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Government consultation on zero hours contracts announced.

The Business Secretary Vince Cable this week announced that the Government will be launching a consultation on the use of zero hour contracts (ZHC) aimed highlighting and address any significant abuses in their use.

The issue of ZHCs has been much in the news of late due to their increased use by employers tentatively seeking to take advantage of the green shoots of recovery, but cautious of over-burdening themselves with significant additional employment costs too soon.

What is a ZHC?

This is part of the problem. ZHC is merely a label. It does not give those working under the contract any particular legal status. The employment status and contractual terms of those working under ZHCs will vary widely and ultimately any dispute would be determined by an employment tribunal, depending on the particular facts.

However, the term ZHC tends to be used for contracts where the employee is not guaranteed any hours of work and is only paid for hours actually worked.

Such contracts appeal to employers looking to maximise the flexibility of their workforce. Historically, they have proved attractive to employers in those service industries which experience significant peaks and troughs, such as catering and hospitality. However, they have also gained in popularity within the retail sector and across a broader spectrum of employers who might be vulnerable to fluctuations in work, such as those reliant on regularly securing new orders or contracts.

Unsurprisingly, ZHCs have proved unpopular with most unions, who perceive them as undermining employment security and open to abuse. The media has largely focussed on these alleged abuses and therefore it is unsurprising that ZHCs have made it on to the radar of all the political parties.

Focus of Government’s ZHC consultation

The announcement of the consultation on ZHCs follows an initial review by BIS over the summer which sought to gather information on the extent and manner of use of ZHCs across the business spectrum.

In light of BIS’s findings, the Government has proposed that the consultation will focus on tackling the potential for abuse of ZHCs and seeking to ensure that employees working under such contracts receive a ‘fair deal’. It would not appear that the consultation will include the possibility of a total ban on the use of ZHCs, as some unions have been calling for.

The detail of the consultation and the launch date will be announced later this year, but the key areas that have been highlighted for consideration are:

  • Exclusivity clauses – whereby an employee is prevented from working for another employer even though they have been provided with no guarantee of work. The Government is concerned that such a limitation can operate unfairly on employees who need to supplement their income and tips the balance of power too far in the employer’s favour.
  • Lack of transparency – as there is no legal definition of a ZHC, some employees may unknowingly be working under a contract which provides for no guarantee of work.
  • Uncertainty of earnings – as earning levels under ZHC are not guaranteed, it is difficult for employees to predict future income, which can have knock-on consequences, such as impacting on benefit entitlements.
  • Balance of Power in the employment relationship – in its review BIS found that many employees working under ZHC expressed a fear that they would be penalised, i.e. not be offered future work, if they did not accept all work that was offered to them under a ZHC - even if that work was offered at very short notice or was not convenient. The Government is concerned that, if this fear is well founded, then the employer is the only party who benefits from the flexibility of a ZHC. Mutual flexibility is one of the key benefits promoted by supporters of ZHC. They point out that many employees wish to retain flexibility as much as their employer if they have other demands on their time, such as family commitments, or if they are students.

EEF response

EEF will be responding to the Government’s ZHC consultation and will seek members’ views once we know the detail of the published consultation document.

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