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Zero hour contracts

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After news that a Labour government would pass legislation giving employees the right to a “normal” contract after 12 weeks working under a zero hour contract, it is worth assessing the impact that such a law would have on the average employee. The Office for National Statistics confirmed on 25 February 2015 that for the period October to December 2014, 697,000 people (2.3% of workers) identified that they were employed on a zero hour contract. While this is an increase to the previous figures for the same period in 2013, this may be due to greater publicity being given to this type of contract rather than an increase in real terms.

Those working on zero hour contracts are on average working 25 hours per week, but have no security that they can expect the same level of salary from week to week. Around a third of workers surveyed by the Office for National Statistics want more hours than that offered by their employer, and the Labour party has highlighted the difficulty these employees face in budgeting and saving for the future when they have no guarantee of future work. Its proposal far exceeds the recommendation made in the independent review carried out by Norman Pickavance, in which employers were only obliged to implement a permanent fixed hours contract after 12 months rather than 12 weeks.

Employers defend the need for zero hours contracts on the basis this allows them to meet the fluctuating demands of their customers and clients. The Institute of Directors has stated that using this type of contract allows businesses to stay commercially viable, avoiding the fixed costs that come with employing workers on contracts with a guaranteed number of hours. Critics of Labour’s plans have stated that reducing the flexibility of the labour market in any way will negatively impact upon the growth in jobs that the UK has seen in the last two years.

Although the details of the proposed legislation is not yet clear, presumably it would include a prohibition upon businesses dismissing workers immediately prior to the 12 week deadline to avoid offering contracts with fixed hours. It would also seem sensible to allow an agreement to be reached between the parties in which they can agree to opt out of the requirement to convert the contract. The fact remains however that no matter how Labour choose to frames its proposal, it will face stiff opposition from the business community. 

By Martha McKinley, solicitor in the employment law team