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Use of 'zero-hours' contracts by UK employers increasing, but difficulty in defining them remains, says expert

Out-Law News | 25 Feb 2015 | 4:04 pm | 2 min. read

The number of 'zero-hours' contracts issued by UK employers reached 1.8 million last summer, while 2.3% of the total UK workforce said they were employed on this type of contract in their main job as of the end of last year, according to official figures.

According to the Office of National Statistics (ONS), 697,000 people were employed on contracts that did not guarantee a minimum number of hours in their main job between October and December 2014, up from 586,000 over the same period in 2013. However, it said that it was not clear how much of this increase was due to "greater recognition" of the term and increased press coverage, rather than new contracts issued.

Employment law expert Stuart Neilson of Pinsent Masons, the law firm behind Out-Law.com, said that the figures showed the difficulties faced by the government in cracking down on abuse of the contracts while at the same time allowing those employers and employees that benefited from more flexible working arrangements to use them.

"The potential for abuse by employers of these types of contracts has led to this issue becoming a hot one for the political parties, with Labour suggesting an outright ban on their use and the government presently proceeding with more limited intervention simply to prohibit employers demanding exclusivity from employees signed up to them," he said.

"There may be particular sectors of the economy where abuse of so-called zero-hours contracts is thought to be occurring, particularly with low skilled and poorly paid occupations," he said. "However, the impact of any proposed legislation is likely to be felt more widely and could impact upon sectors where flexibility is highly prized by both employers and employees; for example in the infrastructure sector, where skills shortages are the primary concern."

"The aim of protecting employees might be a laudable one but legislators need to make sure they can provide very targeted and specific legislation and that it will achieve the aims the politicians want it to without causing greater drawbacks for both employers and employees by damaging choice and flexibility," he said.

Zero hours contracts are contracts under which an employer does not guarantee the worker any work and pays only for hours actually worked. A worker on a zero hours contract is similarly not obliged to accept any work that is offered. Critics of the practice say that businesses use the contracts to avoid giving workers the status of 'employee' and eligibility for the full range of employment rights; however, business groups claim that the contracts give firms the flexibility to cope with fluctuations in demand.

The current UK government has said that it does not intend to ban the use of zero hours contracts outright due to the flexibility that they give to both businesses and certain workers. However, it intends to ban the use of 'exclusivity clauses', which are used to prevent a contracted worker who is not guaranteed a minimum number of hours from taking on another job. The necessary legal changes have been included in the Small Business, Enterprise and Employment Bill, which is currently before parliament.

According to the ONS report, 1.8 million zero-hours contracts were in use over the fortnight beginning 11 August 2014; higher than the 1.4 million of these contracts in use when figures were first collected in January 2014. However, the ONS said that these two estimates were not directly comparable as seasonal factors likely affected the nature of employment.

The ONS said that, on average, those employed on zero-hours contracts worked 25 hours each week. One third of them wanted to work more hours, compared to 10% of people in other types of employment. Workers on zero-hours contracts were more likely to be women, in full-time education or working part time, and were also more likely to be aged under 25 or 65 and over, the ONS said.

Employment law expert Stuart Neilson said that it was easy to see from the findings the "possible unintended consequences" of any legislation restricting the use of zero-hours contracts "where there are good commercial reasons for such contracts and no one is being exploited".

"These groups may find it more challenging to obtain regular employment if legislation is rushed, or remains unclear," he said. "In addition, for many of these groups working under a zero-hours arrangement actually suits them."