A ban on zero hours contracts would be damaging to our economic recovery

Alexander Ehmann
WE FEEL no need to excuse businesses that are doing all they can to create jobs. Those who have this week labelled zero hours contracts abusive have completely missed the point. In uncertain times, firms face tough decisions on the risks – on inventory, expansion, staff – they are willing to take. Employers will only create jobs when they are certain the hours and finances exist to provide them.

In the present climate, many companies lack the certainty to offer contracts with guaranteed hours. But they are able to create opportunities under a more flexible zero hours model. These contracts have acted as an “employment stabiliser” for the UK, providing a method of employment that firms can maintain in a tough environment, as well as guaranteeing basic employment rights. As market conditions improve, those on zero hours contracts may then progress to contracts with guaranteed hours.

Those who argue for the immediate abolition of zero hours contracts seem to assume that all employees currently working on these terms would instantly be given secured hours. This assumption is false. Employers would not be able to meet every request for guaranteed hours, and many would have to withdraw the opportunities currently on offer. This would harm workers – depriving them of hours, and the opportunity to maintain their skill levels and improve their chances of future employment.

And the idea that all employees on zero hours contracts want more work, or do not in fact enjoy the flexibility to fit work around study, children or other commitments, is disputable. Recent research from the Chartered Institute of Personnel and Development shows that only 14 per cent of those on zero hours contracts are dissatisfied with the number of hours they are being offered. Which raises the question: if those on these contracts are largely content with their workload, what exactly is the issue we are trying to address?

If the UK was in possession of world-class flexibility in its employment practices, there might be some sense in the calls to ban zero hours contracts. But compared to other nations, we are not performing well. According to the World Bank, between 2008 and 2010 we slipped from 17th in the world ranking of labour market flexibility to a worrying 35th. The government has taken some positive steps towards more flexibility for employers, including increasing the qualifying period for unfair dismissal claims, and introducing employment tribunal fees. But there is much work still to be done.

Unemployment levels in the UK currently sit at 7.8 per cent. Those who argue for the banning of one of the UK’s few flexibilities in the labour market should acknowledge that such a change would be likely to increase this figure. Half of our members say that the burden of employment law has stopped them taking on additional staff. So perhaps it’s time to shift focus from zero hours contracts, to whether we need further flexibilities in our labour market to help stimulate job creation.

Alexander Ehmann is head of regulatory policy at the Institute of Directors.

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