The evidence is mounting that Zero Hours Contracts have reached their peak


What happens when unemployment is at a close to 40 year low, as it is in the UK today? Economic textbooks tells you that pay pressures mount. But that is not happening – instead a pay squeeze has returned in 2017. Instead, it looks as if more competition for jobs might just be pushing up job quality and leading to a slowdown in the growth of precarious forms of employment, most notably zero-hours contracts (ZHC).

Today, we have new data for 2016 on the number of zero hours contracts used by UK businesses. The figures show a slowdown in their use. The ONS business survey shows that there were 1.7 million of these contracts in the UK in both May and November 2016 – the same as in November 2015 and down from its level in May 2015 (2.1 million).

This isn’t the first data we have pointing towards a reduction in the use of ZHCs either. Recent figures from the Labour Force Survey showed that for the first time since 2010 the proportion of people reporting that they worked on a ZHC in their main job fell between the start and end of 2016.

While it’s preferable to compare the same quarters in different years to capture seasonal variations, it’s notable that the sharp increases in ZHCs recorded every six months since 2014 came to an abrupt end late last year.

So, what’s behind this change? It’s likely a product of a tighter labour market and – as we outlined earlier in the year – could also be a result of the increasing amount of negative media coverage around the use of ZHCs encouraging businesses to look again at the impact of these contracts on their workforce. For example, just last month McDonald’s announced that it would be offering fixed hours contracts to its 115,000 ZHC workers to “help them get better access to some financial products”.

It’s notable the large employers are twice as likely to use these contracts as small and micro ones so this attitude shift could make a big difference to the overall number of ZHCs.

Does that mean attention should move on from ZHCs? No. At last count there are still 905,000 people with no guaranteed hours at work. While these arrangements can work well for some – students and older people are the most commonly cited examples – especially when there is genuine flexibility on both ends of the contract, for a significant number of employees not knowing how much they’ll make from month to month is a major concern. Recent RF research has also highlighted a pay penalty associated with these contracts.

It’s also worth remembering that the number of ZHCs, however you measure it, is significantly higher than a few years ago. The coming months and years may bring a further reduction in their use but for people still on a ZHC, action from the next government to help support these workers is needed. Moves that would allow workers on ZHCs to have a contract guaranteeing them a specific number of hours a week, reflecting their typical working pattern, would be a helpful step.