Recent media buzz about the use of zero hour contracts has divided both the public and UK businesses perception on the issue. News coverage has segmented the story every way from naming individual companies and looking at how it affects the public sector, right through to which sectors rely most heavily on zero hour contracts. Zero hour contracts have previously been a useful business tool to manage staff hours in a flexible way to accommodate  business fluctuations and as such keep costs low. In this way a zero hour contract (a type of UK employment contract) created a kind of ‘on call’ system between the employee and the employer. From the employer’s point of view, they were not obliged to provide work for the employee and the employee did not have to accept the hours on offer. Ultimately, it was meant to be a flexible contract, allowing legal ‘space’ for the employer and employee to agree upon work and hours on an ad hoc basis. However it is now evident that this tool is being abused.

While once considered as a sustainable way of doing business, zero hour contracts, due to the abuse of these contracts, no longer benefits anyone. They limit both the worker and the business in terms of planning and can create more problems than they are worth. I consider the current use of zero hour contracts for the majority of a firm’s employees to be the action of an irresponsible employer.

While some workers, like retirees and students, may enjoy having flexible working conditions, those seeking full-time employment or those that are the family’s main breadwinner, struggle to adequately plan for the future. This is due to the fact that legally, the employer does not have to commit to give employees a set number of, or any, hours and as such they have no guaranteed income. Aside from struggling with day to day bills and living costs, employees on zero hour contracts may be unsuccessful when applying for loans or credit in the future. Zero hour contracts were not created to be a long-term solution, rather, they were created as an option for a niche segment of the working population.

On the other hand, it’s not just the employee who isn’t benefiting. Companies aren’t truly realising value from zero hour contracts either. It’s very likely that due to the employer’s lack of commitment the employees will lack motivation and will demonstrate low productivity levels which will directly lead to an increase in turnover of employees. Recruitment costs aside, a high turnover in a business’ staff also leads to poor customer service, resulting in unhappy employees and customers – which has significant potential to negatively impact the bottom line.

Zero hour contracts were created to deal with the fluctuating level of labour needed from one week to the next. However, there are other affordable, scalable staffing solutions available. In reality, it’s abhorrent that business fall back to zero hour contracts rather than offer their employees a limited number of hours on an ongoing basis which can then be increased as the business requires and allow the employee to effectively stabilise their finances.

The answer as I see it is to move away from zero hour contracts and transfer those employees to  temporary contracts with a limited number of hours that both the employer and employee are satisfied with.  This way the employee gets some security, and the employer can secure a low level of overheads should production or business requirements fluctuate.

Organisations, both in the public and private sector, should begin to seek alternative solutions to zero hour contracts immediately. Otherwise, both public pressure and potential legislative changes could force them into making a change they are unprepared for or uneducated to manage. And why would any business want to employ de-motivated, high-turnover employees at lower cost, when their customer service and productivity and as such the balance sheet will suffer?

Matthew Sanders – CEO of de Poel