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Zero hours contracts - on borrowed time?

Zero hours contracts have hit the front page with reports suggesting that anything between 250,000 and one million employees are employed on them. By Gavin Matthews, head of retail at Bond Dickinson


Zero hours contracts - on borrowed time?

These contracts have traditionally been used by sectors, including retail, where demand changes and staff needs can fluctuate.

Under these contracts, workers are not guaranteed any particular hours of work and are usually contacted at the start of each week and told how many hours they will be needed for that week. Employees agree to be available for work when they are required but they do not receive paid holidays or sick leave. Effectively these contracts move the financial risk of underemployment from the employer to the employee. 

There are clear advantages for employers but what about employees? Some workers find them beneficial, as they have more flexibility, but others find it difficult to manage their finances if they do not know how much they will be earning and it can be difficult for them to take out a mortgage. In addition, it is hard to claim benefits or tax credits if you do not know what your hours of work or earnings will be and those with children may struggle to arrange childcare at short notice.

Events of recent weeks could be the sign of things to change however. The unions are pressing for a total ban on zero hours contracts and the Labour Party announced they would hold a zero hours summit. Andy Burnham, the shadow health secretary, has called for a ban on these contracts.

A legal challenge has also been brought against a High Street retailer over its use of zero hours contracts. The employment tribunal claim is for paid holidays, sick pay and bonuses, which are denied to those on such contracts.

The Department for Business, Innovation and Skills is currently carrying out a review of the breadth and impact of zero hours contracts, with Vince Cable stating that he is concerned there might be "some exploitation" of staff on the contracts. BIS will decide next month whether to hold a formal consultation on proposals for legislation, although an outright ban has been ruled out. At this stage, we can only speculate as to the form the legislation might take but it has been suggested that employers would only be able to use these contracts if they were not exclusive, meaning that workers would also be allowed to work for other employers.

With pressure mounting for a change in the law, retailers who still use zero hours contracts should consider whether they still work for them and what their options are if the law is changed to restrict their use.

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