Zero to hero?

Charlie McCurdy looks at the Government’s plan to end exploitative zero-hours contracts

Right now, workers on variable-hours contracts shoulder the risks of unpredictable hours (and income), even as their employers benefit. But, as the Government consults on ending exploitative zero-hours contracts (ZHCs), a predictable row has broken out. While unions urge the PM to “keep going” on guaranteed hours rights, businesses press for the narrowest possible definition.

At Resolution Foundation (RF) we’ve been calling for a right to guaranteed hours for over a decade. It would be transformational for the 2.4 million workers who feel ‘very anxious’ about unexpected changes to their hours. A week in the life of nine workers on ZHCs revealed that five were sent home mid-shift and lost pay. All nine worried about money because their incomes fluctuated. But this isn’t a simple issue, so we’ve broken down some of the biggest decisions facing the Government, drawing on previous RF work and novel data kindly provided to us by the Living Wage Foundation.

Decision 1: the ‘low’ hours threshold

The first element of the Government’s plan is a right to guaranteed hours, assessed over a (probably twelve-week) reference period. People on ZHCs, agency workers and those on ’low’ hours contracts would all be in scope.

Defining ‘low’ hours is arguably the most consequential decision, for both cost and coverage. The Government have said its preferred definition is somewhere between eight and twenty hours a week – but we think the ‘low’ threshold should be set high. Why? Variable-hours workers tend to work substantial hours. New data from the Living Wage Foundation shows that six-in-ten variable-hours workers (59%) contractually work up to 24 hours per week.

That means a very low threshold – eight hours would be the length of many shifts – risks excluding three-quarters of workers on variable-hours contracts from this new right.

On top of this, anxiety about unpredictable hours and earnings persists for workers on a range of part-time hours. When I ran some new analysis, I found that workers on around 25 hours per week are just as likely as those on lower hours to feel ‘very anxious’ about unexpected changes to their shifts.

Of course, for employers, a broader threshold means more workers will be covered. That will cost them both in the form of the uncertainty currently being borne by workers transferring to them, and in additional administrative costs that will come from tracking hours. If employers are discouraged from offering ‘low’ hours roles altogether, there may be fewer opportunities for workers who can only work part-time, including those with disabilities or caring responsibilities.

On balance, the evidence suggests a higher threshold – up to 25 hours a week – would bring significant gains for workers. But given the current weakish state of the labour market, and the success of the incremental introduction of the minimum wage, we should start lower and raise the threshold over time.

Decision 2: the “regularity” test

So, are there ways to mitigate the loss of flexibility for employers and risk of fewer opportunities for workers, without simply lowering the threshold?

The Government is considering a “regularity” test alongside the hours threshold, so the right kicks in only when someone works consistently across the reference period. That way, if a restaurant wants to trial an extra trading day, it can experiment without immediately having to offer new contracts.

The consultation sets out two options for how this could work. The first only asks that a worker was present in a set number of weeks (say eight out of twelve), regardless of exceeding their contractual hours. This isn’t an automatic pass for workers with characteristics like those on ZHCs: our analysis shows only 65% work in all twelve weeks, although 92% clear a six-week threshold.

The second is stricter, also requiring a minimum number of hours above contracted hours. We back option two, given it does more to mitigate the risk of a broad ‘low’ hours threshold.

Decision 3: shift notice and cancellation

The Government is considering two further rights: reasonable notice of shifts and payment for short-notice cancellation.

In 2023, 73% of variable-hours workers received less than two weeks’ notice of shifts, and 54% got less than a week. It doesn’t have to be this way. Two weeks’ notice is fast becoming standard practice in parts of the US. And evidence suggests these ‘predictive scheduling’ laws have improved well-being for workers while also bringing benefits to employers – through better workforce planning, lower staff turnover and fewer last-minute absences. Workers are also routinely left out of pocket when shifts are cancelled last-minute, sometimes after they’ve already paid for childcare or travel. We recommend paying workers 100% compensation if a shift is cancelled with less than 24 hours’ notice, sliding the payment down as notice increases.

Getting the details right

None of this is easy to get right, but if we do, we could improve the lives of millions of workers on insecure contracts.

The Government’s own analysis expects the package to have a small but positive effect on growth. Tellingly, it also finds the largest benefits for workers – less anxiety and more control over their lives – are the hardest to put in pounds and pence.

There are real trade-offs for employers, especially in responding to changing demand. But these risks can be managed, particularly by a well-designed regularity test. In the end, that’s why this policy matters to me: it’s about worker well-being. Predictable hours and income make it possible to plan childcare, budgets and daily life – things those of us with secure hours often take for granted.

This article was originally published on the Resolution Foundation Substack. Charlie McCurdy is a Senior Economist at the Resolution Foundation. You can follow him on BlueSky here.