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Is It Time to Put a Stop to 'Zero Hours' Contracts?

02/06/2013 20:46 BST | Updated 31/07/2013 10:12 BST

A government report showing a big rise in the number of companies hiring staff on 'zero-hours' contracts has sparked fresh debate. Many speaking out in the media have drawn a parallel with the Victorian era when worker rights were virtually non-existent, leaving many living a life in limbo, neither in work nor out of work. Unquestionably these contracts carry a lot of uncertainty for those that 'choose' to accept their terms, but, are they all really good for nothing?

According to the 2011 Workplace Employment Relations Study, the number of organisations using these non-committal contracts has risen to a record high - jumping from 55,000 people in 2005 to 200,000 between October and December last year. Those that sign up to them agree to be available for work as and when required, but have no guaranteed hours or times of work. They come with virtually nothing in the way of employment rights, including the right not to be unfairly dismissed, the right to any redundancy payment, and maternity leave. The TUC, a vocal opponent in the past, described these latest figures as a sign of the times - "a sign of desperation that people will take anything at the moment. We're not valuing people, we're just looking at them as industrial fodder." But among those that subscribe to them are some high-profile names that include the NHS, the Police, Boots, Bupa and the House of Lords.

Without doubt the economic backdrop needs to be factored into this whole debate. Historically, as was the case in the 1990s, zero hours contracts are more prominent during times of uncertainty as businesses look for ways to keep costs down, and without doubt there are challenging conditions out there. HSBC announced a few weeks back it is to shed over a 1,000 jobs as part of cost savings, and similarly insurance group Aviva announced it plans to cut its workforce by 6% worldwide, affecting some 2,000 jobs in the UK. From a commercial perspective, what these contacts provide is a pool of people who are 'on-call' and who can be called upon when demand arises, ensuring organisations can maintain productivity without committing to more full-time staff.

The other factor to add in to this debate of whether they are right or wrong is that one size doesn't fit all. The work place has changed and many people are now choosing to work non-traditional hours with many, spurred on by advances in technology, actively seeking more flexible ways of working. People are looking to take more control over their work-life balance and are choosing to work part-time, working fewer hours a week - 'compressed hours' - or working on short-term contracts. Plus, there is a whole group of people who do want to be able to dip in and out of work on a less committed basis: those who are retired, for example, who want to earn a bit of extra from time to time, as well as students and those with family commitments where juggling a fulltime work isn't so straightforward. For them zero hours contracts can work.

The question that needs to be asked, particularly in the face of the large moral question mark hanging over zero hours contracts, is have businesses done enough to explore the alternatives, and in all cases. From my own experience there are good alternatives that can address both the commercial needs of the employer and the needs and rights of the employee, which not enough businesses are tapping into. Offering 'annualised hours' contracts, for example, can help businesses that have fluctuating demand issues, both in terms of cost savings and maintaining efficiency levels.

As the name implies, under annualised hours the employee agrees to work a set number of 'core hours' over the year, but then the remainder of their contract is worked on a flexible basis, as and when there's demand. Palram, a manufacturer of polycarbonate and PVC sheets, is one company that has implemented it to great success recently. It had faced a perennial problem of how to keep staff on during quiet periods over June and July, as a result of a large number of their construction clients in continental Europe shutting down and destocking during the July and August holiday period. By introducing annualised hours, the company was not only able to avoid any redundancies but also actually improve efficiencies, increasing productivity by 5% but with the same workforce. "Essentially this meant that more could be produced, for the same money, with fewer staff," said Palram CFO Mike Burton.

What the debate on zero hours contracts boils down to is finding the right balance. It's about being transparent and making sure those employees who do accept them are fully aware of what they are signing up to. And from an employer's perspective it is making sure all avenues are explored first in terms of how to balance those fluctuating demands for staff and controlling overheads in the face of economic pressures to protect the long-term future of the business, and ultimately their existing workforce.