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A quarter of employers who hire people on zero-hour or other flexible contracts are doing so to reduce their labor costs, according to a study that will fuel calls for reforms to strengthen workers’ rights.
The finding from think tank Resolution Foundation, based on a survey of 750 companies, will add to concerns that while flexible contracts help bosses manage uneven demand and deal with economic uncertainty, they can also work to the detriment of employees and workers.
The Resolution Foundation said the investigation showed the contracts entailed “real costs for some workers” who faced “lower wages and pensions, as well as the uncertainty and volatility associated with them.”
Almost 4 million people in the UK, or more than one in eight workers, work in some form of flexible contracting that could be considered “precarious”, the think tank found.
The promise to ban zero-hours contracts is one of the key measures in the opposition Labor Party’s New Deal for workers. She has promised to introduce legislation within 100 days if she wins the upcoming general election.
The study found that managing uneven demand was the most common reason given by employers for using flexible work arrangements. About half said this was the reason they used the contracts and a quarter said it was the main reason.
But one in four cited cost reduction as a reason for using flexible working arrangements, ranging from casual and seasonal work to zero and variable contracts that do not offer guaranteed periods of employment.
Some wanted to limit working hours to compensate for the increase in the minimum hourly wage, others wanted to spend less on non-wage benefits such as sick pay, pension contributions and social security.
The companies that used flexible contracts the most – particularly in the transport and logistics, retail and hospitality sectors – were also more likely to cite cost reduction as their main motivation than companies with low usage.
Company leaders argue that these forms of flexibility allow them to manage busier and quieter times, and say many employees prefer contracts that allow them a better work-life balance.
But Hannah Slaughter, senior economist at the Resolution Foundation, said the results showed that flexible contracts were not a “simple win-win situation for businesses, workers and consumers alike.”
But she argued that calls for an outright ban on zero-hours contracts and other flexible arrangements – which some unions and workers’ rights groups have campaigned for – could also be counterproductive.
Labor’s plan to strengthen workers’ rights aims to address concerns that strong employment and a rising minimum wage are accompanied by increasing uncertainty for workers who don’t know how much they will earn in a given week or how long their job will last .
A complete ban on zero-hour contracts would be controversial even among unions. Labour’s proposal, backed by the Trades Union Congress, is instead to give workers the right to a contract that reflects their regular working hours.
The Resolution Foundation found that two-thirds of employers would use flexible contracts less if government policy changed in this direction. Without change, half of those already using flexible contracts said they would increase the proportion of their workforce with variable working hours over the next five years.
“New worker rights, rather than outright bans, could help curb over-reliance on flexible contracts and the associated problems for workers, while maintaining flexibility for workers and companies that value it,” Slaughter said.