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How widespread are zero-hours contracts?

If political arguments over zero-hours contracts have proved anything, it’s that the ethics surrounding them are not clear cut.

Employment is an emotive issue and never more so than during the general election campaign, when zero-hours contracts emerged as a political hot potato.

Criticised for breeding a lack of job security and leaving workers without a guaranteed income, zero-hours contracts are designed so employees have no set hours but are expected to be available for work as and when required. Working hours can be cut without notice, meaning pay varies from week to week. In fashion retail, those with such contracts are most likely to work in a warehouse or on the shop floor.

In their 2015 manifestos, Labour and the Green Party both pledged to ban zero-hours contracts, with Labour leader Ed Miliband promising to give employees working for a company for over 12 weeks the right to a regular contract.

The Labour policy was supported by the Union of Shop, Distributive and Allied Workers (Usdaw). In a statement the union’s general secretary John Hannett argued that since 2010 the labour market has been skewed by zero-hours and short-hours contracts (eight hours or less), as well as underemployment (workers unable to secure the hours they need).

Ukip took a similar view, expecting businesses with 50 or more people to give workers on zero-hours contracts either a full or part-time secure contract after one year, while the Liberal Democrats wanted to give employees the right to request a fixed contract.

The Conservatives announced they would eradicate employer exclusivity clauses in zero-hours contracts, which prevent an employees from working for anyone else, even if their current employer cannot guarantee secure hours.

Sir Brendan Barber, chairman of The Advisory, Conciliation and Arbitration Service (Acas), the government-funded organisation that aims to settle employment disputes, was unable to speak in detail on the issue during the election period but questioned the banning of exclusivity clauses, saying employers could then simply reduce or stop offers of work to individuals who take an additional job, discouraging them from looking for other work.

Workers often do not know they are on zero-hours contracts or believe the contract is permanent due to their length of service, Acas reported in January. The service received an average of 70 calls a week about zero-hours contracts in May 2014 from people afraid to look for other work, turn down hours or question their employment rights. 

The sense of dissatisfaction surrounding zero-hours contracts was heightened after Sports Direct admitted that 15,000 of its UK employees, or 75% of its workforce, were on them. The sportswear retailer, which declined to speak to Drapers, revealed to a Scottish Affairs Committee in March that only 4,300 of its 19,000-strong payroll were on permanent contracts.

Sports Direct’s ‘dubious’ working practices were further highlighted by a Channel 4 investigation - Dispatches: The Secrets of Sports Direct (aired on April 27) - which identified challenging working conditions for its warehouse staff, many of whom are on zero-hours contracts.

However, while high-profile cases like Sports Direct have pushed zero-hours contracts up the political agenda, Office for National Statistics data shows they are not as widespread as might be expected. Just 1.8% of employees working in retail and wholesale (or 72,000 people) were employed on zero-hours contracts from October to December 2014. This accounts for less than 11% of the total number of UK workers employed on these contracts.  

The ONS figures revealed people on zero-hours contracts usually work 25 hours a week and are more likely to be women, in full-time education or looking for part-time work. The age group working on zero-hours contracts is typically 16 to 25 (36%).

The survey found that in a sample week 14% of people on zero-hours contracts worked no hours at all, compared with 16% during the same period in 2013. The ONS reports that while 20% of those questioned want more hours at their current job, 66% didn’t want any more hours.

The ONS data tallies with the experience of some of the UK’s major retailers. House of Fraser, John Lewis, Next and Marks & Spencer all confirmed to Drapers that they do not employ staff on zero-hours contracts. All M&S employees, for example, operate on full, part-time or fixed-term contracts. Department stores cannot, however, control the employment practices of their concession partners. Debenhams, for example, will expand its number of Sports Direct concessions from four to 16 stores by August.

Sally Read, business development director at Cornish lifestyle brand Seasalt, believes that, while zero-hours contracts can offer a flexible working solution for retailers - and as a smaller business Seasalt used them to accelerate growth - she does not believe such contracts are a long-term solution or that they engender employee security, commitment or loyalty.

The brand has eliminated all long-running zero-hours contracts, although it does have seasonal staff on such contracts, mostly students on holiday who work for short bursts, Read explains.

“We’re not convinced zero-hours contracts benefit employees. Presumably some people love the flexibility and supposed freedom, but most people have monthly bills and need to plan for spending,” she says. “We review pay annually, benchmarking internally and externally. We have an ‘all aboard’ appraisal system, so people get annual and regular reviews.”

The fact that major fashion companies have shunned zero-hours contracts, coupled with the ONS statistics, leads the Institute of Directors to believe the issue has simply been used by politicians to win votes.

“This is a tiny, fringe issue that has been presented as a national epidemic purely for electoral advantage,” says IoD head of communications and campaigns Christian May. “The debate around zero-hours contracts has been one of the most dishonest and manipulated discussions of this parliament.”

The IoD has campaigned to ban exclusivity clauses because they decrease flexibility, arguing that, overall, zero-hours contracts help employers adapt to demand and are central to a flexible labour market.

“It’s not just employers and businesses who benefit. Employees on zero-hours contracts often value the flexibility,” says May.

“It’s a total myth to suggest that anyone on zero-hours contracts is being exploited. In reality, a lot of employers pay their contract staff higher rates in recognition of the added value that comes with their willingness to work flexibly. It’s also the case that a lot of people will have two or three of such contracts on the go.”

The Confederation of British Industry agrees that zero-hours contracts are essential to a flexible labour market, and expecting companies to offer fixed contracts could impact on job creation.

“Forcing firms to give fixed contracts after 12 weeks to staff who have signed up to flexible contracts will create fewer opportunities for people to move on from lower paid work,” says CBI director for employment and skills Neil Carberry.

“Flexible contracts are an important feature of our successful labour market, which has kept the wheels of the economy turning during the recession. The CBI stands strongly against exploitative poor practices, such as the use of exclusivity clauses, but businesses do have concerns around policies that could undermine the success of our flexible labour market.”

The British Retail Consortium backs zero-hours contracts. Its business and regulation director Tom Ironside says: “The key issue for zero-hours contracts is that where they are used, they are used responsibly. Our members don’t generally make extensive use of them, but in the right circumstances, they can offer mutually beneficial flexibility and certainty that, for example, students away at university might require to return to work during the holidays. Parents can also benefit from the flexibility that zero-hours contracts offer as they juggle family commitments. Also, colleagues moving towards retirement might see benefits as they begin to reduce their hours.”

Maureen Hinton, global research director at retail research firm Conlumino, appreciates the flexibility of zero-hours contracts, especially for students who don’t want to commit to specific hours.

“During the general election zero-hours contracts were used as a symbol of the exploitation of workers and to undermine the government’s positive employment news, overlooking the fact that the majority on zero-hours contracts are reported to be happy with the arrangement,” she says. “The exploitation of young people in unpaid internships has been overlooked though.”

The fact that just 1.8% of people working in retail and wholesale are on zero-hours contracts suggests the problem might not be as widespread as politicians led the public to believe. The ONS data indicates a general satisfaction among zero-hours contract employees with their hours. However, as the Acas findings show, in some cases people are unaware they are on such contracts or will not complain for fear their work will be taken away. Any support, therefore, for such vulnerable workers should be welcomed by the fashion industry.

The legal perspective

Nigel Mackay is a solicitor specialising in employment and discrimination at law firm Leigh Day

Nigel Mackay

Nigel Mackay

In February, law firm Leigh Day began proceedings on behalf of nearly 300 Sports Direct workers who missed out on bonuses as a result of being on zero-hours contracts. The solicitors also represented former Sports Direct zero-hours contract employee Zahera Gabriel-Abraham, who in October reached a settlement with the retailer for sex discrimination, unfair treatment and breach of holiday rights.

“People often aren’t aware they are on zero-hours contracts. While all employees should be given written terms of conditions of their contract, this doesn’t happen during the interview and would most likely be supplied after the job had been accepted.

On zero-hours contracts people are expected to drop everything to work when shifts are available or they’re threatened with shift cuts or not given holiday pay. People working under these conditions are vulnerable and will do whatever they can to ensure their hours aren’t cut.

Students and young people are particularly vulnerable. Often, it can be their first job, so they won’t be aware of good working practice and, worryingly, they could take these expectations into their next job.

A fairly operated zero-hours contract can offer flexibility for seasonal work, for example during a busy period like December when retailers can offer a fixed term for a month. That being said, it doesn’t mean you need to be available whenever you’re asked.

Zero-hours employees are entitled to holiday and statutory sick pay. While under the current legislation workers have no specific right to ask for a fixed contract, they could make a flexible working request
to work specific hours. Of course, employers can always say no.

Labour, for example, says anyone working over 12 weeks has the right to a fixed-hours contract, but that’s difficult to put into practice as employers could get round this by not offering regular hours.

Exclusivity contracts are another issue. Some contracts stipulate that an employee cannot work for anyone else while they are ‘employed’ by that company, even if it’s not a competitor. All the political parties say they want to ban exclusivity clauses, but plans were shelved until after the election.  
Workers on zero-hours contracts can challenge a contract if they can show an equivalent full-time staff member is being treated better. Similarly, if you can show you are an employee and paid regularly, then you should be entitled to maternity leave and pay.

Taking employers to court is, however, costly for these low earners, with employment tribunal fees rising to £1,200. Even so, if you feel like you’re being exploited it is always good to seek legal advice.”

Zero-hours contracts: key statistics

Source: Office for National Statistics (October to December 2014)

-          1.8% (or 72,000) is the percentage of people in retail and wholesale on zero-hours contracts

-          25 is the average number of hours a week worked by a zero-hours contract employee

-          36% of people on zero-hours contracts were aged 16 to 25

-          Women are more likely to be on zero-hours contracts

-          Most people on zero-hours contracts have worked for the employer for under a year

-          20% of those surveyed want more hours at their current job

-          66% don’t want more hours

-          14% is the average number of people on a zero-hours contract who work no hours in a sample week

-          20% of zero-hours contract workers have another job

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