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Labour’s plans for zero-hours contracts “example of politics trumping good policy”

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Pledging to get rid of “exploitative” zero-hours contracts, Labour leader Ed Miliband went beyond a previous promise of providing employees with a permanent contract after a full year by dropping it to 12 weeks. According to the party, the change would mean the inclusion of 92 per cent of those on zero-hours contract terms.

Eamonn Butler, director of the Adam Smith Insitute, warned that Labour’s plans could “harm the very people it is intended to help”.

“About two-thirds of people on zero-hours contracts are happy with the hours they get – limiting the contracts they can sign hamstrings not just the firms that employ them but their own employment options,” Butler added.

“On top of this, we’d expect this labour market straightjacket to cut, rather than boost, productivity. The UK’s productivity troubles are real, but they’re also so hard to diagnose that the issue is known as the ‘productivity puzzle’.”

Butlet’s sentiment was mirrored by Christian May, head of communications at the Institute of Directors (IoD). He commented: “Labour’s proposals go too far. They are unnecessary and potentially damaging. Frankly, this is an example of politics trumping good policy.

“When it comes to zero-hours contracts, the rhetoric simply does not match the reality. They are used by a little over two per cent of workers, which can hardly be described as an epidemic. Nobody supports the misuse of these contracts, but demonising and ultimately outlawing them will simply risk jobs and undermine a labour market that has made us the envy of Europe.”

Read more about zero-hours contracts:

The detailing of zero-hours contracts means that, although not currently defined in legislation, it is generally understood to be an employment contract between an employer and a worker whereby the employer is not obliged to provide the worker with any minimum working hours of work, and the worker is not obliged to accept any hours that are offered.

Miliband said of the issue: “Labour will legislate for a new principle: if you are working regularly, you have legal right to a regular contract. We will give working people more control of their working lives, we’re going to put an end to exploitative zero-hours contracts.

“The next Labour government will ban zero-hour contracts for employees who are in practice working regular hours. This absolute new legal right to a regular contract will apply to workers after just 12 weeks.”

For Doyle Clayton partner Jessica Corsi, Miliband’s plans are workable and “interesting”. She explained: “The real issue is going to be what ‘working regularly’, which will lead to the conversation to permanent employment means.

“It all comes down to what ‘flexibility’ means for employers. It is reported that some lawyers have criticised this proposal as allowing employers to dismiss employees on such contracts just before their employment is converted into permanent employment contracts, but actually employees don’t gain unfair dismissal rights till they have worked continuously for an an employer for two years, so employers won’t actually be less free than they are now.”

Corsi does believe that the plan will help ensure that employers focus more carefully on who they need in instances such as season surges in work.

John Longworth, director general of the British Chambers of Commerce, said: “Zero-hours contracts are not used by most of the businesses we work with, but they remain appropriate in a small number of cases where both the employee and the employer value the flexibility that they provide. What’s more, recent action to outlaw exclusivity clauses already prevents mis-use of zero-hours contracts by a small number of rogue employers. 
 
“Heavy-handed regulation of employment contract options is not the answer. There are surely better ways to help improve the prospects for the lower paid, such as promoting training in the workplace, which would help more people move up within businesses and earn more.”

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