A more balanced debate on zero hours contracts

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Zero-hours contracts have grabbed the headlines in recent weeks. Examples of bad practice have been highlighted and showcased and there have been calls from Parliamentarians to Government to impose an outright ban on them. But it is important to understand this is not just about zero hours. This is about much deeper concerns about whether the recovery is generating improving living standards for wide swathes of the UK's population.

Looking specifically at zero hours, there is clearly a case for Government to look closely at whether these contracts are striking the right balance between businesses and workers, and if there is evidence of bad practice consult on how it should address this. However, there is also a need for all the main political parties to look deeper at why the recovery is not generating the hoped for increases in living standards before proposing quick fixes that will not address the underlying problems. And as part of this, they should look at what role zero hours might play in helping to address some of these underlying issues.

Ultimately, the issue is, as the Bank of England warned last week, that the recovery is still unbalanced. This isn't just about manufacturing playing a greater role but, as our previous blog demonstrated, pay is rising faster in manufacturing than the rest of the economy, people are paid better in this sector, apprenticeship opportunities are expanding and are better paid and its employees are more likely to be in good pensions schemes. Our economy needs more of this but this will only happen in manufacturing and other business sectors once we start to see the improvements in skills and business investment that will drive our economy forward, and help to generate high quality jobs and underpin increases in pay. This is not easy and our Autumn Statement submission will set out some ways to address this.

So where do zero hours fit into this? The first point to recognise is that at worst they are a symptom and not the cause of the so-called ‘living standards crisis' and in many cases not even that. Research from the CPID shows that only 14% of workers on zero hours contacts report that their employer often fails to provide them with sufficient hours. The flexibility that zero hours contracts offer also helps companies to win and deliver orders in fast moving markets that are becoming increasingly competitive. This is not about costs. It's about having the agility to respond rapidly to customer orders that are increasingly placed at extremely short notice. This ability to turn things round quickly, to be innovative and occupy niches where they offer something different from their competitors has been key to manufacturing's success. This has seen manufacturing employment expand in 2012 for the first time in almost twenty years and growing number of companies reshoring activities back to Britain. Zero hours contracts are not the only solution but in many cases help companies to access the niche skills they need to succeed in niche markets. For the employees they offer well paid opportunities and the flexibility they are seeking in their lives.

These contracts also help older workers to prolong their working lives without the need to work full time. Take, for example, one company that told us that they often use zero hours contracts to bring back retired workers with niche skills to work on specialised projects. Such an arrangement is quite obviously agreed between the employer and the former employee. Such skills aren't found easily in the local labour market and so accessing such skills in this way is the most effective way forward. And why shouldn't this be the case?

Looking at the other end of the spectrum, the Work Foundation found that almost a quarter of zero hours contacts workers are full time students – not surprising as students often seek flexible working patterns which they can balance with their academic studies. Most such students may work in sectors such as hospitality but there also good opportunities in manufacturing. Take, for example, a specialized manufacturing company serving the aerospace and defence markets, which told us it offers zero hours contracts to students and recent graduates when it has short-term, high intensity projects. This is not about bringing in short-term labour but giving young people the opportunity to work on engineering projects to boost their future career prospects. This is far more beneficial than seeing new graduates out of work, or students without any experience.

Our call to Government is therefore simple. Take a close look at zero hours and take action where there is bad practice. But also recognise that the majority of these contracts meet important needs for both employers and employees. It is vital that a blanket approach does not undermine arrangements that in most cases are working well and play an important role in our economy.


Head of Education & Skills Policy

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