The existence and regulation of zero-hours contracts has become a much debated policy area over recent years as the number of people on such contracts has dramatically increased. Here, Dr Douglas Bamford considers the policies put forwards in some of the general election manifestos to tackle zero-hours contracts and argues for a more nuanced, balanced approach to addressing precarious employment.

• Zero hours contracts can mean unequal power relations and insecurity, but can also be beneficial for some workers
• Those on zero-hours contracts have no clear guarantee about their working patterns and future income, which is likely to exacerbate feelings of stress and anxiety where they have ongoing costs to meet
• Banning zero-hours contracts will not improve the bargaining position of many workers
• workers and employers could have the option to opt-out of such a requirement to offer a more regular contract if the worker meets certain requirements

In their election manifesto, the Labour party have set out a commitment to “Ban zero-hours  contracts – so that every worker gets a guaranteed number of hours each week.”  Although there is an argument for government to intervene more in zero-hours contracts, I believe this proposal goes too far.

Banning two people from making a contract with one another implies that there is something seriously wrong with the practice. This is reasonable in cases such as allowing contracts for humans (slavery) or for organs. Deborah Satz’s book Why Some Things Should Not Be for Sale provides a useful starting point for considering which types of exchange should be banned.

Do zero-hours contracts imply or create what Satz terms a noxious market that justifies a ban? Or are such contracts unproblematic? And if they are sometimes problematic and sometimes not, is there anything that can be done short of a ban?

According to Satz’s theory, a market is noxious if it is caused by:

1. Weak agency for the individual (people enter without understanding of or power over their choices)
2. Vulnerability (a party entering a market from a position of desperation relative to others)

Or if it causes extreme harms to individuals or society.

An argument can no doubt be made to say that the market for zero-hours contracts is noxious because it arises due to weak agency or vulnerability. However, while this may be the case for some of those who have recently ended up in such contracts (there has been a huge rise in recent years), for many this won’t be the case.

It is also hard to see how the existence of a zero-hours labour market will undermine the fabric of society and so the only real concern is that it causes extreme harms to the individuals with such contracts.

Happy cases

There are many occasions in which a zero-hours contract will suit both parties. It is not clear to me that in such cases the worker/contractor is harmed in any way by the fact that they are on such a contract. Indeed, some research (albeit from the HR industry) indicates that most people on zero-hours contracts are happy and indeed overall are happier with their work than those on ‘standard’ contracts.

These satisfied workers will often be in a strong bargaining position, where they can perhaps afford to turn down work if they don’t want it because they have other sources of income, savings on which they can they can draw, or other employers to whom they can turn. I don’t see a problem with an IT contractor with a very high hourly charge rate agreeing to a contract with no guaranteed hours but which leaves them free to undertake other activities during the time they are not employed.

A further group may not be in a favourable economic position, but simply find that flexibility does not adversely affect them. The typical example here would be students who would consider work if it suited them given their studies, but others, such as artists and carers might also find zero-hours work perfectly suitable.

The Labour proposal to ban zero-hours contracts would affect such acceptable cases and may result in many people being unable to have the working set-up that they would prefer.

Troubling cases

Nevertheless, the desire for a ban does result from a genuine concern that zero-hours contracts will cause serious harm to some of those who are on them. The worry is that workers on these contracts will not end up working the hours they require while employers get exactly the amount of work that they desire; that workers will often end up either under (or over-) employed.

Two troubling issues result in such cases: unequal power relations and insecurity.

The worry about unequal power in recent employment contracts is that workers in their desperation may firstly agree to contracts that do not suit them, and secondly that they may feel they need to accept more work than they would like to maintain their precarious employment relationship. They may refuse other offers of work to avoid jeopardising this relationship, even though there is no legal requirement that they do so.

Workers in the situation described above are most likely to prefer a more ‘standard’ work contract with set hours but presumably accept zero-hours employment as they have no alternative. This leads them to insecurity, the second concern.

Those on zero-hours contracts have no clear guarantee about their working patterns and future income, which is likely to exacerbate feelings of stress and anxiety where they have ongoing costs to meet. Put simply, insecurity is psychologically damaging. Of course, those who enter into zero-hours contracts from a stronger position will not face such concerns. Furthermore, workers with contracts with minimum hours may also find themselves in a position of anxiety because they fear underemployment and unemployment.

The above problems result from a worker’s poor bargaining position much more so than the existence of zero-hours contracts. These contracts can exacerbate the situation of those in a poor bargaining position, but on the other hand may offer some a route to employment and income that would otherwise be closed to them. For some people, less-than-ideal zero-hours employment may be better than no employment at all.

Banning zero-hours contracts will not improve the bargaining position of many workers. Providing alternative forms of income such as a guaranteed work scheme or guaranteed income would be another way to improve their bargaining position and reduce anxiety. Banning zero-hours contract is neither necessary nor sufficient to reduce the serious harm of economic insecurity and anxiety to individuals.

Given that some people clearly benefit from zero-hours contracts, perhaps even including some of those about whom we are concerned above, a ban seems like using a machine gun to crack a nut.

Alternatives to a ban

The Liberal Democrats and Conservatives have indicated they intend to look at the issue of zero-hours contracts, so perhaps Labour’s extreme position could have some impact without their being in power.

The Liberal Democrats in their manifesto have proposed to “Stamp out abuse of Zero-hours Contracts. We will create a formal right to request a fixed contract and consult on introducing a right to make regular patterns of work contractual after a period of time.”

This seems like a more sensible proposal and Labour propose something a little similar (though again stronger) for those on short term contracts: “We will strengthen the law so that those who work regular hours for more than 12 weeks will have a right to a regular contract, reflecting those hours.”

However, such rules may end up making life harder for the happy zero-hours workers. After all, employers may be reluctant to continue to give them work if they are concerned the worker could invoke a right to a more fixed contract. Some workers and employers may miss out on working together because of this fear.

So, is a more nuanced option available? The troubling cases arise for workers with a poor bargaining position and so any rules should be aimed at those in such a position. For example, workers and employers could have the option to opt-out of such a requirement to offer a more regular contract if the worker meets any of the conditions below:

• Earns a higher amount per hour (say, £12 minimum)
• Has regular work elsewhere
• Has a required amount of savings and other liquid wealth (say, over £50,000)

Such a solution may help to reduce the scope for zero-hours contracts to count as a noxious market by increasing the power of those who enter zero-hours contracts from a poor position.