Why are zero-hours contracts so popular?

Offering a greater degree of flexibility than standard employment contracts whilst fitting neatly around your studies or personal obligations: zero-hours contracts sound rather enticing in principal. Look beneath the surface, however, and you’ll find that for every pro there are two or three cons, leading many to condemn the practice as downright exploitative.

Yet, despite the increasing numbers of people voicing their opposition to zero-hours contracts, statistics published this year reveal an astounding 910,000 individuals are currently subject to such contracts: a record high.

Attempting to make sense of this contradiction, TEC Partners’s latest post delves deeper into the heart of the matter.

Explaining their popularity

The general consensus among experts is that the zero-hours contract arose in direct response to the financial crisis of 2007; a time when employers throughout the UK were desperate to cut costs and streamline their businesses. This led to a decline in the number of available jobs which, in turn, caused employees to be less discerning about the type of roles and contracts they were willing to accept.

Irrespective of their somewhat dubious origins, up until Theresa May’s ascension to the prime ministership in 2016 and her pledge to combat the “corporate excesses” represented by zero-hours contracts, the government initially backed ZHC’s, arguing they had become a vital part of the working environment. Studies were cited in defence of their claims, including one which asserted the majority of individuals on zero-hours contracts (70%) were perfectly content with the arrangement; students and adults aged 55-64, in particular, were identified as advocates of the system. Students, it is said, favour casual contracts as they enable them to gain real-world work experience in a way that doesn’t hinder their education. Likewise, those who’re closer to retirement age have more time at their disposal; time which can then be spent with family members or indulging their chosen hobbies. Nor are these groups put off by the intermittent, uncertain workload characteristic of a zero-hours contract. As it turns out, two-thirds of those polled in a survey compiled by the Office for National Statistics confirmed they were happy with the number of working hours provided.

What about the bulk of the workforce who fall between those two demographics? Are they comfortable with this paradigm? Appearing to answer these questions in the affirmative, one survey reported in the Financial Times claims people on zero-hours contracts are, generally speaking, happier than the average full-time employees. But before we get carried away, it should be noted that the survey itself isn’t overly compelling or especially reliable. 65% of participants on a ZHC declared they were satisfied with their job situation, compared to the reported 63% in the rest of the workforce: a minute difference. Of greater importance, as critics have highlighted, is the fact only 350 zero-hours workers were actually polled, a survey sample far too small to be conclusive.

Still, it’s not hard to see why some are in favour of ZHC’s when you consider the contracts themselves. Basic employment rights are safeguarded, such as annual leave and national minimum wage, while it’s often entirely up to the employee whether or not to accept the work that’s offered. That being said, the negatives in this regard are telling. Those on a zero-hours contract don’t receive a redundancy package if their services terminated, for instance, and worst of all, some companies will penalise individuals if they choose to turn down an assignment – no matter the reason.

However, ultimately, it seems the surge in zero-hours contracts has been driven by the needs and desires of the country’s employers. Modern businesses covet the flexibility furnished by a ZHC (when they need to hire someone at short notice to cover maternity leave or staff shortages during a transitional period etc.) not to mention the access they have to a steady supply of workers unwilling to negotiate for fear of missing out on a rare opportunity in a competitive job market.

The controversy

It’s already been stated, but while there are clearly some benefits afforded by zero-hours contracts, the bulk of the evidence is overwhelmingly negative. Contrary to the findings of the Financial Times survey mentioned earlier, research conducted by Glassdoor suggests public opinion is mixed at best. Of the 27% of those canvassed who’d been offered a ZHC, as many as a third admitted to turning down the offer outright, explaining that, as much as anything, they couldn’t trust the employer under such circumstances. The student contingent, meanwhile – one of the groups said to profit most from these contracts – believe this type of employment is exploitative, one in four going so far as to say they would like to see the practice abolished.

From a financial standpoint, there’s little to commend them either. The fluctuation in the amount of money an individual’s able to earn from one month to the next makes it extremely difficult to effectively plan for the future. For example, it seems buying a house is almost impossible as certain banks will actually reject mortgage applications submitted by those who are subject to a zero-hours contract. Even the minority who’re earning a steady income from them will most likely be taking home a smaller paycheck than their full-time counterparts because of the nature of a ZHC; approximately £1000 per annum, according to an article published in The Independent.

There’s a third, not insubstantial problem; job security. Without a specified contract length, notice period or fixed hours, a position that appeared to be settled one week might suddenly become redundant the next: there’s no knowing how long someone will be needed. Instances of sudden and severe changes to hours and stories of staff members being let go at a week’s notice aren’t uncommon which does little for the morale and productivity of those in that position.

In response to such concerns, people like former Unite general secretary Len McCluskey have asked the government to curtail the advance of the zero-hours contract, or ideally, ban them altogether. Although a policy as stringent as that has yet to be adopted, the work of individuals like Len has surely played a significant role in the recent changes made by global corporations like Sports Direct, who have begun altering the contract status of their staff members from ZHC’s to fixed hours.

At this point you’d be justified in asking “if zero-hours contracts are so bad, why do almost a million people put up with them?” The simple answer is that choice isn’t always an option; in other words, some work is better than no work. This is best illustrated by data from the abovementioned Glassdoor survey which found that two-thirds of people who accepted a zero-hours contract did so because they needed the money to keep their heads above water, rather than preference.

Have they reached their peak?

Thankfully, the recent surge in zero-hours contracts appears to have reached its zenith. In the last months of 2016, a BBC article published data showing how the rate of progressed slowed sharply during the second half of the year, explaining there were a multitude of reasons for this – not least the sobering effect Britain’s decision to leave the EU (I avoid using the well-known buzzword to describe the event, if at all possible) has had on employers. Namely, with uncertainty rife within our country at present, businesses are worried they may struggle to find suitable employees should a large percentage of the foreign workforce leave the UK.

Combined with the considerable drawbacks discussed earlier, it would seem we can be cautiously optimistic that we’re on the cusp of a seed change in the country’s employment practices; one which will give all workers access to the same rights and job security we’re all entitled to.

Why are zero-hours contracts so popular?