HR & Management

Zero Hours Contracts: Navigating the changing employment landscape

7 min read

26 September 2013

Simon J Macpherson of Kronos considers whether zero-hours contracts are really worth the hassle.

The headlines have been dominated by zero hours contracts in recent months, prompted by a CIPD report claiming 1m workers are on zero-hours contracts. It is alarming this figure is far more than the 250,000 official estimate from the Office for National Statistics (ONS), and has now generated interest from government bodies and politicians alike.

Vince Cable, the Business Secretary commented on the controversial contract method saying ministers could legislate to allow people on zero-hours contracts to work for more than one employer. While he ruled out categorical banning of the controversial contracts altogether, he said the Government was looking to prevent employers from requiring people to work for them exclusively, unless they were prepared to guarantee their hours.

More recently Labour held a zero hour’s summit. The summit was called in order to discuss zero hours contracts, prompted by further results from an Office of National Statistics survey, suggesting that employees on zero-hour contracts are being paid 40 per cent less than employees on other contracts. This has now led to Labour leader Ed Miliband outlining his party’s formal stance on the issue and unveiling a series of measures which – if elected – Labour would implement. 

These include: banning employers from insisting zero-hours workers be available even when there is no guarantee of any work, ending zero-hours contracts that require workers to work exclusively for one business and ending the misuse of the contracts where employees are, in practice, working regular hours over a sustained period.

Zero hour contracts have produced widespread concern and debate across the political spectrum, the unions, employer and employees alike.

The current landscape

Zero hours contracts are growing in popularity. As a consequence of the tough economic conditions of recent years employers are increasingly seeing them as a cost-effective and easy solution to staffing issues and managing resources in line with fluctuating customer demand.

Employees who sign a zero hours contract agree to be available for work as and when required but no particular number of hours or times of work are specified. This arrangement has clear benefits for employers but increasingly issues around the legality of such contracts and the implications on the employees themselves have led to significant concerns.

The findings revealed from the CIPDs recent survey highlight the true extent to which the zero hour contracts are becoming increasingly prevalent in UK businesses and the workforce considerations needed to manage the changing employment landscape. 

However, it is claimed that some employees are not necessarily unhappy being on zero hours contracts. In one survey, over half (52%) of respondents said they don’t see them failing to provide them with sufficient hours to have a basic standard of living.

Certainly zero hours contracts are very much on the business agenda but is anyone really getting value from them?

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An element of control

Whilst it can be argued zero hours contracts can offer a ‘quick fix’ for businesses in terms of flexibility, this is no substitute for control. In the long-run organisations need accurate, real-time visibility across their whole workforce. Managers need to understand the importance of being in control of when employees are working, where they have been deployed and the skill sets at their disposal.

The ability to deploy the best possible resource, in the right place at the right time can have a significant impact on business performance. From improved quality in production, faster time to market and better customer service, the impact of effective workforce management can drive revenue and customer satisfaction.

Of course organisations will suffer from unexpected fluctuation in resourcing requirements and there will be times when they will need to dramatically ramp up, or down, their employee base. But where employers have a well-balanced workforce with a mix of full-time/part-time and flexible contracted employees, there should be no problem meeting customer demand in many industries. In comparison, widespread deployment of staff on zero hours contracts is actually an inefficient staffing solution which could lead to wasted time and money and missed opportunities to improve the bottom line.

Morale and engagement

Managers also need to review how their workforce strategy affects staff morale and employee engagement. It’s vitally important to ensure that all employees – zero hours contractors or otherwise – still feel part of the overall organisational culture.

One pain point for managers can be that seasonal, part-time and casual workers become disillusioned with the apparent lack of prospects from their current contractual situation and feel cut-off from the main workforce.

To combat this, managers must create a culture of confidence amongst the workforce and reiterate the value added by all workers, regardless of whether they are full-time, part-time or zero hours contractors.

Where next?

With the recent revelation at the true extent of UK employees being on zero hours contracts the onus must be on managers to look at more sustainable, holistic solutions. 

As the interest and concern continues to trouble government, there is no doubt that legislation will be brought in to contest the popularity of zero hours contracts. This legislation, if passed, will largely be welcomed by industry, as long as it does not leave organisations with any employee constraints which could affect the performance and growth of their business.

Simon J Macpherson is senior director operations at Kronos EMEA.