Zero hour contracts – the power factor!

14 March 2014

On 10th March the Guardian ran a story exposing the huge rise in zero hour contracts. According to the lastest official statistics from the Office for National Statistics, nearly 583,000 employees – more than double the government’s estimate – were forced to sign up to the exploitative conditions last year.

Commenting on the figures, Chuka Umunna said “Under David Cameron we have seen employment becoming less secure at a time when families are facing a cost-of-living crisis.

“These new figures from the ONS, ….. confirm that there has been a huge rise in the numbers of people on zero-hours contracts since 2010. …..Labour would tighten up the rules to outlaw zero-hours contracts where they exploit people and turn around the rising tide of insecurity we’ve seen under the Tory-led government.”

But do these new figures reflect reality? Zero hour contracts are spreading like a disease across a growing number of sectors including social care, retail, hotels and universities. The contracts allow employers to hire staff without any obligation to guarantee a minimum number of working hours.

According to UNITE, even the revised ONS figures underestimate the extent of the problem. Quoting a study by the Chartered Institute of Personnel and Development (CIPD), Unite believes that at least 1 million workers are struggling to get by under these exploitative contracts.

Last year Vince Cable set up a consultation on the use of these contracts. That consultation ended on 13 March 2014. Cable said he wanted to crack down on “exclusivity clauses” that prevent staff on zero-hours contracts working elsewhere. Labour adopted a tougher approach with Ed Miliband telling the TUC in 2013 that he would ban the exploitation of workers on zero-hours contracts by banning employers from insisting employees on the contracts are available even when there is no guarantee of any work, ending “exclusivity clauses” and stopping the use of the contracts when employees are in practice working regular hours.

But is that tough enough? Will tinkering around the edges of these abusive contracts solve the problem?

According to recent recommendations from the Regulatory Policy Committee (RPC) – an independent body set up by the Government to scrutinise evidence for regulations – one important aspect of the contractual relationship has so far been ignored – the power factor. The RPC argued that the employers’ market power over employees should be considered in any review about zero-hours contracts.

Its report stated: “If employers did not have market power, then employees – if they wished – would presumably, for example, be able to negotiate a move to guaranteed hours contracts without Government intervention.

“This might also explain why employees with zero-hours contracts accept clauses like exclusivity which disadvantage them.”

The RPC identified the government’s impact assessment had failed to consider the market power of employers over employees as a reason for Government intervention

Secondly, the report suggested the Government should have provided more data about the distribution of zero-hours contracts used by the private and public sector.

Finally, the RPC suggested that before the Government could make a decision on whether to introduce legislation around zero-hours contracts it should provide estimates of the proposed impacts.

The RPC will report again at final consultation stage, and assess whether the Government adequately responded to evidence submitted to the consultation.