IDR | 22 Jan 2019

Negative publicity around ZHC’s affects employers’ approaches

Our survey of variable hours contracts and low pay attracted widespread interest at its launch: we received initial responses from more than 200 organisations, suggesting the topic is of significance to many employers in industries such as hotels and leisure, retail, and social care as well as parts of the manufacturing and public sectors. However, only around a fifth of these respondents made it past the preliminary screening questions, which were designed to eliminate employers that do not operate these contracts and/or do not pay such staff less than £10ph. We nevertheless managed to produce a sample of 40 employers, with a combined workforce of just over 460,000 people.

Our survey explored the use of two types of variable hours contract: zero hours and minimum hours. The first of which provides employees with no guarantee of hours in their contract (zero hours), while the second guarantees only a small number of hours in the contract (minimum hours). Within the sample, we found that far more employers use zero hours contracts than minimum hours contracts (80% and 33% of respondents respectively). However, minimum hours contracts cover more staff: minimum hours workers represent 29% of the total sample workforce (and 37% of the low-paid workforce), while zero hours workers account for just 15% of the total sample (and 24% of the low-paid workforce). This is likely for various reasons, including the fact that minimum hours contracts are commonly used by large retailers and that zero hours contracts are often used for discrete activities.

Employers’ use of zero hours contracts appears to be for genuinely unpredictable and infrequent work. For example, they are often utilised for discrete activities and/or where it is recognised that there are likely to be peaks and troughs in demand (28% of respondents with zero hours contracts said they were largely used where demand is highly variable/difficult to predict, whereas no respondents said the same of minimum hours roles). The nature of such assignments ranged from erecting estate agent boards to summer activity instructors employed by a local authority.

Meanwhile minimum hours contracts appear to be used when fixed hours contracts might be equally suitable, which may indicate that employers are choosing to use minimum hours approaches because they are more advantageous for employers than employees because it means they can flex people’s hours at very little notice. For employers, providing workers with only a minimum guarantee of working hours (from as little as one hour a week at one hospitality firm in our sample) establishes a contractual relationship which the survey shows gives employees less freedom to turn down work or to request an alternative working pattern. The survey also indicates that while minimum hours contracts provide a minimum guaranteed number of hours for work, workers regularly work more hours than stated in their contract.

Managing fluctuations in demand is a key consideration for employers and 88% (35) said that this drove staff/shift scheduling decisions and was often the only consideration. Employee choice does feature as a consideration at 60% (23) but very few (8% or just 3 organisations) consider this alone. More than one employer told us that from their perspective a key reason for operating variable hours contracts was to facilitate flexible working for staff. For example, a retailer said that some staff worked additional hours to enable their colleagues to attend to family commitments, such as the first day of school, while seasonal or ad hoc jobs may be attractive to workers such as students who cannot necessarily commit to fixed working hours on a long-term basis.

One respondent suggested that the introduction of a higher rate for non-contracted hours, as suggested in the Taylor Review of Modern Working Practices, might therefore have a detrimental effect on work-life balance for some employees if it disincentivised employers from offering flexible hours in this way. However, the survey shows that managing demand is the main consideration when it comes to the use of variable hours contracts, regardless of employers’ views in respect of employee choice.

Media reports indicate significant growth in the use of variable hours contracts. However, on the whole our survey indicates little or no change in the use of variable hours contracts: while three respondents have implemented or increased their use of such working practices over the past two to three years, four respondents told us that they had reduced their use. The necessary caveat here, though, is the small size of the sample.

In analysing the survey findings and talking to respondents it became clear that some did not want to term their working arrangements ‘minimum or zero hours’, instead insisting that they employ staff on ‘flexible’ contracts. In addition, a number of employers, including two large retailers who we profile in short case studies, do not perceive themselves as offering variable hours contracts but in practice make extensive use of ‘overtime’ (paid at plain time up to full-time weekly hours) for workers on minimum hours contacts or what one respondent defines as ‘additional hours’, especially for part-time staff. These ‘additional hours’ are technically optional but, as one employer told us, an awareness of the precarious nature of the retail industry and peer pressure within teams can make some workers think twice before declining any overtime offered.