Zero-hour contracts

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It seems that the recent controversy surrounding billionaire Mike Ashley’s Sports Direct has dragged the controversial debate over zero-hour contracts back into the headlines. The sports retailer is facing legal action from 250 workers who feel they have been unfairly excluded from a multimillion pound bonus scheme because they were on zero-hour contracts. In total the bonus scheme paid out approximately £16million worth of shares to 2000 permanent workers in 2013. Yet Sports Direct may find itself having to pay out more – to the tune of £4million – if the court agrees with the employees legal team that not offering a bonus to PT staff – all of whom are on zero-hour contracts – is discriminatory practice, specifically against women, who are more likely to work PT. The retailer has been widely criticised for employing nearly 90% of its staff on zero-hour contracts, which exclude those employees from certain employment rights such as annual leave and sick pay.

Zero-hour contracts an overview

Zero-hour contracts are seen as an acceptable way of safeguarding a business operating in an environment where work fluctuates unexpectedly and consequently employers are unable to guarantee consistent work. However many have argued that zero-hour contracts work against the employer by lowering employee identity, engagement and productivity. It is estimated that around 700,000 people are employed on zero-hour contracts, but with 52% of job seekers claiming they are not willing to take on these controversial contracts you begin to understand the extent which people are willing to compromise to secure employment and reject benefits.

Undoubtedly zero-hour contracts will be one of the big issues in the run up to the 2015 election, with all of the big parties already voicing their stance on the issue. Ed Milliband was first to speak out, claiming that Labour would seek tougher regulations on companies refusing employee compensation when shifts are cancelled at the last minute. Likewise, Vince Cable is seeking to ban exclusivity clauses in zero-hour contracts that bar employees from taking on additional work for another firm when the current employer has no work to offer. Whilst not proposing to scrap zero-hour contracts, both men would like to reduce certain ‘exploitative’ features in the majority of zero-hour contracts.

Taking an alternative stance, the Conservatives see zero-hour contracts as a key driver in their Universal Credit scheme, designed to replace means-based benefits and get more people into employment. Under the Universal Credit scheme job seekers will lose their benefits if they refuse offers of employment, including zero-hour contracts. An ‘any pay being better than low pay’ philosophy.

The issue of zero-hour contracts is amplified by the UK’s current economic outlook, particularly with the recent publication of news stories concerning a 9% pay rise for MPs, justified by Ipsa on the basis that MPs do an important job and are not paid at a level commensurate to comparable roles in the private sector. Going from £67,000 to £74,000 is a big rise at a time when public sector pay rises are capped at 1% and more and more people are having to accept zero-hour contracts and payday loans are on the increase.

There is nothing inherently or legally wrong with zero-hours contracts and any suggestion to ban them should be tempered. Zero-hours contracts provide flexibility to employers who face unknown levels of demand and fluctuating workloads, and in a number of cases worker engagement is shown to improve. Looking at the evidence, it seems clear that the bigger issue is implementation of zero-hour contracts, not the morality of their existence. Employers wanting to issue zero-hour contracts should consider setting out a code of practice that helps managers understand how to implement the use of zero-hour contracts and offer employees clear communication on the reasons why and the benefits for both parties. Transparency is key for improving employee engagement and reducing tensions or feelings of exploitation.

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Elena Boura