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An Anatomy of Zero-Hour Contracts in Britain

The ZHC debate

There is no legal definition of a zero-hour contract (ZHC) job but it is generally accepted to occur when a contract of employment lacks a guaranteed minimum number of hours (BIS 2013; ONS 2014). Proponents praise the flexibility such contractual arrangements afford to organisations and workers alike.

For employers, they offer a way of quickly adjusting labour inputs to work demands. For employees, such jobs may offer a gateway to more secure employment, or may simply offer a way to fit paid work around other life commitments.

Critics, on the other hand, describe ZHCs as a form of precarious employment more extreme than any of their “atypical work” predecessors, associated with inferior job quality and labour market prospects.

Despite much public debate, hard facts on this issue are difficult to come by.

How prevalent are ZHC jobs?

The amount of press coverage ZHCs receive may lead one to think they are a particularly salient feature of the UK labour market. We analysed the 2014 UK Labour Force Surveys (LFS) – the representative survey of the labour market used by the Office for National Statistics (ONS) to calculate things like the unemployment rate – to do just this.

We estimated that there were around 836,000 workers on ZHCs – about 2.2% of the active labour force in 2014. This is comparable to other forms of flexible working such as on-call working, but less prevalent than shift work or annualised hours – which are flexible but offer guaranteed hours.

 Flexible arrangements by employment status (%)

All workers Standard workers Nonstandard workers Self-employed
Annualised hours 4.1 5.1 3.7 0.5
Shift worka 17.6 20.6 17.6 5.8
Temporary contract 6.5 22.1
Zero-hour contract 2.2 0.8 5.9 1.0
Agency worker 1.5 1.5 1.2
On call working 2.0 2.2 1.5 2.2
Any flexible arrangement 16.3 15.1 24.7 4.4
All workers 100 53.5 30.8 15.8

Source: Respondents’ main job in the Labour Force Surveys 2014. Notes: a Available in the April to June quarter only. Standard workers are full-time permanent employees, nonstandard workers are part-time and/or non-permanent employees.

Whether they are growing or declining in size is a more difficult question to answer given changes in the question format within the LFS. Media reports of rapid growth in the wake of the recession therefore have a flimsy basis, although they probably did grow, we just don’t know for sure.

 Are ZHC jobs set to become the standard form of working?

One way to understand the likely trajectory of ZHC jobs is to identify which sections of the labour market they are concentrated. This is useful for several reasons. First, identifying what type of work they are concentrated in helps to understand employer motivations for using them in the first place.  Second, in identifying the occupations in which they are concentrated, we can make a more educated guess to their growth potential e.g. if they tend to be found in growing occupations then they are likely to become more common.

Top 10 occupations in which ZHCs are concentrated

Occupations (4-digit) % of all ZHC jobs % occ ZHC jobs
1 Care assistants and home carers 19.8 12.0
2 Kitchen and catering assistants 5.2 7.4
3 Sales and retail assistants 4.8 2.4
4 Cleaners, domestics 4.2 3.6
5 Bar staff 3.1 12.2
6 Security guards and related occupations 3.1 9.9
7 Waiters, waitresses 2.8 11.2
8 Nursing auxiliaries and assistants 2.7 4.7
9 General office assistants/clerks 2.3 1.8
10 Chefs, cooks 1.8 3.3
Total top 10 occupations (%) 48.1

Source: Employees’ main job in the Labour Force Survey 2014.

Our analysis reveals they are highly concentrated in just a handful of occupations: Almost half of ZHC workers are in just 10 occupations (out of 356 classified by the ONS) – with 1 in 5 being care assistants and home carers. In further analysis we found that they tend to be in low-skilled but labour-intensive service sector jobs where employers can easily monitor labour inputs and where specialist knowledge is not important. This implies employers use them in jobs with variable product demand, where the main product is a service requiring little training – as a way to shift risk on to workers when margins are tight. We find that in larger workplaces, other forms of flexible arrangements such as shift-work tend to be used instead, supporting this view.

These sorts of occupations are also the types of occupations which have seen strong growth in recent years. Thus ZHCs are likely to be a growing form of employment – not because employers substitute existing contracts for ZHCS – but because these are the sorts of jobs in which it makes sense to use them from the point-of-view of employers.

Are ZHC jobs really that bad?

Finally, we investigated the quality of ZHC jobs. In summary, we find that the ZHC jobs:

  • Have no statistically significantly different hours than other types of contract once the fact they are often part-time or temporary is taken into account
  • Unsurprisingly, hours and pay are much more variable than standard jobs – but they are much more variable even when compared to comparable working arrangements such as on-call working
  • ZHCs are associated with a risk of low pay (defined as earning 60% of the median hourly pay) and associated with looking for another job, indicating that many use them as a gateway form of employment but have restricted opportunities

Should ZHCs be regulated?

We note that ZHCs tend to be concentrated in labour-intensive service work and in small workplaces where managing variable work demands is critical. For this reason we would not back any heavy handed approach to their regulation such as outlawing them. In turn, we do highlight that the biggest concern for employees surrounds the insecurity in hours and earnings – and this the area we highlight regulation could address. We suggest legal minima of, say 11 hours (the legal minimum resting time between shifts), before employers can call an employee to work a shift or indeed cancel a shift, and say four hours once a shift has commenced – such that if a shift is cancelled less than 11 hours before it is due to start, or cut short before the first four hours have been worked, the employee is entitled to four hours pay. These sorts of regulation exist quite successfully in some States in America. Such regulation still allows some flexibility in matching employees to hours for employees and employers alike, but reduce some of the insecurity for employees – and may well encourage employers to take a more strategic approach to managing short-term staffing demands.

A version of this post was published by the Chartered Institute of Personnel and Development. Read the full report here.

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