The row over the increasing use of zero hour contracts has been rumbling on for a few months with a move by the Business Secretary Vince Cable to review the situation. However, although the impetus is to protect vulnerable workers, there are fears that any clampdown on zero hours contracts could impact on the freelancer market.
A recent survey by the Chartered Institute of Personnel and Development (CIPD) found there were one million people in the UK on zero-hours contracts, which do not guarantee workers shifts or work patterns and they are expected to be available when the company or organisation needs them. And research by agency group, REC, found that more than one in four companies employs somebody on a zero-hours contract.
Now, a Professor of Human Resource Management at Warwick Business School believes zero-hours contracts are actually a drag on the UK economy.
Professor Kim Hoque, said: “Zero-hours contracts could represent a drag on consumer spending and hence economic recovery. People on insecure zero-hours contracts are less likely to have the confidence to spend than people with more stable incomes.
“The flexibility they provide may well have enabled the UK to avoid higher levels of unemployment during the economic downturn. They may also have enabled some people to maintain an attachment to the labour market who would otherwise not have been able to do so. That said such contracts could also be seen as part of the wider underemployment problem that has affected the UK economy in recent times, with large numbers of workers on part-time or casual contracts wanting to work more hours but being unable to do so.
“Hence, while unemployment has remained lower than many economists predicted would be the case, underemployment has been high – and zero-hours contracts may be a significant part of this picture, and so impacting on consumer confidence and spending.”
Professor Hoque believes more research on zero-hours contracts is needed, especially as they are becoming more prevalent in the public sector.
Echoing the concerns that these contract exploit workers, official figures showed that zero-hours workers earned an average of £9 an hour, compared with £15 for other employees and Professor Hoque believes these contracts will eventually affect a company’s productivity and performance.
Professor Hoque said: “From the employer’s point of view zero-hours contracts provide ultimate labour flexibility, enabling them to keep labour costs down by matching staffing to demand as closely as possible.
“While this clearly has significant cost saving potential in the short-term, it is difficult to see how businesses can build motivated workforces that are committed to the goals of the business when they are employing staff in such a manner.
“The growth of such contracts is perhaps testimony to the extent to which employers have focused more in recent times on squeezing the wage bill rather than responding to attempts to encourage them to seek greater employee engagement.”
The unions have been actively opposing these types of contracts, saying they present 'huge drawbacks' in comparison to permanent employment.
Professor Hoque said: “Union leaders have called for zero-hours contracts to be outlawed entirely, with Dave Prentis, general secretary of Unison, arguing that such contracts hark back to the times when people would stand at the factory gates waiting to be picked for a day’s work.
"He has also highlighted that many people on zero-hours contracts are on the lowest wages in the economy, making them the least able to cope with financial shocks such as a cut in hours from one week to the next. Zero-hours contracts also make financial planning all but impossible. It is difficult to get a loan, a mortgage, a credit card or a tenancy agreement if you are not able to provide proof of earnings.
“Given how far the benefits of such contracts are weighted towards employers, this is testimony to where the balance of power in the employment relationship lies. Employees have no means by which to resist such contracts - given the weakness of unions in the private sector in particular - and the only option for many to such contracts is the prospect of unemployment."
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Susie Hughes © Shout99 2013