Zero-hours contracts "prevent European-level unemployment"

26 February 2015 -

Major UK business groups argue that work contracts with no guaranteed hours have been the UK’s saving grace, amid jobs turmoil on the Continent

Jermaine Haughton

Two of the UK’s leading business groups have expressed support for zero-hours contracts, after new data showed the number of workers on the controversial employment schemes has risen by 100,000 in the past year.

According to the Office for National Statistics, between October and November last year the number of staffers who were on zero-hours contracts in their main jobs, with no minimum guarantee of working hours, stood at 697,000: 2.3% of all people in employment. In the same period of 2013, that figure was 586,000 (1.9%).

Zero-hour contracts have received much criticism in recent years, with some workers, unions and support groups arguing that the schemes validate and encourage low incomes for workers – enabling managers to simply dismiss staff for the day if there is no work to be done. It has also emerged that some employers have been placing exclusivity clauses in their contracts, preventing workers from holding more than one job of a zero-hours type.

Neil Carberry, director for employment and skills at the Confederation of British Industry (CBI), said in reaction to the figures that zero-hours contracts are now an important and legitimate part of UK employment – and have helped the country avoid the severe unemployment that prevails across Continental Europe. “Flexible contracts,” he said, “offer an important source of job creation that supports business growth and employees who need to manage different responsibilities. The range of options on offer in the UK is why we are continuing to create thousands of new jobs, and have a high employment rate and lower unemployment than many other countries.”

He added: “While there has been an increase in the use of these contracts, they are still only used by just over 2% of the entire labour market. The important thing is to ensure that action taken to avoid any abuses doesn’t restrict the use of flexible contracts – figures show that almost two-thirds of people are satisfied with the number of hours they work, and being in work gives people more opportunities to increase their hours.”

The CBI’s view was echoed in a statement from the Institute of Directors, which described the contracts as an “attractive and convenient way into work”. Stressing the need for greater regulation of zero-hours contracts, its head of communications Christian May noted that the UK’s major political parties have effectively united around the issue of abuses. “There doesn’t appear to be much difference between the Coalition and the Labour Party when it comes to zero-hours contracts,” he said. “All parties now support a tough clamp down on the use of exclusivity clauses, and the IoD led the charge in calling for this change during the consultation process. After all, it’s the flexibility that makes these kinds of contracts so valuable to the labour market – and there’s nothing flexible about restricting and controlling an individual’s freedom to seek work.”

However, he argued, restricting discussion of zero-hours contracts purely to abuses was unrealistic and narrow. “Given the consensus that now exists on ending the exploitative use of exclusivity clauses,” he said, “what remains of the debate is largely semantic. Those who wish to hold up zero-hours contracts as a symptom of an unfair economy will continue to do so – but they must appreciate that, for hundreds of thousands of workers and employers, these contracts represent an extremely attractive proposition. Despite efforts to portray all those on such contracts as exploited, the truth is that there are plenty of engineers, contractors and professionals whose willingness to be flexible adds significantly to their market value – and, therefore, their earning power.”

He added: “It’s also worth remembering that a flexible labour market, of which zero-hours contracts are a vital component, has protected the UK from European levels of unemployment. Indeed, the UK’s labour market has been singled out for praise by the OECD. The alternative is a rigid labour market and high unemployment.”

May and Carberry’s comments reflect a stark difference in priorities between how politicians and the media view zero-hours contracts, and how the issue plays out among bosses. Indeed, according to a Chartered Management Institute (CMI) survey of 1,200 managers for its recent Future Forecast: Priorities and Expectations for 2015 report, only 43% of business chiefs consider zero-hours contracts worth banning.

Upon the launch of the report, CMI chief executive Ann Francke said: “It is clear that there is a mismatch between the Westminster Village and UK managers. The big question is why – and what do politicians need to do to connect with this significant segment of the electorate?”

She explained: “Our report shows that [the year ahead is] all about improving productivity. Employers want people-focused policies that will help them upskill and motivate their teams. Rather than election rhetoric, we need to see a commitment to shifting business culture in this direction.”

Download the full CMI Future Forecast report.