CONDITIONS OF WORK AND EMPLOYMENT SERIES No. 101
Zero-Hours Work in the United Kingdom
Abi Adams
Jeremias Prassl
INWORK
Conditions of Work and Employment Series No. 101
Inclusive Labour Markets, Labour Relations
and Working Conditions Branch
Zero-Hours Work in the United Kingdom
Abi Adams
*
Jeremias Prassl
*
*
* Associate Professor in the Department of Economics and Fellow of New College.
** Associate Professor in the Faculty of Law and Fellow of Magdalen College.
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Conditions of Work and Employment Series No. 101 iii
ExecutiveSummary
In this report, we provide a detailed study of zero-hours work in the United Kingdom. An initial section
defines zero-hours work, emphasising key characteristics as well as overlaps between zero-hours work
and other casual work arrangements, and draws parallels both with historic instances of on-demand work
and current experiences of ‘if and when’ contracts in the Republic of Ireland.
Section two presents the most recent available data on the prevalence and key characteristics of zero-
hours workers and employers, explaining the evolution of such work arrangements as well as the technical
issues which make measuring the phenomenon through official labour market statistics particularly
difficult. Section three complements the empirical evidence with an analysis of the effects of zero-hours
work for workers, employers, and society more broadly. Our focus is not limited to the legal situation of
those working under such arrangements, but also includes questions of social security entitlements, and
wider implications such as business flexibility, cost savings, and productivity growth.
As the fourth section explains, a growing awareness of the growth of zero-hours contracts from 2011
onwards brought about a marked increase in public discussion of the phenomenon, leading eventually to
(limited) legislative intervention. We explore the positions taken by the social partners, before analysing
historical as well as recent legislative responses, and setting out a case study of Parliament’s response to
a particularly egregious instance of labour standards violations in warehouses operated by the sports
equipment chain Sports Direct. A brief concluding section, finally, turns to a series of policy
recommendations and broader considerations, with a view to finding a model in which (some of) the
flexibility of zero-hours work arrangements might be preserved, without however continuing to pose a
real threat to decent working conditions in the United Kingdom’s labour market.
iv Conditions of Work and Employment Series No. 101
TABLEOFCONTENTS
Executive Summary .................................................................................................................................................. iii
1. Defining Zero-Hours Work .............................................................................................................................. 1
a. The ‘Zero-Hours Contract’ ............................................................................................................................ 1
i. Common Parlance, Statistical, and Legal Definitions .............................................................................. 1
ii. Relationship to other casual work arrangements....................................................................................... 3
b. Parallels and Precedent ................................................................................................................................. 4
i. Historical Development ............................................................................................................................. 4
ii. The Irish Experience .................................................................................................................................. 5
2. Prevalence ........................................................................................................................................................... 7
a. Key Statistics ................................................................................................................................................... 7
i. Measurement .............................................................................................................................................. 7
ii. Numbers ..................................................................................................................................................... 9
b. Detailed Characteristics ............................................................................................................................... 12
i. Earnings on ZHCs .................................................................................................................................... 12
ii. Hours and Working Patterns .................................................................................................................... 13
iii. Worker Characteristics ............................................................................................................................ 15
iv. Employer Characteristics ......................................................................................................................... 18
v. Social Care ............................................................................................................................................... 20
3. The Impact of Zero-Hours Work .................................................................................................................. 21
a. What’s the Counterfactual? .......................................................................................................................... 21
b. Workers ......................................................................................................................................................... 22
i. Flexibility? ............................................................................................................................................... 22
ii. Income and Social Security ..................................................................................................................... 23
iii. Legal Implications ................................................................................................................................... 26
iv. Other Factors ............................................................................................................................................ 30
c. Business ......................................................................................................................................................... 31
d. Government and Society ............................................................................................................................... 33
4. Policy Responses .............................................................................................................................................. 34
a. The Position of the Social Partners .............................................................................................................. 34
i. Trade Unions ............................................................................................................................................ 34
ii. Employer Representatives ....................................................................................................................... 35
b. Legislative Responses ................................................................................................................................... 36
c. Parliamentary Inquiry .................................................................................................................................. 37
d. National Minimum Wage Act 1998 .............................................................................................................. 38
5. Conclusion and Recommendations ................................................................................................................ 39
i. Employment Law ..................................................................................................................................... 39
ii. Social Security ......................................................................................................................................... 40
iii. Government Commissioning ................................................................................................................... 40
iv. Broader Outlook ....................................................................................................................................... 40
Conditions of Work and Employment Series ......................................................................................................... 41
Conditions of Work and Employment Series No. 101 1
1. DefiningZero‐HoursWork
This section addresses a series of fundamental definitional issues. We turn, first, to the many different
definitions of the contractual arrangements underpinning zero-hours work: despite widespread
assumptions to the contrary, there is no such thing as ‘the’ zero-hours contract (ZHC). It is important to
see zero-hours work as a wide spectrum of contractual arrangements, centred on the absence of guaranteed
hours for the worker. Having set out different definitions and sample clauses, we situate zero-hours work
in the broader context of precarious or casual work arrangements. A second sub-section addresses a
further set of misconceptions: that zero-hours work is a relatively novel phenomenon, found exclusively
in UK labour markets. In reality, examples of zero-hours work in its current instantiation can be found as
early as the 1970s; functionally equivalent short-term hire models reach back several centuries, from the
hosiery industry to dock workers in the 19
th
century. Similar arrangements also exist in the Republic of
Ireland, under the label of ‘if and when’ contracts.
a. The‘Zero‐HoursContract’
As the then Secretary of State for Business, Innovation and Skills, Dr Vince Cable MP noted during a
2013 Opposition Day debate in Parliament, definitional problems are at the heart of any discussion of
zero-hours contracts:
There is an issue about what zero-hours contracts actually are; they are not clearly defined.
[…] There are a whole lot of contractual arrangements […] They are enormously varied.
1
In public discourse, the zero-hours label is applied to a wide range of arrangements in which workers are
not guaranteed any hours of work in a particular period. At least in theory, workers party to such
arrangements are often thought at liberty to reject any offer of work made by their employer. The scope
of the term in colloquial usage has expanded in recent years as a result of media attention, not least
because of the rise of the “gig economy”.
i. CommonParlance,Statistical,andLegalDefinitions
A series of definitions can be found in the academic literature, official government policy documents,
statutory enactments, and statistical surveys. While a necessary element of definitions is a lack of
guaranteed hours, as we shall see, there is a great deal of heterogeneity in the realities of work that falls
under the label “zero-hours contracts”. Simon Deakin and Gillian Morris suggest that zero-hours
arrangements encompass all
cases ‘where the employer unequivocally refuses to commit itself in advance
to make any given quantum of work available.’
2
Mark Freedland and Nicola Kountouris bring out this
diversity even more clearly, when they refer to ‘work arrangements in which the worker is in a personal
work relation with an employing entity […] for which there are no fixed or guaranteed hours of
remunerated work. These arrangements are variously described as ‘on-call’, ‘intermittent’, or ‘on-
demand’ work, or sometimes referred to as ‘zero-hours contracts’.’
3
1
HC Deb 16 October 2013, vol 567, col 756.
2
S Deakin and G Morris, Labour Law (6th edn Hart 2012) 167.
3
M Freedland and N Kountouris, The Legal Construction of Personal Work Relations (OUP, 2012) 318-319.
2 Conditions of Work and Employment Series No. 101
Parliament intervention in 2015, resulting in section 27A of the Employment Rights Act of 1996 (‘ERA
1996’),
4
stipulates that:
(1) In this section “zero hours contract” means a contract of employment or other worker’s
contract under which—
(a) the undertaking to do or perform work or services is an undertaking to do so
conditionally on the employer making work or services available to the worker, and
(b) there is no certainty that any such work or services will be made available to the
worker.
(2) For this purpose, an employer makes work or services available to a worker if the employer
requests or requires the worker to do the work or perform the services.
This definition builds on official consultation documents on the use and regulation of zero-hours
arrangements, published by the government in December 2013. There a zero-hours contract was defined
as ‘an employment contract in which the employer does not guarantee the individual any work, and the
individual is not obliged to accept any work offered.’ The consultation illustrated the technical
implementation of such arrangements by means of a specific ‘example of a clause in a zero-hours contract
which does not guarantee a fixed number of hours work per week’:
“The Company is under no obligation to provide work to you at any time and you are under
no obligation to accept any work offered by the Company at any time.”
5
While zero-hours contracts do not guarantee a minimum number of hours, there is heterogeneity across
contracts in stated expectations of work availability and the degree of notification given of when work
will be available. Additional contractual examples to highlight this are given below.
6
Under some
contracts, time when a worker must be available to work if needed must be agreed upon;
7
under others
no such commitment is required. Some contracts state that workers will be notified on a weekly basis
about available work; in others, this commitment is missing. The Advisory, Conciliation and Arbitration
Service (Acas) documents that many workers are often not aware that their contracts do not guarantee
any hours as the reality of their day-to-day work experience suggest otherwise. In their opinion, “many
workers experience a false sense of security when it comes to their contractual relationship”.
8
4
For an earlier example of an attempted statutory definition of Zero-Hours Contracts, see the Zero Hours Contracts HC Bill (2013-14) 79
introduced by Andy Sawford MP in the summer of 2013, with a view to making it ‘unlawful to issue a zero hours contract.’ (cl 1(1)). That Bill
sought to define such arrangements in its clause 3(1), identifying them through a combination of factors as follows:
A zero hours contract is a contract or arrangement for the provision of labour which fails to specify guaranteed working
hours and has one or more of the following features—
(a) it requires the worker to be available for work when there is no guarantee the worker will be needed;
(b) it requires the worker to work exclusively for one employer;
(c) a contract setting out the worker’s regular working hours has not been offered after the worker has been employed for
12 consecutive weeks.
5
BIS, Consultation: Zero Hours Employment Contracts (London, December 2013) [‘Consultation’] [11] – [12].
6
N. Pickavance, Zeroed Out: the place of zero-hours contracts in a fair and productive economy (London, 2014), 9 [‘Pickavance’].
7
See discussion of contract terms in House of Commons Business, Innovation and Skills Committee, Employment Practises at Sports
Direct: Third Report of Session 2016-17, 7.
8
Acas, ‘Give and take? Unravelling the true nature of zero-hours contracts’ (2014) Acas Policy Discussion Papers, 6.
Conditions of Work and Employment Series No. 101 3
Some have responded to this factual complexity by developing more refined categories. Hugh Collins,
Keith Ewing and Aileen McColgan, for example, draw a distinction between zero-hours contracts, where
‘the employee promises to be ready and available for work, but the employer merely promises to pay for
time actually worked according to the requirements of the employer’ and ‘arrangements for casual work’
where ‘again the employer does not promise to offer any work, but equally in this case the employee does
not promise to be available when required.’
9
This distinction is relevant for comparisons of the UK and
Republic of Ireland experiences. In Ireland, a distinction is drawn between zero-hours contracts, which
do not guarantee work but an individual is contractually required to make themselves available to work,
and ‘if-and-when contracts’, which do not guarantee works and do not require an individual to be
available for work at any point.
10
The heterogeneity in work experiences under zero-hours contracts has created significant difficulties in
measuring the prevalence and characteristics of ‘the’ phenomenon. The main official data source on
information on zero-hours contracts is the Labour Force Survey (LFS), which is administered by the
Office for National Statistics (ONS). Here, the work arrangement is defined as:
“[A zero hours contract] is where a person is not contracted to work a set number of
hours, and is only paid for the number of hours that they actually work”
11
However, this definition is only provided to respondents if they ask explicitly for clarification of the term.
The precise working definition of a zero-hours contract in the LFS is, therefore, deeply unclear as
classification is primarily a matter of respondent self-identification. This has caused deep reservations
about the quality of the statistical evidence, to which we return in Section 2.
ii. Relationshiptoothercasualworkarrangements
Given the diverse set of work arrangements that the term applies to, the ‘zero-hours contract’ label should
not be seen as representing a clear or overarching category or organising principle of precarious work.
There is a considerable degree of heterogeneity of temporary work,
12
reflected in ‘a growing
nomenclature of ‘atypical’ and ‘non-standard’ work, apart from commonly used categories such as
temporary, part-time and self-employed work. Terms include ‘reservist’; ‘on-call’, and ‘as and when’
contracts; ‘regular casuals’; ‘key-time’ workers; ‘min-max’ and ‘zero-hours’ contracts.’
13
Indeed, the
9
H Collins, K Ewing and A McColgan, Labour Law (CUP 2012) 243.
10
M O’Sullivan et al, A Study on the Prevalence of Zero Hours Contracts among Irish Employers and their Impact on Employees (University
of Limerick, 2015).
11
User Guide: Volume 3 – Details of LFS Variables, Labour Force Survey, February 2014. http://www.ons.gov.uk/ons/guide-
method/method-quality/specific/labour-market/labour-market-statistics/index.html
12
D McCann, Regulating Flexible Work (OUP 2008) 102.
13
L Dickens, ‘Exploring the Atypical: Zero Hours Contracts’ (1997) 26 ILJ 263.
4 Conditions of Work and Employment Series No. 101
various categories of ‘atypical’ work can frequently overlap, for example where agency work
incorporates a ‘zero-hours contract dimension’.
14
Relationship to Self-Employment and “Gig Work”. The distinction between zero-hours work
arrangements and self-employment has particular economic and legal significance in the UK. The self-
employed are not subject to minimum wage legislation nor working time regulation. Self-employment is
also tax advantaged for both workers and firms; National Insurance Contributions (NICs) are 3% lower
for the self-employed compared to employees, and employers pay 13.8% NICs on employee income.
These differences in tax rates are not met with significant differenc es in social security entitlements.
15
The distinction between the self-employed and zero-hours workers has acquired greater urgency in the
last year with increasing media and policy interest in the rise of the on-demand economy and “gig-work”.
Developments in communications technology have supposedly led to the emergence of new forms of
employment ‘located in the grey and often uncharted territory between employment contracts and
freelance work’.
16
There is a great deal of heterogeneity in the types of working relationships that are
labelled as part of this phenomenon. Among the most salient examples in the UK are ‘ride-sharing’ app,
Uber, and food delivery company, Deliveroo.
17
Firms in this sector, including Uber and Deliveroo, insist that their workers are independent contractors,
while recent UK Employment Tribunal rulings suggest that their workforce should be classified as
individuals working on zero-hour contracts. For example, in Aslam v Uber BV, the tribunal ruled that
Uber drivers are workers within sec 230(3)(b) of the ERA 1996 given the high degree of control exerted
by the firm.
18
We return to this point in Section 3.
b. ParallelsandPrecedent
In defining the zero-hours contract, it is equally important to note what zero-hours work is not: the
phenomenon is neither a recent labour market development, nor is it unique to the United Kingdom.
i. HistoricalDevelopment
In exploring the historical development of zero-hours work, two important dimensions should be
highlighted. First, that as regards modern labour markets, arrangements akin to zero-hours work have
been recorded in the literature and judicial proceedings at least since the 1970s, most recently coming to
public consciousness in the 1990s. Second, that historical examples can even be found much further back:
a vast number of industries in the 19
th
century, from hosiery manufacturing to dock labour, were built
around an employment model in which workers were not guaranteed any amount of fixed work from one
week, or even one day, to the next.
Modern use of zero-hours arrangements should thus not be seen as a new phenomenon but rather part of
a much larger ‘tendency toward numerical flexibility [which has been] particularly marked [since] the
1980s’.
19
Litigation arising from the use of zero-hours contracts to allow employers numerical flexibility
14
J O’Connor, ‘Precarious Employment and EU Employment Regulation’ in G Ramia, K Farnsworth and Z Irving, Social Policy Review 25:
Analysis and Debate in Social Policy’ (OUP 2013) 238.
15
A Adams, J Freedman and J Prassl, Different Ways of Working (Oxford, 2016).
16
J. Prassl and M. Risak, ‘Uber, Taskrabbit & Co: Platforms as Employers? Rethinking the Legal Analysis of Crowdwork’ (2017), 37
Comparative Law and Policy Journal 619.
17
J Prassl, Humans as a Service (OUP 2018).
18
Aslam, Farrar and Ors v Uber (Case No 2202550/2015; decision of 28 October 2016). See also R Hunter and J Prassl, Worker Status for
App-Drivers: Uber-rated?, Oxford Human Rights Hub Blog 21
st
November 2016.
19
S Fredman, ‘Labour Law in Flux: The Changing Composition of the Workforce’ (1997) 26 ILJ 337, 339. The effects were originally
particularly marked in the case of female workers (339-340) and industries such as construction and dock-working (340), or trawler working.
See also P Leighton and R Painter, ‘“Task” and “Global” Contracts of Employment’ (1986) 15 ILJ 127; A McColgan, Just Wages for Women
(OUP 1997) 391.
Conditions of Work and Employment Series No. 101 5
and attempt to avoid the application of statutory protection can be traced back nearly forty years.
20
In the
1978 decision of Mailway,
21
for example, the claimant postal packer ‘could and would only attend for
work in accordance with the need expressed by the employers.’
22
Discussion of zero-hours contracts can also be found in the academic literature prior to their recent rise
to notoriety.
23
A study by Katherine Cave in the 1990s showed the already widespread use of ‘something
that could be classified as zero hours contracts’;
24
with a strong growth trend as an area where there has
been abuse’
25
continuing in the subsequent decade.
26
The work arrangement even merited an explicit
mention in New Labour’s 1998 White Paper on ‘Fairness at Work’;
27
perhaps in response to one of the
earliest examples of public controversy, when Burger King’s practice to pay staff only for time spent
actually serving customers was exposed in the mid-1990s.
28
The (then) government there welcomed
‘views on whether further action should be taken to address the potential abuse of zero hours contracts
and, if so, how to take this forward without undermining labour market flexibility.’
29
ii. TheIrishExperience
Parallels can also be drawn with other contemporary labour markets, notably in the Republic of Ireland.
There, a distinction is drawn between zero-hours and ‘if and when’ contracts, as referenced in Section
1(a). The key difference between the use of the two terms in Ireland is whether individuals are
contractually required to make themselves available for work with an employer: zero-hours contracts
require individuals to be available for work while if-and-when contracts do not.
30
A recent study the
University of Limerick, commissioned by the Irish government’s Department of Jobs, Enterprise and
Innovation, provides a detailed examination of contracts with no guaranteed hours in the context of the
Irish economy.
31
Similar issues regarding definition, measurement, legal status, and policy arise in the
UK and Irish contexts. As we shall explore in later sections, the debate in the Irish context is similarly
skewed by a focus on the benefits of flexibility by employers’ organisation and on income insecurity by
trade unions.
In the UK, if-and-when work arrangements would be classified as zero-hours arrangements. It is unclear
how many of the zero-hours arrangements in the UK would be classified as if-and-when contracts if the
Irish definitions were applied. However, the recent UK ban on so-called ‘exclusivity clauses’, which
prevent workers on zero-hours arrangements from accepting work from another employer, might have
limited the prevalence of zero-hours contracts in the Irish sense of the term.
Policy recommendations arising from the University of Limerick report are more substantive than those
arising from the UK consultation, aiming to provide mechanisms to regularise work patterns to provide
stability for workers whilst retaining flexibility for employers. The proposals include legislative
provisions for guaranteeing hours and providing notice of work and its cancellation. It is suggested that
employers provide a written statement of terms and conditions of employment on the first day of work,
20
In the instance cited, the employer’s minimum guarantee payment for employees within the meaning of s 22(1) of the Employment
Protection Act 1975.
21
Mailway (Southern) Ltd v Willsher [1978] ICR 511 (EAT).
22
ibid 513G. See H Collins, K Ewing and A McColgan, Labour Law (CUP 2012) 163.
23
The earliest mention of the label in the leading specialist journal appears to be in L Watson, ‘Employees and the Unfair Contract Terms
Act’ (1995) 24 ILJ 323, 323.
24
K Graven, Zero Hours Contracts: a Report into the Incidence and Implications of Such Contracts (University of Huddersfield, 1997); as
discussed in L Dickens, ‘Exploring the Atypical: Zero Hours Contracts’ (1997) 26 ILJ 262, 263.
25
J Lourie, Fairness at Work – Research Paper 98/99 (HC Library, London 1998) 26-27.
26
B Kersley et al, Inside the Workplace: First Findings from the 2004 Workplace Employment Relations Survey (DTI, London 2005).
27
DTI, Fairness at Work (White Paper, Cm 3968, 1998) [3.14]ff. For a critical analysis on point, see B Simpson, ‘Research and Reports’
(1998) 27 ILJ 245, 251; D McCann, Regulating Flexible Work (OUP 2008) 167ff.
28
see eg B Clement, ‘Burger King pays £ 106,000 to Staff Forced to “Clock Off”’ The Independent (London, 19 December 1995). Today this
practice would no longer be possible under the Minimum Wage Act 1998.
29
Fairness at Work (n 27) [3.16].
30
M O’Sullivan et al, A Study on the Prevalence of Zero Hours Contracts among Irish Employers and their Impact on Employees (University
of Limerick, 2015).
31
Ibid.
6 Conditions of Work and Employment Series No. 101
including a statement of working hours that are a “true reflection” of the hours required. We will return
to these themes in Section 4.
Finally, the UK and Republic of Ireland are not alone in their use of zero-hours arrangements. They can
be found in varying forms across other European and Commonwealth countries, subject to varying
degrees of regulation as summarised in Table 1.
32
Table 1. Zero Hours Contracts in Europe
Allowed Allowed, heavil
y
re
g
ulated Not
g
enerall
y
allowed Not used/rare
Cyprus
Finland
Ireland
Malta
Norway
Sweden
United Kingdom
Germany
Italy
Netherlands
Slovakia
Austria
Belgium
Czech Republic
Estonia
France
Lithuania
Luxembourg
Bulgaria
Croatia
Denmark
Hungary
Poland
Romania
Slovenia
Spain
Source: A Study on the Prevalence of Zero Hours Contracts among Irish Employers and their Impact on Employees (University of Limerick,
2015); Flexible Forms of Work: ‘very atypical’ contractual arrangements (European Observatory of Working Life, 2010); Full Fact, Zero hours
contracts: is the UK “the odd one out”?
32
Note that some caution is required in cross-country studies of zero-hours arrangements. As noted, their heterogeneity creates issues of
definition and measurement within countries, let alone between. Further, zero-hours contracts may be rarely used in some labour markets if
employers rely on self-employment or substitute forms of casual labour to a greater degree.
Conditions of Work and Employment Series No. 101 7
2. Prevalence
This section presents the most recent available data from the Labour Force Survey, ONS Business Survey,
and National Minimum Data Set for Social Care among others, on the prevalence and key characteristics
of zero-hours work in the United Kingdom. A first sub-section sets out the key statistics, explaining the
evolution of zero-hours work and focussing on some of the technical issues which make measuring the
phenomenon through official labour market statistics particularly difficult. A second sub-section then
turns to the specific characteristics of those involved in zero-hours work arrangements, whether as
employees or employers.
In summary, our calculations show that approximately 6% of contracts on which work is performed in
the UK do not guarantee minimum hours and 10% of employers make some use of zero hours work
arrangements. Wage rates and hours worked are significantly lower on average under zero-hours
arrangements compared to alternative work arrangements. Zero-hours contracts are associated with a 35%
lower median hourly wage and ten fewer hours worked per week on average when compared to other
types of contracts. Controlling for worker and job characteristics still leaves a 10% zero-hours pay gap
on top of that usually associated with part-time work. Zero-hours work is particularly concentrated
amongst younger workers and students. Women, migrants, non-white workers, and workers with
disabilities are also disproportionately employed under zero hours work arrangements.
a. KeyStatistics
Before setting out the most recent headline figures available in official government statistics and from
private data sources, it is important to sound a note of caution as regards the reliability of key indicators.
i. Measurement
The following paragraphs first address a series of historical problems with the recording of zero-hours
work in the official Labour Force Survey. They highlight, in particular, the impact that an increased
awareness through public dialogue has had on key indicators, and explain recent changes in ONS
methodology enacted to provide reliable estimates of the number of zero-hours workers in the UK
economy.
The LFS is the largest regular social survey of private households in the UK administered by the Office
for National Statistics (ONS). It samples around 40,000 individuals each quarter and collects information
on their employment status. Estimates of the prevalence of zero-hours arrangements come from a question
that relates to work arrangements that might vary weekly or daily. A zero-hours contract is defined as
“where a person is not contracted to work a set number of hours, and is only paid for the number of hours
that they actually work”
33
33
User Guide: Volume 3 – Details of LFS Variables, Labour Force Survey, February 2014. http://www.ons.gov.uk/ons/guide-
method/method-quality/specific/labour-market/labour-market-statistics/index.html
8 Conditions of Work and Employment Series No. 101
Some people have special working hours arrangements that vary daily or weekly. In your (main) job
is your agreed working arrangement any of the following… (up to 3 coded)
a. flexitime
b. annualised hours contract
c. term-time working
d. job sharing
e. nine-day fortnight
f. 4.5 day week
g. zero hours contract
h. on call working
i. none of these
FLEX10 (Applies if in work during reference week.)
2014 Measurement Controversy. Given the aforementioned definitional issues, it should not be
surprising that accurate measurement of zero-hours work is a key challenge for statistical agencies. In
2014, these measurement issues became salient enough to warrant media attention in their own right as
empirical evidence in the Department for Business, Innovation and Skills’ (‘BIS’) official consultation
document came under attack.
Until 2012 the empirical evidence on zero-hours contracts (ZHC) in the UK did not suggest significant
cause for concern. Statistics concerning the prevalence and characteristics of ZHCs were instead
suggestive of a relatively benign labour market phenomena; the prevalence of zero-hours contracts
appeared relatively low,
34
with majority apparently content with the number of hours worked in an
average week.
35
In the final quarter of 2012, responses to the Labour Force Survey suggested that a
negligible percentage of the workforce, a mere 0.8%, were employed on a ZHC.
36
Indeed, the historical
evidence presented in the consultation document suggested that the percentage of workers on a ZHC had
not exceeded 0.9% of total employment since the early 2000s.
37
However, the consensus is now that previous LFS methodology resulted in a gross underestimate of the
prevalence of zero-hours contracts. The LFS estimate in the fourth quarter of 2012 suggested that 250,000
people were on zero-hours contracts.
38
However, this figure was recognised as incredible in the face of
evidence from other sources. For example, Skills for Care, the partner in the sector skills council for
social care, estimates that 307,000 individuals were employed on zero-hours contracts in the social care
sector alone in May 2013.
39
Under the instruction of Sir Andrew Dilnot, the Office for National Statistics revised its estimates of the
prevalence of ZHCs in 2013 to reflect the evidence presented in independent estimates.
40
This, alongside
rising public awareness of the term, led to a substantial increase in estimates of the prevalence of zero
hour contracts. In 2013, the ONS estimated that 582,935 workers were on ZHC contracts,
41
a three-fold
increase in the numbers of individuals working under such arrangements since 2008 (as estimated by the
LFS).
42
34
Consultation 12.
35
Consultation 12.
36
ONS, Zero hours contract levels and percent 2000 to 2012, ad hoc analysis, 31 July 2013
37
Consultation 9.
38
Note that these numbers were revised upwards from 200,000 to 250,000 in late 2013. See for example, Office for National Statistics,
Corporate Information: Zero hour contract levels and percent 2000-2012, July 2013.
39
Sir Andrew Dilnot, Zero-hours employment statistics, Correspondence to Chuka Umunna MP, 7 August 2013.
40
Office for National Statistics, Statement: ONS urges caution on zero-hours estimates, March 2014.
41
Ibid.
42
Authors’ calculation from ONS.
Conditions of Work and Employment Series No. 101 9
Measurement Challenges. A number of factors contributed to the under-recording of ZHCs in the LFS.
First, the survey prevented individuals from simultaneously identifying themselves as, e.g., working shift
work and being employed on a ZHC. This issue has now been resolved, with certain ‘check and box’
questions. Further, the question on ZHCs is not asked in all quarters, excluding the recording of seasonal
workers on ZHCs.
More fundamentally, the LFS is based upon the responses of individuals, who frequently do not have the
necessary information about, or understanding of, their contractual situation to provide reliable evidence
in this regard. For example, in an interview given to the Resolution Foundation, a further education
lecturer in Bradford suggested that he:
‘had no idea [that he] had signed a zero-hours contract. When I applied for the job it
was advertised a being for between three and twenty-one hours work a week.”
43
This problem is compounded by the fact that awareness of the term has been increasing in recent years,
increasing the likelihood that individuals will self-identify with the ‘zero-hours’ label. This makes an
analysis of trends in the prevalence of ZHCs particularly problematic.
Finally, only respondents who work a positive number of hours or who are ‘temporarily away from their
job’ in the reference week are asked about the nature of their work contract. This is not a problem for
individuals who worked a positive number of paid hours during the reference week: they can be
unambiguously classed as having been in employment. However, it appears that the ‘in employment’
criterion might be of issue for those who were not assigned any work during the survey reference week,
a phenomenon that we shall see is very common in the next section.
In response to these difficulties, the ONS now also includes questions on zero-hours work in their survey
of businesses because firms are thought to be better placed to respond to questions about the contractual
arrangements of their workers.
44
Rather than ask about zero-hours contracts explicitly, the ONS came to
the conclusion that the most useful definition for purposes of this survey was “contracts that do not
guarantee a minimum number of hours”.
45
This has been justified by reference to the fact that it is the
lack of guaranteed hours that is the salient common feature of all current definitions of zero-hours
contracts.
46
This survey records contracts rather than workers, even if no hours were worked on those
contracts in the survey reference period.
ii. Numbers
Through a series of graphs, tables, and brief explanatory paragraphs, this section sets out the most recent
numbers of zero-hours workers and contracts, as well as the number of business users of such employment
arrangements. While the precise figure varies across surveys, the best evidence suggests that
approximately 6% of contracts on which work is performed do not guarantee minimum hours.
Approximately 2.8% of the UK workforce was employed on a zero-hours contracts for their ‘main job’
in 2016.
Labour Force Survey. The latest estimate from the LFS for October to December 2016 suggests that
905,000 individuals, or 2.8% of the workforce, were employed on a ZHC for their main job. This is 13%
higher than the figure for the same period in 2015 in which 804,000 individuals were thought to be
employed on ZHCs. A naïve analysis of Figure 1 might suggest that there has been fast growth in the
prevalence of zero hours work since 2011. We would like to caution against this interpretation, however,
given the aforementioned measurement issues.
43
M Pennycook, G Cory, and V Alakeson, A Matter of Time: The rise of zero-hours contracts (Resolution Foundation, London 2013) [‘Matter
of Time’].
44
Office for National Statistics, Press Release: ONS announces additional estimate of zero-hours contracts, 22 August 2013.
45
Analysis of Contracts that Do Not Guarantee a Minimum Number of Hours, Office for National Statistics, April 2014.
46
M Chandler (2016), Measurement of zero-hours contracts, ONS Presentation.
https://www.ukdataservice.ac.uk/media/604638/chandler.pdf
10 Conditions of Work and Employment Series No. 101
Figure 1. Main Job as Zero Hours Contract, Q4 2000-2016, LFS
Source: Author Calculations from Labour Force Survey
Business Survey. To overcome reporting biases associated with surveying individuals about the terms of
their employment contract (see above), data on the prevalence of ‘contracts that do not guarantee a
minimum number of hours’ (NGHCs) is now collected annually in the ONS Business Survey. Table 2
gives the currently available statistics on the number of NGHCs in the UK. Approximately 6% of all
contracts on which work was carried out in the reference period did not guarantee any hours of work. The
survey estimates that 10% of businesses make use of this work arrangement. In addition to the 1.7million
contracts on which work was carried out in November 2015, there were an additional 2 million contracts
on which no work was performed. It is unclear whether no work was performed because individuals did
not accept work offered or because an employer offered no work.
Table 2. Contracts with no guaranteed hours, ONS Business Survey
Reference Period Number NGHCs in which
work carried out
% Contracts that are
NGHCs
% Business making use of
NGHCs
Jan 2014 1.4 5 13
Aug 2014 1.8 6 11
Jan 2015 1.5 6 11
May 2015 2.1 7 11
Nov 2015 1.7 6 10
Source: Office for National Statistics Business Survey
47
The Business Survey suggests a higher prevalence of ZHCs than the LFS. It is unclear which is the ‘best’
measure to use. Employer surveys record contracts that cover a variety of arrangements, as opposed to a
single individual’s ‘main employment’. This measure thus includes contracts for those who work on an
irregular basis. Employers are also more likely to be aware of their employees formal contractual
arrangements. This may differ may differ from the perception of employees if their normal working hours
are relatively stable or if changes in hours are mainly as a result of personal choice.
47
Office for National Statistics, Contracts that do not guarantee a minimum number of hours: March 2016.
0
100
200
300
400
500
600
700
800
900
1000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Hundred thousands
Conditions of Work and Employment Series No. 101 11
Social Care. Given the difficulties in assessing trends over time from the LFS, we present data from the
social care sector in which the prevalence of ZHCs has, arguably, been better measured since 2012.
Indeed, administrative data on the prevalence of ZHCs in the social care sector was used in 2014 as
evidence of the limitations of previous LFS estimates. The National Minimum Data Set for Social Care
is a workforce planning tool managed by Skills for Care which is used to analyse employment practises
and workforce composition in the sector. There were 315,000 people employed on ZHCs in March 2016,
or 24% of the workforce. The percentage of workers on zero hours contracts in social care grew by 3
percentage points between 2012/13 and 2015/16 due to increases in the proportion of care workers and
registered nurses working under these arrangements.
Table 3. % Social Care Workforce on ZHC, NMDS-SC
Job Role 2012/13 2013/14 2014/15 2015/16
All 21 23 25 24
Senior Mana
g
ement 4 4 4 4
Registered Manager 3 2 2 3
Social Worker 3 3 3 3
Occ. Therapist 3 3 2 3
Registered Nurse 16 18 19 18
Senior Care Worker 9 9 9 10
Care Worker 30 33 35 33
Support 15 15 14 15
Source: NMDS-SC
48
Prevalence Across Industries. The prevalence of zero-hours work arrangements varies markedly across
industries. Figure 2 shows the percentage of people in each industry employed on a zero-hours contract
and the distribution of those on zero-hours contracts across industries. Responses to the Labour Force
Survey show that the over two-fifths of workers on zero-hours contracts for their main job are located in
Social Care, Health, Accommodation and Food Services. Zero-hours contract workers make up 11% of
total employment in Accommodation and Food Services, 9% of employment in the Arts sector and just
over 4% of employment in Health and Social Care.
Figure 2. Zero-hours work across Sectors, Oct-Dec 2016
Source: Author Calculations from Labour Force Survey October-December 2016
48
Skills for Care, The state of the adult social care sector and workforce in England, September 2016.
0 5 10 15 20 25
Health & Social Work (Q)
Hotels & Restaurants (I)
Arts (R.)
Retail (G)
Education (P)
Admin & Support (N)
Transport (H)
Manufacturing ©
Finance & IT (J, K, L, M)
Construction (F)
Other (S, T, U)
Public Admin (O)
Mining & Utilities (B, D, E)
Agriculture (A)
% Workers in Industry on ZHC % of ZHC Workers in Industry
12 Conditions of Work and Employment Series No. 101
b. DetailedCharacteristics
Discussion now turns to an analysis of the key features of work and remuneration, the characteristics
workers engaged, and employers offering work, under zero-hours arrangements.
i. EarningsonZHCs
Hourly wage rates on zero hours work arrangements are significantly lower than average. The median
wage rate for ZHC work is approximately 35% less than that for all workers. In real terms (adjusting for
CPIH inflation), wages on ZHC fell by 13.8% between 2011 and 2015, while real wages for non-ZHC
workers stayed approximately flat. Zero hours work is thus likely to be highly affected by increases in
the national minimum wage which was increased to £7.50 on 1
st
April 2017.
Figure 2. Median Hourly Wage, ZHCs and All Workers
Source: Author calculations from Labour Force Survey
There are many reasons why remuneration might be lower on ZHC contracts. Zero hours work might be
relatively concentrated in lower paying sectors, workers employed on ZHCs might have less experience
or be less productive, or the nature of the contracts could provide opportunities for value extraction by
employers or render the nature of work less productive.
The Resolution Foundation have previously estimated that approximately four-fifths of the overall hourly
pay gap between ZHC and full time work can be accounted for by the characteristics of the workers doing
them and the lower average pay in the occupations that the contracts are concentrated in.
49
We repeat this
analysis for the most recent data finding that a 10% ‘precarity pay gap’ remains after controlling for
observable differences between those working on zero-hours contracts and those working on other types
of contrast. Our analysis is robust to whether one considers the mean or median hourly pay. While it is of
course possible that this pay gap could be driven by other worker or job characteristics not measured in
the data, the analysis does provide relatively compelling evidence that there is a pay penalty associated
with zero hours work beyond that associated with part-time work more broadly.
49
Resolution Foundation, Zero hours contract workers face a ‘precarious pay penalty’ of £1,000 per year, December 2016
http://www.resolutionfoundation.org/media/press-releases/zero-hours-contract-workers-face-a-precarious-pay-penalty-of-1000-a-year/
0
2
4
6
8
10
12
14
2011 2012 2013 2014 2015 2016
Median Hourly Pay, £
ZHC Not ZHC
Conditions of Work and Employment Series No. 101 13
Table 4. Hourly Wage Regression Analysis, LFS Q4 2016
Log hourly wage
Mean Regression (1) (2) (3) (4)
ZHC -.449*** -.243*** -.102*** -.09***
(0.04) (0.03) (0.03) (0.03)
Controls:
Worker Characteristics
Industry & Occupation
Characteristics
Part-Time
N 10,244 9,676 9,594 9,591
R
2
0.0160 0.2778 0.4476 0.4484
A
d
j
R
2
0.0159 0.2769 0.4459 0.4466
ii. HoursandWorkingPatterns
Here, we focus on working time data, including average working hours of workers under zero-hours
contracts and, to the extent that such data is available, on the variability of their work schedules. We also
link to the broader debates and statistics on underemployment in recent years.
The LFS records actual hours worked during the survey reference week. Figures below are again the
latest available from the LFS October-December 2016 unless otherwise stated. Note that to appear in the
statistics, respondents must have done at least one hour of paid work in the week before they were
interviewed or to have reported that they were temporarily away from their job. Therefore, this source is
likely to miss those who did no work on under a zero hours work arrangement.
Actual Hours. The majority of people on ZHCs (65%) report that they worked part-time, compared with
26% of other workers. Average actual weekly hours in zero hours work are thus unsurprisingly lower at
22.0 hours per week compared with the average actual weekly hours for all workers at 31.8 hours. This
shows a similar pattern to usual hours worked, that is, the weekly hours usually worked throughout the
year, which were 25.2 and 36.4 for people on “zero-hours contracts” and all workers respectively. Table
5 shows that this hours gap closes slightly but remains significant when controlling for observed worker
and job characteristics (e.g. female, have children, age).
Table 5. Hours Worked Regression Analysis, LFS Q4 2016
Hours in Reference Week (1) (2) (3)
ZHC -10.2*** -8.2*** -7.4***
(0.59) (0.57) (0.59)
Worker Characteristics
Industry & Occupation
Characteristics
N 34,623 32,845 28,222
R
2
0.0086 0.1222 0.1568
Adj R
2
0.0086 0.1219 0.1559
Hours Variability. Zero hours work is associated with greater weekly hours variation when compared
to all work as shown in Figure 3. For October to December 2016: 43% ZHC workers worked their usual
hours compared with 58% of other workers, while 35% of ZHC workers worked less than their usual
14 Conditions of Work and Employment Series No. 101
hours compared with 30% of other workers. Note again however that the LFS might under-record those
who work zero hours when they might usually work a positive number. Those on zero-hours contracts
are also much less likely to work 5-day weeks, the norm amongst those on other types of contracts. This
pattern is depicted in Figure 4.
Figure 3. Variability in Actual Hours versus Usual, Oct-Dec 2016
Figure 4. Number of Days per Week Worked, Oct-Dec 2016
Source: Author Calculations from Labour Force Survey
Conditions of Work and Employment Series No. 101 15
Underemployment. There is compelling evidence of underemployment amongst workers on ZHCs. A
quarter (25%) of those on ZHCs want to work more hours compared with 9% of people in employment
not on these contracts. 9% of those doing zero-hours work would like a different job with more hours
compared with 1% for other people in employment, while the remainder would like more hours in their
current job or an additional job. Disaggregating underemployment figures by key worker characteristics
is suggestive that while underemployment is a problem across all groups, men, immigrants and those with
disabilities (according to Equality Act 2010 criteria) are particularly affected. While men and women
employed on other types of contracts are equally likely to report being underemployed, women on zero-
hours contracts are less likely to be underemployed than men suggesting that some women who want low
hours might be selecting into this form of work. There is also some suggestion that a similar phenomenon
might be at work with students.
Table 6. Underemployment by Worker Characteristics, Oct-Dec 2016
ZHC Non-ZHC
Age
Youn
g
er workers 31% 15%
Older 22% 7%
Diff 9%** 8%***
Gender
Female 22% 9%
Male 29% 7%
-7%** 2%***
Disabled
Disability 31% 10%
No Disability 24% 8%
7%* 2%***
Immigrant
Migrant 33% 11%
Not Migrant 23% 8%
Difference 10%** 3%***
Student
Student 26% 12%
Not Student 24% 8%
Difference 2% 4%***
Source: Author’s calculations from the Labour Force Survey
iii. WorkerCharacteristics
Here, we focus on whether zero hours work is associated with particular groups of workers (such as
migrant workers, or those in particular sectors). In short, those doing zero-hours work are more likely to
be young, migrants and either still studying or less educated.
The relationship between age and work under zero-hours arrangements is particularly striking. A third of
zero-hours works are aged under 25, and 8% of those employed in this age group work on a zero-hours
contract compared to 2% of those aged 25 and over.
16 Conditions of Work and Employment Series No. 101
Figure 5a. Age Distribution of ZHC Workers
Figure 5b. % Workers in Each Age Group on ZHC
Source: Author Calculations from Labour Force Survey
Women, students and those with lower education are over-represented among zero-hours contract
workers. However, it is important to note that zero-hours arrangements still account for a relatively small
share of overall employment for most groups. While 52% of zero-hours workers are women, only 3% of
women in employment are on a zero-hours contract. However, for students, zero-hours work does account
for a bigger share of overall employment: 8% of students in work are employed on zero-hours
arrangements.
0
5
10
15
20
25
30
35
16-24 25-34 35-49 50-64 65+
%
0
1
2
3
4
5
6
7
8
9
16-24 25-34 35-49 50-64 65+
%
Conditions of Work and Employment Series No. 101 17
Figure 6. Characteristics of ZHC Workers, Q4 2016
Source: Author Calculations from Labour Force Survey
To control for the impact of various characteristics simultaneously, we run a multivariate logistic
regression of an indicator of whether an individual was employed on a zero-hours contracts on various
characteristics. An odds ratio of more than one indicates that workers with this characteristic are more
likely to work under a zero-hours arrangement. An odds ratio of less than one indicates that workers with
this characteristic are less likely to work under a zero-hours arrangement. We give results with and
without controls for industry and occupation.
The most salient themes match those of our graphical analysis: that zero-hours work is much more
common amongst workers under age 25, current students, and, amongst those who have finished
studying, those who do not have any qualifications higher than A-Levels (awarded at age 18 in the UK).
There is also evidence for the work arrangement being more prevalent amongst those classified as
disabled according to Equality Act 2010 criteria; 16% of those on zero hours arrangements are classified
as disabled under this measure, compared to 12% employed on other types of contract. Non-native UK
workers are also disproportionately employed on ZHCs; 20% of workers on ZHCs were born outside the
UK compared to 15% on other types of contract. Those who self-identify with a non-white ethnicity are
similarly over-represented amongst zero-hours work (14% to 10%). Women are more likely to be
working under zero-hours arrangements but this is largely because the industries and occupations that
women work in are more likely to use zero-hours contracts. Controlling for industry and occupation in
the second column of Table X results in the relationship between women and zero-hours arrangements
becoming insignificant.
0
10
20
30
40
50
60
Female Student More than A-Level
%
ZHC Not-ZHC
18 Conditions of Work and Employment Series No. 101
Table 6. ZHC Worker Characteristics, Logistic Regression
ZHC (1)
Odds Ratio
(Std Error)
(2)
Odds Ratio
(Std Error)
Age 16-24 3.89***
(0.43)
2.72***
(0.34)
Age 25-34 1.56***
(
0.17
)
1.42***
(
0.17
)
Age 50-64 1.38***
(0.15)
1.33**
(0.16)
Age 65+ 1.42*
(0.28)
1.78***
(0.38)
More than A-Levels 0.59***
(0.05)
1.03
(0.10)
Student 2.06***
(0.20)
1.84***
(0.20)
Female 1.23***
(0.08)
0.95
(0.08)
Disability 1.60***
(0.15)
1.39***
(0.14)
Immigrant 1.58***
(0.16)
1.26**
(0.14)
Non White 1.30**
(0.15)
1.24*
(0.16)
Children 0.95
(.15)
0.94
(0.08)
Constant 0.01
(0.00)
0.08
(0.12)
Industry & Occupation
N 33,334 28,540
Psuedo R
2
0.0593 0.1419
Benefit Receipt. Workers on zero-hours contracts are more likely to be in receipt of some state benefits
compared to those not on these contracts. 30% of those working on zero-hours contracts are in receipt of
benefits compared to 25% of workers employed under alternative work arrangements. We will return to
a wider discussion of this point in Section 3.
Unionisation. Unionisation rates are lower amongst zero-hours workers. 22% of workers employed on
other types of contracts are a member of a trade union, compared to only 8% of workers employed on
zero-hours contracts. The negative association between zero-hours work and unionisation continues to
hold even after controlling for worker characteristics, industry, and occupation.
iv. EmployerCharacteristics
Zero-hours contract workers are more likely to be found in small firms – 40% of those employed on zero-
hours contracts in October-December 2016 where in firms with fewer than 25 employees. 20% of zero-
hours workers were in the smallest category of firm size, at firms with fewer than 10 employees. However,
it seems that a higher proportion of very large firms make use of zero-hours contracts than smaller firms
(there are just few large firms in the UK).
Conditions of Work and Employment Series No. 101 19
Figure 7a. Proportion of Businesses Making Some Use of NGHCs by Business Size, Nov 2015
Source: ONS Business Survey
Figure 7b. Distribution of ZHCs by Firm Size, Oct-Dec 2016
Source: Labour Force Survey
We gave the breakdown of zero-hours contracts by industry earlier in this section, finding that they are
particularly prevalent in Health & Social Care and Accommodation and Food. Zero-hours arrangements
also appear relatively more common in private than public-sector organisations; 13% of zero-hours
workers are employed in the public sector compared to 23% of workers on other types of arrangements.
Agency Work. There is an important overlap between agency work and zero-hours arrangements. 10% of
workers employed by agencies are on zero-hours arrangements. Thus, hybrid forms of work organisation
are possible. Agency-ZHC work seems to be particularly important in the care sector. 30% of care workers
employed through agencies are on zero-hour contracts according to the LFS.
0
5
10
15
20
25
30
35
40
45
50
0-9 employees 10-19 employees 20 to 249 employees 250 or more
employees
Total
%
0
5
10
15
20
25
30
35
40
45
1-24 employees 25-49 employees 50-249 employees 250 or more employees
%
20 Conditions of Work and Employment Series No. 101
v. SocialCare
Given the heavy use of zero-hours contracts in the care sector, we provide a more in-depth study of their
use and characteristics in the sector. Skills for Care administrative data reveal that approximately a quarter
of all social care workers were employed on zero-hours contracts in 2015/16 (see Table 3). This is more
than estimated in the LFS or ONS Business Survey which might again give reason to believe that these
sources continue to underestimate the prevalence of zero hours work arrangements.
Domiciliary Care. Zero-hours contracts are particularly concentrated within care workers as opposed to
managers or administrative staff. Further they are very common within adult domiciliary care (care given
within an individual’s own home). In 2015/16, a large 58% of care workers and 57% of registered nurses
working in domiciliary care were employed on zero hours contracts.
50
80% of domiciliary care workers
on zero hours contracts were employed on a permanent basis on these contracts. There is also some
evidence that zero-hours contracts are clustered within particular types of provider. Unison and a review
for the Department of Health found that a large number of independent domiciliary care providers used
zero hours contracts for all staff but this was not the case for local authority providers.
51
Zero-hours contracts are sometimes justified as arising from employers need for flexibility, enabling them
to scale the size of their workforce to fluctuating demand. While demand for social care is systematically
high and constant across the week, homecare is time and location specific with some peaks and troughs
over the day. This feature of service delivery combined with ‘chronic underfunding’ and the
commissioning model used by most local councils leads to the use of zero-hours arrangements.
The majority of workers in social care are employed by private firms. However, as the UK Homecare
Association explains, ‘local councils buy around 70% of all homecare, meaning that they effectively have
a near monopsony of purchasing power in their local care market. The purchasing decisions of councils,
and the available funding from central government, largely determine the operation of the sector.’
52
It is widely acknowledged that councils do not usually pay for travel time; research by Unison suggests
that more than 65% of councils only pay for the time a carer actually spends in a service user's home.
Funding pressures have led councils to freeze the fees they pay to providers or providing only nominal
annual increases.
53
Care providers have been ‘very clear’ in arguing that the use of zero-hours contracts
is necessary because of the extremely low rates that local authorities pay for care, and the practise of
councils paying for care by the hour.
54
Indeed, ‘the majority of providers told [the UK Homecare
Association] that their services would be unsustainable on the current levels of funding, without the use
of zero hours contracts.’
55
There is thus little if no scope for many providers to remunerate workers fully
for travel and on-call time. In addition to likely resulting in the use of ZHCs, as we will discuss further
in Section 4, this practise has led to violations of National Minimum Wage regulations.
50
Skills for Care, The state of the adult social care sector and workforce in England (Skills for Care 2016).
51
Unison, Outsourcing the Cuts: Pay and Employment Effects of Contracting Out (The Smith Institute 2014).
52
C Angel, The use of zero hours contracts in the homecare sector (Acas Blog 2014) http://m.acas.org.uk/index.aspx?articleid=4901
53
House of Common Communities and Local Government Committee, Adult Social Care: Ninth Report of Session 2016-17, HC 1103 March
2017.
54
Angel (n 52).
55
ibid.
Conditions of Work and Employment Series No. 101 21
3. TheImpactofZero‐HoursWork
In the third section of this report, we complement the numerical evidence just set out with an extended
analysis of the effects of zero-hours work for workers, employers, and society more broadly. Our focus
is not limited to the legal situation of those working under such arrangements, but also includes questions
of social security entitlements, and wider implications for business flexibility, cost savings, and
productivity growth.
a. What’stheCounterfactual?
Before turning to a detailed discussion of the benefits and limitations of zero hours work for key
stakeholders, we first explore the important issue of what constitutes the relevant counterfactual. While
there might be drawbacks to the use of zero hours working arrangements, it might be the case that they
are preferable to the alternatives that would exist in their absence. Some job is often thought better than
no job at all.
Indeed, flexible work arrangements such as zero hours are suggested by some to have contributed to the
UK’s ‘employment miracle’ since the financial crisis. The UK employment rate is now at its highest level
since records began at 74.6% of the working age population. As zero hours arrangements enable firms to
take on workers with limited risk if demand falls short of expectations, there might have been higher
unemployment over the recession if such work arrangements were not available. The CBI, for example,
predicts that unemployment would have risen by an extra 500,000 people had firms not been able to resort
to these work arrangements.
56
This is supported by evidence that a third of all workers and more than half
of workers between 16-24 years old say that they are on these contracts because they cannot find a job
with regular fixed hours.
57
This is important because a large body of research highlights the long-term
damage of unemployment spells for individuals and society as people lose skills, lose confidence, and
face difficulty returning to employment.
58
Zero hours arrangements might also function as a stepping-stone to ‘better’ employment. The
Government consultation, for example, argues that ZHCs provide people with “opportunities to enter the
labour market and a pathway to other forms of employment.”
59
It is thus plausible that for certain groups
of individuals facing a lacklustre labour market, the opportunity to work on a zero hours contracts
represents a real benefit over the alternatives available.
However, that being said, there is evidence that zero hours contracts are used by some employers not
because positions that guarantee hours are economically unviable but rather because of poor management
practises. As we will explore in Section 3(b), many businesses stress that there exist more efficient means
of workforce management. Many CEOs and HR managers interviewed as part of an independent review
on zero hours contracts in the UK argued that, in the current economic climate, reliance on zero hours
contracts represents “lazy management”, an “unsophisticated way of managing workplace flexibility”,
and an “ineffective way of motivating people”.
60
Further, the link between forms of temporary and causal work and positive future labour market outcomes
is weak. Indeed, economists David Autor and Susan Houseman found that temporary help placements
might even harm subsequent employment and earnings outcomes in their study of the Work First
programme in Michigan.
61
According to Norman Pickavance, the lack of training and the emergence of
a two-tier workforce that can be associated with reliance on zero hours arrangements have ‘broken’ the
56
http://www.publicsectorexecutive.com/Public-Sector-News/vital-role-for-zero-hours-contracts-cbi-
57
Pickavance 5.
58
See, e.g. D Bell and D Blanchflower (2011), ‘Young People and the Great Recession’, Oxford Review of Economic Policy, 27(2); W
Aruampalan, A. Booth and M. Taylor (2000), ‘Unemployment Persistence’, Oxford Economic Papers 52.
59
Consultation 13.
60
Pickavance 13.
61
D Autor and S Houseman, ‘Do Temporary-Help Jobs Improve Labour Market Outcomes for Low-Skilled Workers? Evidence from “Work
First”’ (2010) American Economic Journal: Applied Economics 2.
22 Conditions of Work and Employment Series No. 101
ladders that normally allow people to progress through the ranks of an organisation.
62
Thus, it is not
unambiguously clear that zero-hours contracts necessarily have a positive effect on future labour market
prospects.
With the difficulty of the counterfactual point raised, we now turn to a detailed discussion of the benefits
and costs of zero hours work arrangements for workers, businesses, and society at large.
b. Workers
Zero-hours work arrangements are simultaneously lauded as good and bad for workers. On the positive
side, employment on zero hours work arrangements is argued to reflect a ‘preference for flexibility’
amongst students, older workers, and women with care giving responsibilities. Further, as mentioned
above, employment on a zero hours contract might be better than no employment at all. However, workers
are subject to much greater income risk on these contracts and face greater uncertainty over the scope of
their employment rights. Difficult questions also arise in relation to the social security system, particular
as part of the on-going shift to the so-called Universal Credit (‘UC’) system, and broader issues from
work-life balance to worker health.
i. Flexibility?
In principle, zero-hours arrangements allow individuals a greater say over when and how much they
work. In theory they permit, for example, students to fit in paid employment while studying and allow
women to work around childcare duties. There is evidence that a preference for flexibility is relevant for
some workers. For example, a CIPD study suggested that 47% of workers were ‘very satisfied’ or
‘satisfied’ with having no guaranteed hours.
63
Interview responses to a Resolution Foundation study in
2013 also suggested that certain types of workers valued these work arrangements, whilst acknowledging
that they would not suit everyone:
“I really value the flexibility of working on zero hours because it allows me to fit
other things into my life and if I don’t get enough hours one week I can always
make them up the next by taking on more. I can see that for families with a
mortgage the situation would be seriously nerve wracking and of course I have to
trust my line manager to deliver those hours and that’s far from ideal but it has
worked for me so far.”
(Male domiciliary care worker, Edinburgh)
64
However, it is important to note that flexibility is not a universally valued characteristic. In the CIPD
study quoted above, 27% reported that they were ‘very dissatisfied’ or ‘dissatisfied’ with having no
guaranteed hours.
65
Recent academic evidence also suggests that the great majority of workers do not
value flexible working arrangements; most workers are not willing to pay for flexible scheduling and
traditional Monday-Friday 9-5pm schedules are preferred by most job seekers.
66
There is also some uncertainty as to the extent to which zero-hours work is genuinely flexible for workers.
Acas argues that the problem of “effective exclusivity clauses” is a “very major concern”.
67
Their
experience suggests that workers are often frightened to turn down work in case their employer starts
‘zeroing in’ on their hours. They conclude that these anxieties “reflect the imbalance of power between
the worker and the employer in these contractual arrangements as workers are also fearful of raising
62
Pickavance 12.
63
CIPD, Labour Market Outlook 2013.
64
Matter of Time 16.
65
CIPD, Labour Market Outlook 2013.
66
A Mas and A Pallais, ‘Valuing Alternative Work Arrangements’, Working Paper.
67
Acas, ‘Give and take? Unravelling the true nature of zero-hours contracts’ (2014) Acas Policy Disucssion Papers.
Conditions of Work and Employment Series No. 101 23
queries regarding their rights and entitlements.”
68
A union representative interviewed as part of a wider
study of zero-hours contracts in the UK retail sector explains that:
69
“People will do their utmost to do the extra hours and will allow themselves to be
bullied into working days they don’t really want to work or shifts that they don’t
really want to work. A lot of them are actually struggling to get childcare in place
and things because they are terrified of not getting any more shifts and being stuck
with this three-and-a-half or seven hours a week, which they’ve gotta live on . . .
so I’ve known managers to say, ‘look if you don’t do the shift tomorrow, I won’t
offer you any more’.
The power that schedule flexibility places in the hands of managers is an emerging theme from the
academic and media coverage. One university academic comments that: “The whole thing is completely
dependent on my relationship with the course leader. If the course leader changed, I could lose it all.”
These arrangements thus contribute to employment relationships based upon ‘grace and favour’, which
involve ‘ingratiating yourself to be given teaching the next year’.
70
Giving evidence to a Parliamentary
Inquiry into the use of zero-hours contracts at a UK retail firm, Steve Turner, the Assistant General
Secretary at Unite the Union argues:
“It is not just about insecurity. It is also about no guarantee on hours, giving
absolute control to the employer […] There is no process; there is no access to
justice. Even though on paper you may be regarded as an employee and able to
access, if indeed you can afford it, the employment tribunal system, the reality is,
for most zero-hour workers and short-hour workers, you are simply denied work if
you raise a grievance or raise a concern with your employer.”
71
The characterisation of zero hours work arrangements as flexible, casual arrangements is also challenged
by their permanency over time. As discussed in Section 2, many zero hours workers have been in their
position for years and describe their job as permanent and full-time. Reports by the Resolution Foundation
and Acas challenge the notion of zero hours contracts as always corresponding to typical notions of causal
work. On the basis of analysis of calls to their helpline and independent research, Acas concludes that:
“Any casualisation may, therefore, says as much about the specific terms of their contract and the way
they are being used, rather than the nature of the work itself or hours worked.”
72
ii. IncomeandSocialSecurity
Variation in hours translates directly into variations in pay for zero-hours contract workers. This is likely
to be a particular challenge for workers who rely on such work for their main source of income, especially
given the low rates of pay associated with such jobs. Forty percent of respondents to the CIPD study had
‘no notice’ when no further work was available from their employer’.
73
This understandably causes
budgeting difficulties for some workers as described in interview responses to a Resolution Foundation
study:
74
“Many of my colleagues who are raising families have got into serious debt from
working on zero-hours contract because they cannot be sure what they’ll get in
each month. Those who’ve avoided debt have done so by living with parents,
drawing on savings, having redundancy pay from previous jobs to fall back on or
68
Acas, ‘Give and take? Unravelling the true nature of zero-hours contracts’ (2014) Acas Policy Disucssion Papers 7.
69
A Wood, ‘Flexible scheduling, degradation of job quality and barriers to collective voice’ (2016) 69 Human Relations 1998.
70
H Swain ‘Zero hours in Universities’ 16/09/2013 The Guardian. Accessed on 7/5/2017.
https://www.theguardian.com/education/2013/sep/16/zero-hours-contracts-at-universities
71
55 Third Report of Session 2016–17, HC 219, 7.
72
Acas (n 68) 4.
73
CIPD, Labour Market Outlook 2013.
74
Matter of Time 17.
24 Conditions of Work and Employment Series No. 101
because mortgage costs are currently low. The housing round here is cheap but
lots of people on these contracts wouldn’t be able to survive without family
support”.
(Female FE lecturer, Bradford)
“You have to be really careful with money. I try to save to cover the possibility
that my hours will be low one week but it’s hard as the pay isn’t fantastic to start
with.”
(Male support worker, Brighton)
Tax. Unlike self-employment, zero-hours contracts are not treated preferentially by the UK tax system.
75
However, income variation week-to-week can nonetheless mean that zero hours workers pay more tax
than otherwise identical workers on fixed hours contracts. In 2017/18, the first £11,500 of income is tax-
free. The basic rate of income tax is 20% and paid on income from £11,501 to £45,000. In addition,
employed individuals pay (Class 1) National Insurance Contributions of 12% on weekly earnings of
£157-866. One potential disadvantage for zero-hours workers is the fact that NICs contributions depend
on weekly pay. Thus, even if a worker earns less than £7,500 per year, they will must pay 12% NICs in
any weeks that their earnings exceed £157.
To illustrate the relevance of the NICs thresholds for zero-hours workers, consider two workers A and B
paid on a weekly basis at the national minimum wage (£7.50 per hour). A is employed on a fixed-hours
contract for 20 hours a week, whilst B is employed on a zero-hours contract. B alternately works 30 hour
and 10 hour weeks, resulting in a weekly wage of £225 and £75 respectively. In contrast, Person A gets
paid a consistent £150 every week, keeping her below the primary threshold. While both A and B work
1,040 hours per year for the same wage, person B will find herself receiving £700 net less than person A
annually, as she will be liable to NICs due to her sporadic income, whilst B—with her regular, fixed pay
packet—will pay none.
Income Support. Given the financial precarity of zero-hours contracts it is not surprising that they are
more likely to be in receipt of government benefits. Thirty percent of zero-hours workers are in receipt
of government benefits compared to 25% of workers on other types of contracts.
76
They are
approximately 25% more likely to be claiming tax credits compared to workers employed on other types
of contract.
77
Work related benefit payments to zero hours contract workers typically come in one of three
forms: tax credits, income-based job seekers allowance (JSA) or universal credit. Universal credit (UC)
is a single monthly payment for people in and out of work that will eventually replace many of the current
benefits that target those with low incomes or who are out of work. As the roll-out of UC is expected to
take until at least March 2022, we describe the interaction of zero hours work and the benefit system
under both the pre-UC and UC regimes.
Under the pre-UC system, zero hours workers can face additional hurdles to claiming benefits because of
the lack of guaranteed hours. To claim income-based JSA, an individual must not be in paid employment
for more than 16 hours per week.
78
To claim tax credits, individuals must work between 16 and 30 hours
a week depending on their circumstances.
79
When hours vary week-to-week, the average hours over the
five weeks prior to making a claim are used as the basis for benefit entitlement. Significant variation in
hours may therefore require ZHC workers to repeatedly send evidence to the Tax Credit office, and
perhaps switch between JSA and tax credits or risk benefit overpayment and the risk of sanctions. A case
described by the Citizens Advice Bureau describes such a situation:
75
A Adams, J Freedman and J Prassl (2016), Different Ways of Working (Oxford 2016).
76
See analysis in Section 2.
77
Analysis of the LFS shows that 12% of ZHC workers claimed tax credits compared to 7.9% of workers on other contracts.
78
https://www.gov.uk/jobseekers-allowance/what-type-you-get
79
https://www.gov.uk/working-tax-credit/eligibility
Conditions of Work and Employment Series No. 101 25
“Our client works for an agency and has a zero hours contract. Initially he was
provided with 5 days work per week but this has decreased and recently he has been
offered anything from 2 days to 4 days per week. This has played havoc with his
benefit situation. He receives working tax credit if he works 4 or 5 days but not if he
works 2 or 3. His housing benefit claim is also constantly changing. Unless he gets
4 or 5 days work he is worse off in employment than when he is not working at all.
He says he has been told by the Job Centre Plus that if he leaves his job he will be
sanctioned for 6 months.”
80
The Universal Credit system will replace six different benefits with a single monthly payment. It is
designed to be more responsive to changes in earnings, using real time information from employer
payrolls, and is not associated with weekly hours worked limits. The level of payment is determined by
earnings in the previous month. While this streamlined process is considered more efficient, there is a
concern that benefit payments might fall short for workers with highly variable hours and volatile monthly
earnings. While the hope is that hours variation will net out over a month, there is currently not
sufficiently detailed statistics to know if this is in fact for the case for the average zero hours contract
workers on benefits.
As UC benefit payments are conditioned on income some of the difficulties noted with the current Tax
Credit system are avoided. However, while there are no hours thresholds with UC, individuals must
accept a ‘Claimant Commitment’. This commitment is drawn up alongside a ‘work coach’ at the local
job centre. It requires unemployed individuals to set out how they will transition into work and, for low
income individuals in work, it must present a plan for them to increase their earnings.
81
UC benefits can be cut, by hundreds of pounds a month for up to three years, if claimants do not meet
their responsibilities. This is referred to as a ‘sanction’. Unemployed individuals, or those working part
time, can face sanctions for failing to accept zero hours work. In 2014, Esther McVey MP, then Minister
for Employment, stated benefits could be cut for failing to accept zero-hours work:
“We believe that jobseekers on any benefit should do all they reasonable can
to get into paid employment….We do not consider zero hours contracts to
be – by default – unsuitable jobs. …So in Universal Credit our coaches can
mandate zero hours contracts.”
82
(Minister for Employment, 2014)
Those currently in-employment on zero hours work arrangements have also raised difficulties with the
UC system. A cross university study, funded by the UK Economic and Social Research Council, notes
that the inflexibility of the current system creates challenges for those on ZHCs. Appointments with work
coaches can rarely be changed to accommodate varying work schedules. A mismatch between work coach
expectations and the reality of contemporary workplaces is also said to generate unrealistic expectations
of the hours and income that individuals can expect to make under zero hours arrangements.
83
“I was working at the time...it was something like: ‘we're going to charge you £10 a
day for seven days’ and I said, 'What, you're going to fine me £70 for missing an
appointment that I couldn't even ring you to tell you that I'd be late?’
(UC recipient)
80
Citizens Advice Bureau, Press Release: Citizens Advice Bureau warns on zero hours contracts, 2013
https://www.citizensadvice.org.uk/about-us/how-citizens-advice-works/media/press-releases/citizens-advice-warns-on-zero-hours-contracts/
81
https://www.gov.uk/universal-credit/overview
82
Letter from Esther McVey MP to Sheila Gilmore MP, 1
st
March 2014.
http://web.archive.org/web/20140506090500/http:/www.sheilagilmore.co.uk/wp-
content/uploads/2014/03/GILM0200202140092020020092.pdf
83
Welfare Conditionality Project, Written evidence from the Welfare Conditionality Project: Sanctions, Support and Behaviour Change;
Submission to Work and Pensions Select Committee Inquiry, Jan 2016 http://www.welfareconditionality.ac.uk/wp-
content/uploads/2016/07/Commons-Work-Pensions-Cttee-UC-Inquiry.pdf
26 Conditions of Work and Employment Series No. 101
Sanctions are regularly applied in the context of the UK benefit system and thus the concerns above are
not ‘academic’. As sanction statistics are not yet published for UC, we give the figures for JSA to provide
some context. 800,000 individuals were referred for benefit sanctions relating to out-of-work and low
income benefits in 2015.
84
24% of all JSA claimants were sanctioned between 2010 and 2015. Eleven to
26% of JSA sanctions were overturned when challenged. The only statistics currently available about UC
sanctions relates to the long waiting time for decisions on sanctions being overturned: 42% of UC referrals
took longer than a month in 2015.
Pensions Since 2012, UK employers have had a duty to automatically enrol eligible workers into a
pension and make contributions towards the scheme in a bid to encourage individuals to save more for
retirement. Automatic enrolment duties apply to those aged 22 years to state pension age who are paid
through payroll and earn over £192 per week or £833 a month. These duties also apply to zero-hours
workers so long as they meet the earnings threshold.
However, Government guidance suggests that there is some confusion amongst firms as to their duties
for workers whose pay fluctuates around the relevant thresholds.
85
Even if a zero-hours worker earns less
than the annual threshold, the relevant pay reference period is usually held to be a week for such
workers.
86
The first time that a worker earns more than £192 in a week, they should be auto-enrolled.
Only when the worker’s earnings fall below £113 a week are employers not required to contribute.
87
There is also the potential for employers to postpone automatic enrolment is they anticipate that a worker
will be on payroll for less than 3 months. However, zero-hours workers must be enrolled once that three
month period has ended.
iii. LegalImplications
In 2013, the UK government asserted that Zero-Hours Contracts ‘are legal under domestic law. If they
are freely entered into, a zero hours contract is a legitimate form of contract between individual and
employer.’
88
The heterogeneity in zero-hours work models we have seen thus far presents a significant
challenge to this statement. In a strict technical sense, the arrangements will of course be legal, in so far
as they do not contravene the (rather generous) limitations of freedom of contract found in doctrines such
as illegality: the arrangements do not involve contracts involving the commission of a legal wrong,
89
or
contracts contrary to public policy.
90
On the other hand, it is deeply problematic to suggest that they
represent a singular form of contract: instead, a rather a wide variety along a broad spectrum of contracts
can be observed.
91
Mutuality and the Global Contract of Employment. The legal institution of the contract is central to
English employment law.
92
Through the dramatic increase of legislative activity in the labour market
from the second half of the twentieth century onwards,
93
contract has become they key legal relationship
which confers an externally defined employment status on its parties. This latter function as a gateway to
statutory rights and duties is illustrated in the interpretative provisions of the Employment Rights Act
1996, which simply provide that ‘“employee” means an individual who has entered into or works under
84
National Audit Office, Benefit Sanctions Report, November 2016. https://www.nao.org.uk/report/benefit-sanctions/
85
Pensions Regulator, Automatic Enrolment: Compliance and Enforcement: Quarterly Bulletin 1 Aril-30 June 2015.
86
Pensions Regulator, Detailed Guidance 75.
87
Pensions Regulator, Employing staff on irregular hours or incomes http://www.thepensionsregulator.gov.uk/employing-staff-on-irregular-
hours-or-incomes.aspx#s20802
88
Consultation 13.
89
E Peel, Treitel’s Law of Contract (13
th
ed, Sweet & Maxwell 2011) [11-011] ff.
90
ibid [11-032]ff. See also Deakin and Morris (n 2) 156-159.
91
See A Adams, M Freedland and J Prassl, ‘The Zero Hours Contract: Regulating Casual Work or Legitimating Precarity’ (2015) Giornale di
Diritto del Lavoro e di Relazioni Industriali 529.
92
M Freedland, The Contract of Employment (OUP 1976); J Prassl, ‘The Notion of the Employer’ (2013) 129 LQR 380, 381-382.
93
S Deakin, ‘The Evolution of the Contract of Employment, 1900 to 1950 - the Influence of the Welfare State’ in N Whiteside and R Salais
(eds), Governance, Industry and Labour Markets in Britain and France - The Modernising State in the Mid-Twentieth Century (Routledge
1998) 225.
Conditions of Work and Employment Series No. 101 27
[…] a contract of employment.’
94
Large parts of the British system of labour market regulation are thus
designed to hinge on this status, the definition of which is left to the common law.
95
Over more than a century, a considerable amount of case law and scholarship has built up to develop,
adapt and refine a series of common law tests to determine on which side of the ‘binary divide’ or the
more recent tri-partite scheme of employees, workers and the self-employment any given individual
should fall.
96
Under the prevailing common law tests, zero-hours arrangements could lead to a series of
different classifications – and thus degrees of statutory protection – including certain scenarios which fall
completely outside the scope of employment protective norms.
The primary reason behind this is the requirement of mutuality of obligation.
97
In Nethermere v Gardiner,
Dillon LJ summarised earlier case law and suggested
that there is one sine qua non which can firmly be identified as an essential of the
existence of a contract of service and that is that there must be mutual obligations on the
employer to provide work for the employee and on the employee to perform work for the
employer. If such mutuality is not present, then either there is no contract at all or
whatever contract there is must be a contract for services or something else, but not a
contract of service.
98
It is often assumed that mutuality of obligation has thus become a significant hurdle in establishing such
a relationship, either by denying a ‘global’ or ‘umbrella’ contract necessary to clear statutory temporal
qualification thresholds, or by attacking the very classification of the work undertaken as employment
due to the absence of future commitments.
99
Upon closer inspection, however, that concept, whilst continuing to be problematic, is frequently in much
less aggressive use than may be presumed from an initial reading of these leading cases. Lord Hoffmann
in Carmichael, for example, warned that ‘in a case in which the terms of the contract are based upon
conduct and conversations as well as letters’ the Courts should not ignore evidence of the reality of what
happened between the parties.
100
Indeed, even O’Kelly itself could be characterised as a misinterpretation
of the earlier decision in Nethermere,
101
driven primarily by jurisdictional questions about the
reviewability of the industrial tribunal’s findings.
102
It is unsurprising therefore that in the more recent decision in Cotswold Developments v Williams,
Langstaff J (as he then was) expressed his concern that Tribunals may
have misunderstood something further which characterises the application of “mutuality
of obligation” in the sense of the wage/work bargain. That is that it does not deprive an
overriding contract of such mutual obligations that the employee has the right to refuse
work. Nor does it do so where the employer may exercise a choice to withhold work. The
focus must be upon whether or not there is some obligation upon an individual to work,
and some obligation upon the other party to provide or pay for it.
103
94
ERA 1996, s 230(1).
95
The same is true for the more recent notion of the worker: ibid, s 230(3).
96
For a full overview, see Deakin and Morris (n 2) 145ff.
97
ibid 164-8. Though cf now N Countouris ‘Uses and Misuses of “Mutuality of Obligations” and the Autonomy of Labour Law’ in A Bogg, C
Costello, A Davies and J Prassl, The Autonomy of Labour Law (forthcoming Hart 2014).
98
Nethermere (St Neots) Ltd v Gardiner [1984] ICR 612 (CA) 632F–G.
99
Deakin and Morris (n 2) 165.
100
Carmichael v National Power Plc [1999] UKHL 47, [1999] 1 WLR 2042, 2050G. See also O’Kelly v Trusthouse Forte Plc [1984] QB 90
(CA).
101
Where ‘evidence of the absence of any strict legal obligation to offer or carry out homeworking was countered by an evaluation of the
practice of the parties which had evolved over a period of time’: P Leighton, ‘Employment Status and the “Casual Worker”’ (1984) 13 ILJ 62,
65.
102
See further H Collins, ‘Employment Rights of Casual Workers’ (2000) 29 ILJ 73, 75.
103
Cotswolds Developments Construction Ltd v Williams [2006] IRLR 181 (EAT) [55].
28 Conditions of Work and Employment Series No. 101
This sensitivity of the mutuality of obligation criterion to a wide range of factual variation can be seen in
operation in the EAT’s decision in St Ives, which found that whilst the work had been characterised
contractually as a zero-hours arrangement, there ‘were mutual obligations subsisting between the
employer and the employee during periods when the employee, a casual worker, was not actually engaged
on any particular shift’.
104
This was primarily due to the tribunal’s findings of a long and well-established
regular work pattern, with the employer on one occasion even taking disciplinary action against the casual
worker’s violation of that pattern.
105
As Elias J (as he then was) noted, ‘a course of dealing, even in
circumstances where the casual is entitled to refuse any particular shift, may in principle be capable of
giving rise to mutual legal obligations in the periods when no work is provided.’
106
Even through an application of the mutuality of obligation test for employment status, it is therefore
entirely possible that an individual working under a zero-hours contract could be classified as an
employee under section 230 ERA. Such an outcome, however, would be heavily dependent on the precise
facts of each individual case. It would, furthermore, and somewhat counter-intuitively, be dependent on
level of precarity in any one work setting: the less stable or secure the arrangement, the higher the chance
that it would fail to be classified as a contract of employment.
Workers’ Contracts and Sham Arrangements. Where a zero-hours contract worker is found not to be
working under a contract of employment, there remains a secondary gateway into (a smaller set of) basic
employment rights. Statutory employment law has reacted to the increasing heterogeneity of work through
a proliferation of additional categories,
107
including notably the worker concept in the sense of section
230(3) ERA, introduced in order to broaden the scope of basic labour standards.
108
The leading dicta on the interpretation of this status can be found in Byrne Bros v Baird,
109
a decision in
the context of the Working Time Regulations 1998.
110
Recorder Underhill QC suggested that the
difference between the statuses of employee and worker was to be understood as one of degree, not kind:
Drawing the distinction in any particular case will involve all or most of the same
considerations as arise in drawing the distinction between a contract of service and a
contract for services – but with the boundary pushed further in the putative worker’s
favour. […] Cases which failed to reach the mark necessary to qualify for protection as
employees might nevertheless do so as workers.
111
Within the wide spectrum of possible factual scenarios, mutuality of obligation will therefore clearly not
prove fatal for all claimants working under Zero-Hours Contracts seeking to rely on their statutory rights.
Even those not found to be working under a contract of employment will frequently be able to have
recourse to at least the set of rights protected under a worker’s contract.
112
The discussion thus far, however, has omitted one particular factual scenario, viz where employers have
begun to react to the changing legal landscape of worker protection,
113
and inserted explicit ‘no mutual
104
St Ives Plymouth Ltd v Mrs D Haggerty [2008] WL 2148113 [1], [33].
105
ibid [9].
106
ibid [26].
107
For an extended discussion of employment status in English law, see J Prassl, ‘Employee Shareholder “Status”: Dismantling the Contract
of Employment’ (2013) 42 ILJ 307, 326ff, on which parts of the present discussion draw.
108
Workers are there defined as those working (a) under a contract of employment or (b) any other contract […] whereby the
individual undertakes to do or perform personally any or work or services for another party to the contract […].
109
Byrne Bros (Formwork) Ltd v Bard and others [2002] ICR 667 (EAT). This case was approved in its basic approach by the
Court of Appeal in Redrow Homes (Yorkshire) Ltd v Wright [2004] EWCA Civ 469, [2004] ICR 1126 (though with some
reservations as regards the overall purposiveness of the approach to be taken: [21]).
110
Working Time Regulations 1998, SI 1998/1833. The worker definition can be found in reg 2(1).
111
Byrne (n 109) [17].
112
Including notably the Working Time Regulations 1998 (n 110) and the National Minimum Wage Act 1998. This position has
been thrown in doubt by some of the most recent cases in this area, as discussed extensively in J Prassl, ‘Who is a Worker’
(2017) 133 LQR (forthcoming).
113
Stevedoring and Haulage Services v Fuller [2001] IRLR 627 (CA).
Conditions of Work and Employment Series No. 101 29
obligations’ clauses into standard form contracts with Zero-Hours workers. This appeared for a while to
be able successfully to deny any employment status, because ‘[s]o long as a document is clearly detailed,
drafted and the worker signs freely […] it seem[ed] unlikely that employee status can be successfully
asserted by the worker.’
114
Today, however, this technique may no longer be successful, especially in the case of zero-hours clauses.
In Autoclenz, the Supreme Court famously addressed the issue of such explicit clauses (including ‘no-
mutuality’ terms), and suggested that in case of any deviation in practice from a written Zero-Hours
clause, effect could be given to the parties’ ‘actual legal obligations’.
115
This was in large part due to the
realisation of the relational inequality inherent in ‘the relative bargaining power of the parties’,
116
which
will be particularly stark in the sort of precarious work arrangements identified in the previous section.
As Bogg has noted, ‘[w]here there is other relevant evidence that the ‘real agreement’ differed from the
signed contract, for example the subsequent conduct of the parties, the court will evaluate that evidence
and determine what was agreed.’
117
This approach can be illustrated in the recent decision of the EAT in
Pulse Healthcare, where a preliminary question as to Zero-Hours Contract workers’ employment status
arose in the context of the transfer of an undertaking. The claimant care workers had provided intensive
medical support under a ‘Zero-Hours Contract Agreement’ which ‘the Employment Judge was […]
entirely justified in saying […] did not reflect the true agreement between the parties.’
118
The work
arrangement in question was from the outset or had over time become one in which the parties are subject
to some degree of continuing mutual obligation with regard to the provision of work and the doing of
work as offered. ‘The mere fact that an employee can object to rostered hours [… did] not mean there is
no mutuality of employment.’
119
This line of cases is of course to be welcomed, as it ensures that a further cluster of zero-hours work
arrangements is brought within the scope of statutory employment protection. At the same time, however,
it is important not to overstate its potential, and to note its high degree of fact-specificity, and thus
diversity of potential solutions: the finding of an Autoclenz-style sham will again be directly dependent
on the level of precarity in any one work setting: the ‘no mutuality’ clause will only be disregarded if the
relationship on the ground did in fact have a stable and permanent character.
The Individual Wage/Work Bargain. The final potential set or cluster of cases to be evaluated, then, are
those situations where a zero-hours clause and corresponding working arrangement have in fact denied
the existence of a global or umbrella contract. It is clear today that even in such scenarios, the courts will
at least find the presence of a contract of employment in place during each period of work.
120
This
assertion might at first sight contradict the already-discussed decision in O’Kelly.
121
Subsequently,
however, Lord Hoffmann in Carmichael saw no problem with each individual wage-work bargain
constituting a contract, which could be classified as one of service: ‘it may well be that, when performing
[…] work, [the casual tour guides] were being employed.’
122
A short-term contract is frequently in place between the parties, and there is nothing in principle to stop
it from being characterised as a contract of employment; indeed, the Court of Appeal so found in
McMeechan.
123
Mutuality of Obligation similarly does not stand in the way of such a finding: as Elias J
(as he then was) suggested in Delphi Diesel, ‘The question of mutuality of obligation, however, poses no
difficulties during the period when the individual is actually working. For the period of such employment
a contract must, in our view, clearly exist. […] This is so, even if the contract is terminable on either side
114
P Leighton, ‘Problems Continue for Zero-Hours Workers’ (2002) 31 ILJ 71, 74.
115
Autoclenz Ltd v Belcher [2011] UKSC 41, [2011] 4 All ER 745 [32].
116
ibid [35].
117
A Bogg, ‘Sham Self-Employment in the Supreme Court’ [2012] 41 ILJ 328, 333.
118
Pulse Healthcare Ltd v Carewatch Care Services Ltd [2012] UKEAT 0123/12/BA [35].
119
ibid [38].
120
cf the notion of formation by conduct, Freedland (n 92) 10ff.
121
Though cf Ackner LJ’s dissent: O’Kelly (n 100) 118H; 127B.
122
Carmichael (n 100) 2051C.
123
McMeechan v Secretary of State for Employment [1996] EWCA Civ 1166, [1997] IRLR 353.
30 Conditions of Work and Employment Series No. 101
at will. […] The only question then is whether there is sufficient control to give rise to a conclusion that
the contractual relationship which does exist is one of a contract of service or not’
124
Each incidence of actual work might thus be regarded as taking place under the legal form of a miniscule
contract of employment or miniscule ‘worker’s contract’. In the absence of an over-arching contract to
join up those dots, however, the worker-protective consequence of such a series of contracts has been
said to be ‘illusionary’.
125
One example of this possibility are the provisions of the National Minimum
Wage Act of 1998, Regulation 3(1) of which stipulates that onsite availability should be counted as
working hours. This was seen as a solution to ‘one of the issues raised by an alleged abuse of the labour
market, the “zero hour contract” under which the worker is required to be on site available for work, but
only paid when actually working’:
126
in the Burger King scenario set out in the previous section, for
example, payment could not be limited to moments actually worked whilst a worker is behind the
counter.
127
The provisions nonetheless only address one part of the larger problem: if Zero-Hours
Contract workers are asked to turn up, but then not offered any work for that day, their time will not be
counted under the National Minimum Wage Act provisions, even though the worker may have already
expended effort and incurred significant cost, from transportation to arranging child care.
The suggestion put forward by Wynn and Leighton that the courts’ ‘commercial reasoning if applied to
contracts of zero-hours and intermittent workers would result in the denial of any contractual obligations
at all’,
128
is thus perhaps too stark an analysis. As courts at all levels are increasingly becoming aware of
the fact that mutuality of obligation may be a ‘red herring [which] hinders the tribunals from asking the
relevant legal questions’,
129
various clusters of zero-hours contracts can be analysed under traditional
models, representing different points on a spectrum of casual work arrangements, from global or
intermittent contracts of employment subject to varying degrees of employment protective norms to spot
contracts for labour, which are much more difficult to classify under existing structures. At the same time,
however, courts are still ‘often caught between a rock and a hard place’,
130
as the considerable
opportunities for bringing a number of workers within the scope of employment protective regulation are
but some of the points on a vast and complex fact-dependent spectrum. In law, as in fact, then, there is
no such thing as the zero-hours contract.
In terms of legal questions, therefore, by far the most problematic technical issues arise from the fact that
ZHC arrangements are in their nature apt to fall outside the worker-protective scope of key statutory
employment right. The main legal problem identified by the government, on the other hand, relates to so-
called exclusivity clauses. These are provisions in zero-hours contracts or arrangements whereby the
worker undertakes to work exclusively for the employer in question. We return to a discussion of
legislative action taken on exclusivity clauses in Section 4.
iv. OtherFactors
In addition to these legal and income concerns, work under zero-hours arrangements might also have
important implications for workers’ career development, health and personal security. For example, a
lack of training has been cited as a problem facing zero hours contract workers. This finds support in
evidence from the LFS in which zero hours contract workers are 20% less likely to have been offered
124
Stephenson v Delphi Diesel Systems Ltd [2003] ICR 471 (EAT) [13]-[14].
125
Such as for example the annual leave rights in the Working Time Directive: C Barnard, ‘The Working Time Regulations 1998’ (1999) 28
ILJ 61, 62. Though cf now Case C-173/99 R v Department of Trade and Industry (ex parte BECTU) [2001] 3 CML Rev 7.
126
B Simpson, ‘The National Minimum Wage Act 1998’ (1999) 28 ILJ 1, 17.
127
Clement (n 28).
128
M Wynn and P Leighton, ‘Agency Workers, Employment Rights and the Ebb and Flow of Freedom of Contract’ (2009) 72 MLR 91, 98,
make an excellent comparison with Baird Textiles Holdings Ltd v Marks & Spencer plc [2001] EWCA Civ 274 (commercial dealings could be
stopped without notice, as there was no ‘framework’ or ‘umbrella’ contract in place).
129
Collins (n 102) 74.
130
H Collins, ‘Book Review: D McCann Regulating Flexible Work (Oxford, OUP 2008)’ 2009 (72) MLR 141, 143.
Conditions of Work and Employment Series No. 101 31
training by their employer.
131
When offered, it is more likely that zero-hours workers have to pay for
training than other workers.
132
On the basis of 39 semi-structured interviews and participant observation, research at a large retail firm
in the UK suggested that ZHCs could be ‘highly damaging to the work/life balance of employees. It has
a negative impact on family life, caring responsibilities and personal relationships … The anxiety and
insecurity that result, both personal and economic, lead to high levels of stress which are detrimental to
health’
133
Professor Sir Michael Marmot who led a government review into health inequalities, links
stress directly to a lack of control that people experience over their working lives. Mental illness,
metabolic syndrome, and cardiovascular disease are all directly linked to workplace insecurity in the
review.
134
Beyond the difficulty of managing a fluctuating income and hours, relying on zero hours arrangements
as a main job can be a barrier to renting properties and being approved for loans and mortgages. The
Citizens Advice Bureau comments that many ZHC workers find it difficult to rent in the private sector
because landlords and agencies regard them as at risk of rent default if they have no guaranteed income.
A number of banks only consider ZHCs as ‘secondary income’, meaning that it is discounted by 50%,
and typically require a longer track record of between 1-3 years as evidence of income.
Finally, in contrast to the family-friendly picture painted in some portrayals of zero hours work, some
workers cite the difficulties that such arrangements pose for childcare and managing family
commitments. Some of those interviewed by the Resolution Foundation, for example, cited a difficulty
in managing their work-life balance and arranging childcare at short notice.
135
c. Business
For employers, there are also costs and benefits to employing individuals on zero hours arrangements.
From the employer perspective, the key benefit of zero-hours arrangements relates to their flexibility,
which enables firms to limit wage costs and overheads. According to the 2013 Government Consultation,
zero hours work arrangements ‘allow businesses to hire staff while being able to adapt to changes in
demand, for example offering more work when new orders arrive and being able to scale back when they
do not.’
136
Further cost savings might also be achieved through the avoidance of employment law,
including unfair dismissal protection and rights to maternity pay, as detailed above.
In discussions of the benefits of zero-hours arrangements, the relevant comparator group referenced is
often agency workers rather than permanent employees at the same firm. For example, in the UK
Government consultation document, it is argued that ZHCs enable businesses to ‘retain a pool of trained
and skilled staff, who know the culture of the businesses and its procedures, rather than agency staff who
may not.’
137
The Association of Colleges in evidence to the consultation notes that zero-hours
arrangements facilitate ‘greater consistency of teaching and learning compared to agency workers.’
138
The Resolution Foundation suggest that there is some evidence of firms substituting agency staff for zero
hours arrangements as a means of avoiding agency fees and the 2010 Agency Workers Regulations (SI
2010/93) that implements the 2008 European Union Temporary Worker Directive (2008/104/EC).
139
The
significance of this channel is unclear, however, given that zero hours contracts are often used alongside
agency staff (see Section 2) – 10% of agency workers are on a zero hours contract.
131
Authors’ calculations from the LFS.
132
Pickavance 6
133
A Wood, B Burchell, A Coutts, From Zero Joy to Zero Stress: Making Flexible Scheduling Work (Cambridge 2016) 6.
134
M Marmot, Fair society, healthy lives: the Marmot Review : strategic review of health inequalities in England post-2010 (London, 2010).
135
Matter of Time 17.
136
Consultation 12.
137
Ibid.
138
BIS, Zero Hours Employment Contracts - Impact Assessment (2013), 6.
139
Matter of Time.
32 Conditions of Work and Employment Series No. 101
The potential cost savings arising from the use of ZHC must, however, be weighed against potential
downsides, including notably a lack of worker availability, and broader questions of worker retention,
control and investment in firm-specific human capital. Since the ban on exclusivity clauses, employers
cannot contractually prevent ZHC workers from getting work elsewhere. This can leave employers
exposed to labour shortages and unable to meet demand in situations where the zero-hours model is
genuinely two-sided. The significance of this factor will vary across time, industries, and regions
depending on the tightness of the local labour market. A ready availability of large pools of workers with
few alternative prospects is thus the ideal setting for the use of ZHCs. This helps explain a recurring
theme in interviews conducted by the Resolution Foundation that where ‘alternative prospects for
standard forms of employment are small, zero-hours contracts have become ubiquitous.’
140
However, the
risk of worker shortfall might also be mitigated by ‘effective exclusivity’, in which employer sanctions
for not accepting work as discussed above.
In many jobs, both the firm and worker must invest for the employment relationship to be as profitable
as possible. It takes time and energy for workers to become competent and efficient at the task in hand.
It is costly for firms to train staff and devote time to getting new workers up to speed. As investment is
costly, each party must expect the employment relationship to persist for it to be worth their while. As
zero-hours contracts often undermine the commitment to a long-term relationship, investment in firm-
specific human capital might be inefficiently low under such arrangements, reducing workforce
productivity. There is some evidence that zero hours work is associated with lower training. In the LFS
in Q4 2016, zero hours workers were over 20% less likely to have experienced training than those on
other types of contracts. Qualitative research also supports this theme:
141
“People come and go quickly and the new girls are always inexperienced and
untrained”
(Female Domiciliary Care Worker, Newcastle)
Finally, zero hours contracts can undermine staff morale and trust, reducing workforce productivity. Zero-
hours workers reference a lack of ‘collaborative spirit’ between staff that can be intensified by perceived
competition for hours amongst workers.
142
Research by Acas also sounds a word of caution about the
potential for ZHCs to ‘erode’ trust if not used in a sufficiently transparent manner.
These costs might explain why some firms publically reject the use of zero hours contracts. A number of
firms have spoken publically about the tension they perceive between high customer service, workforce
productivity, and use of zero hours arrangements (see quotes below). Other firms have put in place
mechanisms to ensure that ZHCs workers are able to transition onto contracts with guaranteed hours if
they desire to. For example, Center Parcs, who employs about 3% of its staff on ZHCs, has an automatic
monitoring system in place so that when an individual has worked at least one hour per week for 13
weeks, they are invited in for a meeting with their line manager to discuss if they should be put on a
contract with fixed minimum hours.
143
140
ibid 15.
141
Matter of Time 19.
142
Ibid.
143
Pickavance 8.
Conditions of Work and Employment Series No. 101 33
d. GovernmentandSociety
We now turn to the costs and benefits of zero hours contracts for society and the Government. The
drawbacks of zero hours contracts for wider society should be clear from the preceding discussion: low
productivity, high stress, and low economic security undermine growth, and thus tax revenues, and can
lead to greater reliance on the benefits and pressures on the healthcare system. Of course, what is the
counterfactual is crucial for attempts to quantify the fiscal impact of zero hours working. For example,
the TUC estimates that zero hours contracts ‘cost’ the government £1.87bn per year through diminished
tax revenues arising from lower pay and higher benefit spending.
144
However, the methodology used in
this study is open to criticism. To come up with this figure it was assumed that all workers on zero hours
contracts could become permanent employees with the same wage distribution that currently
characterises this workforce. This is a very important area for future research.
While the public purse might be hurt by the use of zero-hours contracts, it is important to note that the
Government itself is a user of zero-hours contracts and insecure working arrangements. The on-going
drive to outsource public services to achieve cost savings is argued to have contributed to the use of zero
hours work arrangements in social care and health care.
145
For example, a study by Unison argues that
the growth in zero-hours contracts in the domiciliary care sector might originate with the commissioning
models used by local councils.
146
Local authorities and public service providers are often heavy users of
zero-hours contracts as they attempt to cut running costs to cope with austerity policy.
147
144
TUC, The impact of increased self-employment and insecure work on the public finances (2017) 31.
145
IDS Thomson Reuters, Flexploitation: zero-hours contracts in focus. https://ids.thomsonreuters. com/pay-reward/features-analysis/
flexploitation-zero-hours-contracts-in-focus
146
Unison, Time to Care (2013)
147
LocalGov, The use of zero hours contracts, 12/02/2014. https://www.localgov.co.uk/The-use-of-zero-hours-contracts/35606
“We believe [zero hours contracts] fundamentally don’t belong in a highly engaged
business where our colleagues’ commitment to the business and its goals and vision
are critical… Indeed to help reduce colleague turnover we have adopted a minimum
12 hour contract and are moving to a minimum 16 hour contract in larger stores”
(Sally Hopson, People Director, Pets@Home)
“We don’t offer zero-hours contracts… We feel that short-hours providing flexibility is
a bit of a myth and because we’re an expertise and service-based business, retention
is a big deal for us, hence we’re going for longer hours and a more serious
commitment both ways.”
(Jonathan Crookall, Group People Director, Halfords)
“We [stopped using zero-hours contracts because we] realised we could best serve
our values and our colleagues through more sophisticated rostering of employed staff.
The benefits are really for Barclays as a firm because this has allowed us to deploy
our existing staff more efficiently”
(Lynne Atkin, HR Director, Barclays)
“We don’t use zero-hours contracts. They wouldn’t work well for our business
proposition where it’s important that our people really engage with the brand. For us
it’s about dealing fairly and honestly with people and in return we see that people bring
great commitment and flexibility to their roles”
(Maria Stanford, HR Director, Selfridges)
34 Conditions of Work and Employment Series No. 101
4. PolicyResponses
With increasing awareness of the growth of zero-hours contracts from 2011 onwards came a marked
increase in public discussion of the phenomenon, leading eventually to (limited) legislative intervention.
In this section, we first explore the positions taken by the social partners, before exploring legislative
responses (historical as well as recent) and presenting a case study of Parliament’s response to a
particularly egregious incidence of labour standards violations in warehouses operated by the sports
equipment chain Sports Direct.
a. ThePositionoftheSocialPartners
The prevalence of, and working conditions under, zero-hours arrangements rose to the forefront of public
discussion in the course of 2013. As a result of increasing awareness, particularly in the run-up to an
official government consultation, the social partners published a series of opinions and policy lines on
zero-hours work, which are discussed in this sub-section.
i. TradeUnions
Trade union responses to zero-hours work are unsurprisingly critical. The General Secretary of the Trade
Union Congress, Frances O’Grady, argues that zero-hours contracts allow firms to treat workers like
“disposable labour.”
148
A commitment to ensuring guaranteed hours has now made it onto Unite’s “Fight
for Five” pledge that aims to win decent work for all.
In addition to highlighting the often precarious working conditions and low pay experienced by workers
without guaranteed daily or weekly hours, the difficulties of organising an irregular and dispersed
workforce have also been raised. Data from the LFS in the final quarter of 2016 highlights that only 8%
of zero-hours workers are members of a union compared to 22% of those on other types of contracts.
According to Zoe Williams, “You simply cannot mobilise when you don’t know how many hours you’re
going to get each week. A zero-hours employer wouldn’t even have the decency to victimise you; they
just wouldn’t call you.”
149
However, there are increasing moves to mobilise this workforce. The
University and College’s union launched the ‘Campaign Against Casualisation’ in 2015, calling on higher
education institutions in the UK to eradicate the use of zero-hours contracts.
150
Unite is asking for
feedback on those employed on zero-hours contracts in its “No to Zero” campaign, which aims to pressure
the government to eliminate insecure employment from state contracts as one of its goals.
Unions have attacked the Government consultation for not doing enough to tackle the problems
associated with zero-hours work. The focus on exclusivity clauses emerging from the Government
consultation is seen as “a joke. It misses the key point that zero hours confer fear and misery of those
forced into them – no security, no protection and little dignity.”
151
The TUC, for example, argues that the
“policy proposals outlined in the consultation document fail to meet the government’s stated objective of
‘cracking down on any abuse or exploitation of individuals.’”
152
Unions differ in their preferred policy
agenda. Unite is pushing for a ban zero hours contracts,
153
which they argue is supported by more than
60% of the public.
154
The common platform put forward by the TUC does not advocate a ban on zero-
hours contracts but rather moves to ensure that, among others, all workers receive written terms and
conditions setting out hours expectations, are given sufficient notice of work availability and
148
TUC, Zero-hours contracts allow bosses to treat workers like disposable labour, TUC Press Release 15/03/2017.
149
Even employers decry zero hours contracts. So why are staff still being exploited? Zoe Williams, The Guardian, 09/06/2016
https://www.theguardian.com/commentisfree/2016/jun/09/zero-hours-contracts-staff-exploited-businesses-inequality-workplace
150
UCU, A report on UCU’s campaign against casualization 2015-16 (UCU 2016).
151
Unite statement on zero hours exclusivity (2015) http://www.unitetheunion.org/news/unite-statement-on-zero-hours-exclusivity/
152
TUC, TUC response to BIS consultation (2014) 15.
153
Unite, Unite say no to zero hours contracts,10/5/2017 http://www.unitetheunion.org/campaigning/saynotozerohourscontracts/
154
Unite, Public wants zero hours contracts banned (2016) Unite Press Release.
Conditions of Work and Employment Series No. 101 35
cancellations, and that these workers are compensated for the added flexibility that they offer employers
and their increased financial risk.
155
Trade Unions have also successfully exerted pressure on particularly notorious users of ZHCs through
shareholder activism. The Trade Union Share Owners (TUSO) is a group of investors that represent the
financial assets of the TUC, Unison and Unite. In September 2016 they tabled a resolution at the AGM
of Sports Direct, a company to be discussed in more detail in due course, calling for the board to
commission an independent review of the company’s employment practises, including the use of zero-
hours contracts and agency staff.
156
The resolution was supported by the majority of independent
shareholders despite opposition from Sports Direct management. However, despite this success, there is
no evidence that Sports Direct has acted on its pledges to improve working conditions for staff. This has
led to a fresh action by TUSO, who have again written to investors urging them to vote against the
reappointment of the Sports Direct chairman, Keith Hellawell.
157
ii. EmployerRepresentatives
Employer representatives are more likely to highlight the advantages and benefits of a flexible workforce.
The Head of Communications at the Institute of Directors (IoD), for example, argues that “[t]hose who
wish to hold up zero-hours contracts as a symptom of an unfair economy will continue to do so – but they
must appreciate that, for hundreds of thousands of workers and employers, these contracts represent an
extremely attractive proposition. Despite efforts to portray all those on such contracts as exploited, the
truth is that there are plenty of engineers, contractors and professionals whose willingness to be flexible
adds significantly to their market value – and, therefore, their earning power.”
The limited impact of the financial crisis on employment is often attributed to zero-hours contracts by
these organisations. For the IoD zero-hours work can be a “vital tool” in bringing about an economic
recovery: “Countries with a flexible labour market tend to have lower unemployment and higher
employment, and one of the reasons that the UK economy has not gone the way of southern Europe is
because employers have been able to adapt swiftly to changing demand.”
158
The CBI predicted that
unemployment would have risen by an extra 500,000 people over the financial crisis had firms not been
able to resort to these work arrangements.
159
As discussed in Section 3, there is some support for claims that the UK’s flexible labour market limited
the impact of the recession on employment. However, as growth has returned to the economy, there is
increasing concern about the persistence of low pay and low job quality. Employers representatives are
increasingly open to acknowledge that the advantages of zero-hours work are not universal, noting that
there is a time and place when even responsible employers might wish to offer work on a zero-hours
basis. The IoD, in response to McDonald’s giving staff the option to move onto a guaranteed hours
contract notes that while “Zero-hour contracts will continue to be a useful part of a flexible labour market,
but we would encourage firms to engage with staff, and look at offering permanent contracts where
appropriate.”
160
155
TUC (n 152) 15.
156
Sports Direct has twice the average number of injuries says trade union shareholders’ letter, TUC Press Release 16/08/2016
https://www.tuc.org.uk/news/sports-direct-has-twice-average-number-injuries-says-trade-union-shareholders%E2%80%99-letter
157
Sports Direct fails to meet 2016 pledge on working conditions, The Guardian 05/11/2017
https://www.theguardian.com/business/2017/sep/05/sports-direct-fails-2016-pledge-zero-hours-shirebrook-mike-ashley
158
Banning zero hours contracts would be “misguided and extremely damaging, IoD Press Release 17/08/2013
http://web.archive.org/web/20130817194511/http:/www.iod.com/influencing/press-office/press-releases/banning-zero-hours-contracts-would-
be-misguided-and-extremely-damaging-says-iod
159
http://www.publicsectorexecutive.com/Public-Sector-News/vital-role-for-zero-hours-contracts-cbi-
160
McDonald’s offer staff the chance to get off zero-hours contracts, Guardian 15/04/2016
https://www.theguardian.com/business/2016/apr/15/mcdonalds-offer-staff-the-chance-to-get-off-zero-hours-contracts
36 Conditions of Work and Employment Series No. 101
b. LegislativeResponses
The main legal problem identified by the government relates to so-called exclusivity clauses fore zero-
hours work. These are provisions in zero-hours contracts or arrangements whereby the worker undertakes
to work exclusively for the employer in question. The Consultation Document points to exclusivity as an
occasional problem for Zero-Hours contracting, where a ‘small number of individuals on zero hours
contracts are prevented from working for another employer’, whilst being quick to assert that it ‘is clear
that, in some circumstances, exclusivity clauses are useful and justifiable’.
161
Despite these mixed assertions, exclusivity clauses have now become unenforceable. The much-vaunted
‘regulation’ of Zero-Hours Contracts boils down to a brief sub-section in the Small Business, Enterprise
and Employment Act 2015,
162
which stipulates that
(3) Any provision of a zero hours contract which—
(a) prohibits the worker from doing work or performing services under another contract
or under any other arrangement, or
(b) prohibits the worker from doing so without the employer’s consent,
is unenforceable against the worker.
163
The extent to which (if at all) this provision addresses any of the real problems underpinning ZHC work
is questionable. Indeed, as we have previously argued with Mark Freedland, there is a distinct sense that
the ban on exclusivity clauses was put forward with the purpose of making good the legitimacy of a
labour market institution which had already been marked out as a benign one, as the problems thus
highlighted are either insignificant in comparison to the main issues or are falsely identified.
The acknowledgment of exclusivity as problematical, first, is thus a decidedly cautious and rather tactical
one. We suggest that this is, in any case, by no means the greatest problem with Zero-Hours arrangements.
Indeed, it is unlikely that even before the statutory ban, any such exclusivity clause could have ever been
enforceable at common law. It could furthermore be argued that exclusivity clauses are in fact protective
of workers, insofar as a valid exclusivity clause presupposes and confirms the existence of a contract of
some sort.
164
The lack of enforceability in section 27A(3) ERA 1996 might therefore in certain
circumstances have had the unintended consequence of negating an employee’s claim that a certain level
of mutuality of obligation had been established. This scenario was addressed in a last-minute amendment
to section 153, which now provides in section 27A(4) that
Subsection (3) is to be disregarded for the purposes of determining any question whether a
contract is a contract of employment or other worker’s contract.
Even with this savings clause, however, recent governmental policy analysis and legislative action in
section 153 of the Small Business, Enterprise and Employment Act have, somewhat by design, failed to
identify (let alone solve) the real regulatory problems with Zero-Hours Contracts. The 2015 Act fails
completely to tackle the economic issues of precarity and underemployment, nor does it assist in
clarifying the employment status of individual ZHC arrangements.
Furthermore, many note that the regulations can be easily avoided by either guaranteeing workers a
minimal amount of work, e.g. one hour per week, and it does not address the potential for employers to
impose informal economic sanction for breaches, e.g.., a refusal to make future offers to workers who
161
Consultation 13.
162
The Act also provides for a ‘Power to make further provision in relation to zero hours workers’, it is however unlikely that this power would
be able meaningfully to address any of the main problems underpinning Zero-Hours work.
163
Small Business, Enterprise and Employment Act 2015, section 153 (the relevant provisions have now become section 27A(3) of the ERA
1996).
164
E Peel, Treitel’s Law of Contract (13
th
ed, Sweet & Maxwell 2011) 8ff, 70ff.
Conditions of Work and Employment Series No. 101 37
failed to accept hours offered or who accept work elsewhere.
165
An attempt to tackle these avoidance
tactics if found in The Exclusivity Terms in Zero Hours Contracts (Redress) Regulations 2015, which
creates rights for zero-hours workers not to be subjected to any detriment for failing to comply with an
exclusivity requirement. These rights are enforceable through the employment tribunal, which has the
power to award the worker compensation, subject to the same limit as that applicable in unfair dismissal
claims.
166
It is important to bear in mind, however, that the introduction of fees to bring claims to the
Employment Tribunal has rendered it uneconomic for low-paid workers to enforce their rights, which
undermines the force of these provisions in practise.
167
c. ParliamentaryInquiry
We here give a brief account of the employment rights scandal that has recently engulfed Sports Direct,
a major UK retailer. Through a combination of zero-hours arrangements and temporary agency work, the
company had created a particularly hostile work environment, which was the subject of an extensive
parliamentary inquiry and explicit criticism in a recent report published by the Business, Innovation, and
Skills Committee of the House of Commons.
168
Sports Direct International plc is the largest sporting retailer in the United Kingdom, with around 465
stores. Over three quarters of its workforce are employed on zero-hours contracts, many through two
employment agencies. The inquiry was initiated by repeated media coverage of poor employment
practises and evidence given to the Parliamentary Committee. It was viewed as a precursor to a broader
inquiry into the labour market, the Taylor Review of Modern Employment Practises, which was published
in the summer of 2017.
The Sports Direct report was damning, condemning work practises across the board at the company:
“We heard no convincing reason why Sports Direct engaged the workers through
agencies on short-term, temporary contracts, other than to reduce costs and pass
responsibility… The way the business model at Sports Direct is operated, in both the
warehouse at Shirebrook and in the shops across the country, involves treating workers
as commodities rather than as human beings with rights, responsibilities and
aspirations. The low-cost products for customers, and the profits generated for the
shareholders, come at the cost of maintaining contractual terms and working
conditions which fall way below acceptable standards in a modern, civilised
economy.”
While the review did not suggest wide-ranging policy measures to address the substantive problems
associated with zero-hours and insecure work (nor was it intended to), it is reported to have prompted
management to engage with the trade union Unite in a ‘positive manner’. A worker representative now
sits on the company’s board and shop staff directly employed by Sports Direct were supposed to be
offered a choice of a guaranteed hour contract.
169
However, despite the firm’s pledges, there is little
evidence that conditions have improved on the ground and aspirations to offer guaranteed hours to the
more than 4,000 agency workers at its warehouse have not yet been formulated.
165
BIS, Banning Exclusivity Clauses: tackling Avoidance, August 2014. 83% respondents to the consultation thought that it was ‘very likely’
or ‘likely’ that employers would seek to avoid ban, mainly through offering a low minimum number of guaranteed hours or imposing
economic sanctions on workers who were not available for work.
166
D Pyper and J Brown, ‘Zero-hours contracts’, House of Commons Library Briefing Paper 06553, 13 April 2016.
167
A Adams and J Prassl, ‘Vexatious Claims? Challenging the Case for Employment Tribunal Fees’ (2017) 80 Modern Law Review 412.
168
55 Third Report of Session 2016–17, HC 219, 19 July 2016.
169
Reynolds Porter Chamberlain LLP, Working Practises Report: Prepared for the Board of Sports Direct International, September 2016.
38 Conditions of Work and Employment Series No. 101
d. NationalMinimumWageAct1998
Zero-hours work counts at “time work” in the context of National Minimum Wage Regulations, and is
required to be remunerated as such.
170
The national minimum wage (NMW) is currently at £7.50 per hour
for workers aged 21 and over. It has undergone a significant increase since the July Budget of 2015 when
George Osborne announced a transition to a ‘national living wage’.
As well as for time spent in productive activity, zero-hours workers must also be paid at least the NMW
for ‘stand-by time', 'on-call time' and 'downtime' if they are at their place of work and required to be there.
Similarly, such time is likely to count as 'working time' under the Working Time Regulations if the worker
is required to be on-call at the place of work. This means that it's against the law to ask employees to
'clock off' during quiet periods but still remain on the premises.
Also significant in the case of zero-hours workers is the treatment of travel time. Time spent travelling
between locations for the purpose of work is within the scope of NMW legislation. This is especially
important in the case of social care, in which zero-hours workers are often not paid for travel time between
clients or ‘on-call’ hours. A survey by Unison found that only 35% of councils in England make it a
contractual condition that domiciliary care providers pay their workers travel time.
171
The National Audit
Office estimated that as many as 160,000 to 220,000 care workers in England are paid below NMW
because of this.
172
One of the biggest providers of domiciliary care in the UK, MiHomeCare, settled a
claim for non-payment of the minimum wage in 2016 in respect of travel time between appointments.
173
At the start of 2016, HMRC had 130 open investigations into care providers, with Unison funding test
cases to challenge pay and conditions in the sector.
174
170
Section 3 National Minimum Wage Regulations 1999.
171
Unison, SOC 025.
172
National Audit Office, Adult Social Care in England: Overview (2014).
173
Leigh Day, Settlement for carer in legal action over national minimum wage (March 2016).
174
CIPD, Pay victory for workers denied the minimum wage, CIPD News Item 13/12/2016
http://www2.cipd.co.uk/pm/peoplemanagement/b/weblog/archive/2016/12/13/pay-victory-for-care-workers-denied-the-minimum-wage.aspx
Conditions of Work and Employment Series No. 101 39
5. ConclusionandRecommendations
We conclude our report with a series of policy recommendations and broader considerations. We believe
an appropriate goal is a model in which (some of) the flexibility and benefits of zero-hours work
arrangements are preserved, without their use continuing to pose a major threat to decent working
conditions in the United Kingdom’s labour market. In order to address the most egregious problems
identified in previous parts, a series of responses are required. Whilst an extensive discussion of these
options lies beyond the scope of the present report, we highlight our most pressing concerns.
i. EmploymentLaw
Despite some promising developments in recent case law, as chronicled in Section 3, the requirement of
mutuality of obligation for employee status (and to a lesser extent also for worker status) has been a key
obstacle to the inclusion of zero-hours workers in the full scope of employment rights: at first glance, the
absence of guaranteed hours can be seen, in one sense, as the very antithesis of a mutual set of
undertakings between employee and employer.
Two possible reforms are imaginable: first, and most straightforwardly, the abolition (whether by
statutory intervention, or judicial development of the common law) of mutuality as a criterion for
employment status, thus guaranteeing access to at least a basic floor of employment rights to all workers
from day one. A somewhat less ambitious, but still important, step could be a clearer recognition that
mutuality of obligation could also be proved on the facts of a specific relationship (including, for example,
the loss of preferred rota slots as an informal sanction for not accepting any given offer of work), rather
than merely the contractual arrangement.
A further set of recommendations pertain to mechanisms for a regularisation of working hours. We
support calls for employers to provide a written statement of working hours that are a true reflection of
hours required by employee and the establishment of minimum work periods. We also call for further
research on mechanisms to prevent abuse of managerial power over work assignment as discussed in
Section 3.
We call for further consultation on policies which incentivise employers to reduce their use of zero-hours
arrangements and “gig work”, where guaranteed hour contracts are a viable alternative. Jeremias Prassl
has advocated the use of higher minimum wage rates for arrangements that do not guarantee a minimum
number of hours,
175
an idea which was taken up and explored by the Taylor Review into Modern
Employment Practises. The aim of the policy would be to “encourage employers to be a bit less lazy
about transferring risk”.
176
It has this far attracted some criticism from employers groups who argue that
the success of the minimum wage was not “put at risk by complexity or the unintended consequences …
[of] trying to reshape employment contracts using a wage rate”.
177
A final recommendation for reform relates to the enforcement of workers’ right in the United Kingdom
more broadly. The introduction in July 2013 of launch- and hearing-fees of up to £1200 for an individual
claimant’s bringing of an employment tribunal claim has led to a drop of over 70% in workers’ claims.
However, as we have shown in recent work,
178
this has disproportionally effected the bottom end of the
claim distribution; viz low-value claims such as those typically associated with zero-hours workers. Early
evidence indicates that in the absence of meaningful enforcement, many of the problems highlighted
throughout our report are likely to become more frequent and widespread as a result. In the summer of
2017, the Supreme Court’s decision in Unison v Lord Chancellor struck down this fee regime as an illegal
175
J. Prassl, Humans as a Service, (OUP 2018).
176
Higher minimum wage proposed for zero hour workers, FT 17/4/2107 https://www.ft.com/content/84abe8ea-20f7-11e7-a454-
ab04428977f9
177
ibid.
178
A Adams and J Prassl, ‘Vexatious Claims? Challenging the Case for Employment Tribunal Fees’ (2017) 80 Modern Law Review 412.
40 Conditions of Work and Employment Series No. 101
barrier on access to justice. In line with that judgment, we recommend extreme caution in any future
employment tribunal fees model to ensure zero-hours workers are able to enforce their rights effectively.
ii. SocialSecurity
A second set of reform proposals relates to the important point, already raised in section 3(a)(ii), that
zero-hours work cannot be understood as a problem for employment law stricto sensu alone: any
successful attempt at reform must take into account the powerful incentives created by the social security
system, which at present can force individuals to accept work offered on a zero-hours basis or risk losing
basic financial support. Social security regulations need to be adjusted to ensure that the state does not
(inadvertently) create a significant surplus supply of workers desperate to accept work at any cost
especially given the weak evidence of a link between accepting casual work and future labour market
outcomes. The operation of the benefit system must also be sufficiently flexible to deal with the reality
of work on zero-hours contracts. Systems for meeting with ‘work coaches’ must be improved to cope
with work arrangements in which shifts are decided upon at short notice.
iii. GovernmentCommissioning
Funding pressures in social care and local authority commissioning practises are contributing to the use
of zero-hours contracts and low pay in the homecare sector. This has resulted in infringements of workers’
rights and has been linked to a decline in standards that is putting elderly and vulnerable people at risk
(see Section 2). We support calls for an immediate increase in social care funding and a Government
commitment to close the funding gap while creating a sustainable model of social care financing. We
recommend that the Care Quality Commission should oversee the commissioning activities of councils,
including assessments of the true cost of care to provide guidelines for local authorities in setting fees.
As well as auditing the quality of care, the Care Quality commission should audit employment practices
of providers to ensure that workers are being paid the minimum wage and zero-hours contracts are not
used in an exploitative manner.
iv. BroaderOutlook
In concluding, it is important to return to one of key observations made at the outset of this report: zero-
hours work arrangements are but a subset of the wider world of ‘atypical’ work in the United Kingdom,
often overlapping and intersecting with other categories. This can be highlighted with reference to a series
of recent decisions on employment in the so-called ‘gig’ economy, where on-demand work is digitally
mediated: when the Central London Employment Tribunal recently recognised that Uber drivers were
workers,
179
for example, this meant – in effect – that the successful claimants are now employed as zero-
hours workers, with the platform’s algorithms offering individual drivers work as and when customer
demand so requires.
179
Aslam, Farrar and Ors v Uber (Case No 2202550/2015; decision of 28 October 2016). An appeal was pending at the time of writing.
Conditions of Work and Employment Series No. 101 41
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