbies Traynor. The corporate rescue and recovery firm was planning on an upturn in insolvencies during the recession. But, despite the high-profile bankruptcies of HMV and Jessops, our economic downturn has not seen a spike in company liquidations. Begbies Traynor's share price has suffered as a result.

Because the current state of the British economy has left many experts scratching their heads. Some call it a 'Zombie economy'. On the one hand, there are some clear and consistent drags on growth. Consumer spending has been curtailed as inflation outstrips wage growth, investment has been held back by a bank-lending system unfit for purpose, and exporters have had to contend with weak global demand, particularly in the embattled Eurozone.

Yet what has got economists baffled is how, in such conditions, employment statistics are holding up – even improving marginally. There are a number of possible explanations, including weakening productivity, stagnant wages and underemployment – where people are forced to take part-time jobs instead of full-time work.

Certainly, these play a part. But the worrying growth of another phenomenon is also having an impact. Because recent reports show that here in Stoke on Trent and across the country the number of so-called zero-hour contracts is rising rapidly. According to the trade union UNISON, in the private-care sector up to 41 per cent of homecare workers are on zero-hour contracts, while a survey from the Industrial Relations Service suggests that 23 per cent of employers now include them as part of their employment mix.

Zero-hour contracts are an agreement under which an employer does not guarantee the employee a fixed number of hours a week. The employee only receives payment for the specific number of hours worked. This means that they accrue none of the rights enjoyed by contracted employees, such as unfair dismissal, sick leave, maternity leave or redundancy rights.

These contracts first became popular in the late 1980s and 1990s as a way of improving labour market flexibility and reducing business costs. However, there were many reports of workers being asked to remain physically present on the premises, available to work, if their services were required – in work, but unpaid unless a job came available.

The last Labour government outlawed this form of abuse as part of the National Minimum Wage Act in 1998. But the mental pressure of always being on call remains. Especially for workers raising families or caring for dependents. With no guarantee of regular income meeting bills or planning for the future becomes next to impossible, with disastrous implications for overall consumer confidence. And they can also lead to complications with in-work benefits such as tax credits.

Traditionally such contracts have been the preserve of low-paid sectors where flexibility is vital to the success of the business, like catering or security. McDonald's employs the vast majority of its 87,500 UK staff on these terms.

Yet while they can be an attractive arrangement for both parties, this relies on the relationship being a balance of expectations. Just as the employer need not guarantee work, the employee needs to be able to turn down shifts without fear of pressure or future reprisals. In tough times this equality becomes far less commonplace.

Furthermore, there is widespread evidence that employers are using zero-hour contracts as a way of avoiding proper employment regulations. Professional personnel services routinely offer businesses advice on how to prevent zero-hour workers from acquiring employee status. And since temporary and agency workers acquired full employment rights in 2010, it is estimated that over half of all companies that used them have switched to zero-hour contracts.

However, perhaps most distressing of all is the rise of zero-hour contracts in the NHS. The NHS has often used these contracts for cleaners. But now trusts are using them to cover frontline staff, including physiotherapy, psychiatric therapy, and even cardiac services. One of the dangers of zero-hour contracts is when employers underestimate demand – it was precisely that situation that led to the G4S Olympic fiasco. With the Francis Report on Stafford Hospital still being digested, the consequences of doing this in the NHS do not bear thinking about. Is a McDonald's model of employment really appropriate for delivering the best clinical care?

Unfortunately, zero-hour contracts now seem an inescapable feature of a competitive, flexible labour market. And they do have some limited applications. But their growth is no cause for celebration. If this expansion of exploitation continues we urgently need a review to see if there is scope for offering workers more protection.