'Zero hours' contracts vastly underestimated in UK

Deutsche Welle, 5 Aug 2013

Up to 4 percent of the UK workforce lacks a minimum work guarantee, and is allowed to remain on constant standby, new figures show. Germany doesn't have this problem.

A new poll suggests that the number of workers on so-called zero hours contracts in the United Kingdom has been vastly underestimated. The Chartered Institute of Personnel and Development (CIPD) released figures Monday indicating that up to 1 million British workers are employed under such contracts - which provide no guarantee of minimum work or pay, and leave the worker on constant standby.

Unions and non-governmental organizations have criticized the zero hours contract model as insecure, or even as a way for employers to evade the responsibility of providing benefits. A dramatic uptick in such contracts, particularly in certain sectors, is of particular concern.

The increase in such contracts can be traced back to the economic downturn, as well as to the European regulatory environment. In Germany, despite the presence of similar labor models, strong worker protection laws appear to prevent their large-scale implementation.

Workers sort packages at Amazon warehouse in Germany.
(Photo: Jan-Philipp Strobel/dpa)

 Amazon is among the many employers with zero hours contractors in the UK - others include Sports Direct and Buckingham Palace. A new round of strikes against Amazon in Germany is demanding higher wages

Flexibility or exploitation?

Under zero hours contracts, workers are scheduled on a roster with no minimum guarantee of hours, and are often called in for work on short notice. Proponents say such contracts provide necessary flexibility in the modern labor market, but opponents criticize them as exploitative.

Len Shackleton, an economic fellow with the Institute of Economic Affairs and a professor at the University of Buckingham, said the arrangement benefits both employers and employees. "Most workers are young people who can't commit to particular working hours, or older, semi-retired people - many are not looking for permanent, full-time contracts," Shackleton told DW.

Last week, the UK Office for National Statistics (ONS) had estimated the total number of zero hours contractors at around 250,000. The CIPD's survey of 1,000 businesses quadrupled this estimate to around 1 million, or about 4 percent of the total workforce.

Shackleton thinks the CIPD may have overestimated that amount. "The figure is likely to lie somewhere in between [the ONS and CIPD estimates]," Shackleton said.

The CIPD poll also showed that 19 percent of people employed under zero hours contracts actually want more work. A different analysis, by the Resolution Foundation, showed the healthcare and hospitality branches with the highest proportion of such workers, at 20 and 19 percent respectively. 

Teacher at whiteboard in front of
classroom The UK's educational sector
has seen a dramatic rise in zero hours
contract workers

Karen Jennings, who is assistant general secretary for bargaining negotiations and equality at Unison - Britain's largest trade union - said the contracts present numerous problems: "They create an insecure and stressful situation for families to budget, you can't get holiday pay, you can't turn down work, you often have to wait around on standby."

Such workers can't claim tax or unemployment benefits, Jennings added. She also described the arrangement as a Catch-22: "If you complain about the hours you are getting, you get less hours - you haven't got a voice."

In any case, the number of people on such contracts has risen - an ONS study said 208,000 people worked zero hour contracts in 2012, compared to 134,000 in 2006. This dramatic uptick has unions particularly worried.

Jennings thinks the rapid expansion of such contracts in "social" sectors, like healthcare and education, will drive down standards for the services provided. About 1 percent of education workers had zero hours contracts in 2001, but that grew to 10 percent by 2011, Jennings said.

Push to ban

Jennings believes that the gross underestimation of zero hours workers has allowed the UK to pad its employment figures. "Why isn't unemployment higher when we are going through such austerity? The reality is that people listed as having a job are not in proper employment," she said.

Unison and other trade unions are working to outlaw the practice. The Labour Party will hold a summit on zero hours contracts this week, with some voices within the party calling for an outright ban.

The UK currently has about 2.5 million unemployed - unemployment due
to the financial crisis has particularly hit youth across Europe

British Business Secretary Vince Cable has called for a review of the practice, and stated that the government could regulate such contracts differently in the future. He added that a ban was unlikely.

Shackleton described the inquiry as "worthwhile - but people would be very foolish to ban zero hours contracts outright." Although the practice is most prevalent in the private sector, its use in the public and nonprofit sectors reflects a market need, he said.

And while he sympathized with the plight of the underemployed, he also indicated the lack of an alternative: "It's a difficult situation to be in, but so is being unemployed. And that's the situation they would be in if you ban this kind of contract."

Analysts say increasing use of this employment model is likely a response to the economic downtown. A reduction of agency and temporary workers in response to a 2010 European Union directive regulation could also have contributed to the rise.

"It's an indictment of the way this economy has been managed," Shackleton told DW.

High worker protection in Germany

Tom Stiebert, a researcher with the Institute for Labor and Social Security Law at the legal sciences faculty of Germany's University of Bonn, said that relatively high worker protection prevents such models from being implemented on a large scale in Germany.

A German Federal Labor Court ruling from 2005 upheld a minimum income for employment contracts, and said that the employer is responsible for paying regardless of whether work is available or not. But the ruling did introduce some flexibility by allowing 25 percent of employment to be negotiated on an on-call basis.

"It's always a trade-off of protecting the worker and creating work opportunities," Stiebert told DW. Although disputes are often adjudicated through courts, employment models like zero hours contracts ultimately remain "a political question," he said.

And there will always be attempts to go around the law, he added. "Part-time work, limited contracts, subcontracted labor - these can all be precarious working conditions. In Europe, minimum protections are relatively high - but not completely comprehensive," Stiebert said.

Domino's Pizza employs over 90% of staff on zero-hour

contracts Photograph: Alamy

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