FRIDAY 19 SEPTEMBER

DAVID FRY

PRESENTATION TO NICVA ON ZERO HOURS CONTRACTS

210/04/2023

Overview

The core of UK workforces are employed on fixed hours, open-ended contracts, meeting the needs of businesses and workers – there has been no mass casualisation of the workforce. Supplementing this core are a range of more flexible arrangements including zero hours contracts, agency workers and fixed-term contracts. These forms of employment are as important to many of those working on them as they are to businesses, so regulating them must target bad practice without demonising them.

310/04/2023

The evidence

410/04/2023

The consultation in Northern Ireland

● In addition to the wider reform of employment law programme and debate, it is a welcome development that the Minister and Executive are seeking to clarify the status and scope of zero hours contracts in Northern Ireland

● We believe zero hours contracts play a key role in delivering positive labour market outcomes. In our view, the focus should be on tackling bad practice, not demonising flexible work. In addition, inappropriate regulation will damage flexibility and put the very system that has kept unemployment lower here than elsewhere at risk.

From the business perspective there three key reasons to support zero hours contracts…

510/04/2023

Delivering positive labour market outcomes

● Zero hours contracts and other forms of flexible contract made an important contribution to the ability of firms to protect jobs and avoid redundancies – leading to better outcomes for businesses and employees

● But zero hours contracts are much more than a coping mechanism for the labour market during periods of economic difficulty

● More often employees take zero hours contracts because the flexibility the arrangement offers is beneficial for them

● Over the last 12 months the number of employees on zero hours contracts has been strongly contested – not least because the label ‘zero hours contract’ covers such a broad range of contracts that there isn’t a typical experience of a worker employed on one

● But the number of employees on zero hours contracts is the wrong measure to focus on…

610/04/2023

Delivering positive labour market outcomes

● Following close scrutiny of zero hours contracts it has been generally accepted that these arrangements are chosen by some individuals because the flexibility is advantageous for them

● But it is equally true that it is not possible for many other individuals to work in this way. This means that the regulatory challenge is to ensure that flexibility benefits both the business and the individual, rather than reducing the number of these contracts. If the law ensures that the arrangement works for both parties then the number of people choosing to work in this way should not be a cause for concern

● While there are improvements to be made to the regulation of these contracts, these should aim to maximise flexibility for both parties while reducing the potential for unbalanced arrangements

● Inappropriate regulation will damage flexibility and put the very system that has kept unemployment lower here than elsewhere at risk

710/04/2023

Working flexibly is the positive choice of many workers

● Increased flexibility characterises the changing nature of employment relationships over the last 20 years in the UK

● This change has been driven equally by employers’ needs to compete internationally and the needs of individuals to reconcile their work life and other commitments

● Greater flexibility has helped to increase the participation rate of parents -women in particular - and of older workers

● This flexibility takes different forms and is tailored to the specific needs of the business and the individual worker - zero hours contracts are a part of this mix. That most employees on zero hours contracts are happy with their current arrangement is in keeping with the finding by the Work Foundation that 80% were not looking for another job

810/04/2023

The evidence

910/04/2023

Working flexibly is the positive choice of many workers

● Most individuals who prefer to work on a zero hours contract rather than a less flexible contract broadly fit into one of two categories - either that they are not financially dependent on a fixed income from their job, or that they have other responsibilities like childcare, caring for other family members

● A growing number of individuals on zero hours contracts are older workers that are receiving a pension and enjoy being able to keep working at times and on terms that suit them

● Or they are currently in full-time education and use a zero hours contract as a way to maintain a relationship with an employer at home while at university, or as a way of being able to turn down work when studies need to be prioritised

1010/04/2023

Helps UK businesses compete internationally and create jobs

● In a recent CBI survey of business leaders, 97% said that having a flexible workforce was vital or important to the competitiveness of the UK labour market and the prospects for business investment and job creation

● On no other employment issue did the survey produce such unanimity of views across business. The importance of our flexible labour market as a key part of the UK’s attractiveness has been confirmed recently by the CBI’s Regional Councils

● Our survey also revealed that firms most often use flexible contracts to manage fluctuating demand and to respond quickly to growth opportunities. Over half (58%) reported that flexible employment contracts were an important stepping stone into work for groups most vulnerable to periods of unemployment - including young people and the long-term unemployed

For further details on the CBI/Accenture survey detailed, please see this link: http://www.cbi.org.uk/media/2521218/cbi_employment_trends_survey_2013.pdf

1110/04/2023

The evidence

1210/04/2023

Helps UK businesses compete internationally and create jobs

● The outcome of this consultation should look to tackle bad practice, not demonise flexible work. A system that benefits employers and individuals will be sustainable – including addressing the issue of exclusivity clauses - in practice this means that zero hours workers should be able to work for other employers and be free to decline work when it is offered

● It is difficult to conceive of a situation in which an outright ban on individuals on zero hours contracts from working for any other organisations can be justified

● There may however, be some commercially sensitive situations where employers need to operate some restrictions. Some individuals hold positions where they have access to information which would justify preventing them from working for a direct competitor. But even in this situation, this shouldn't prevent the individual from working for other companies who are not competitors

● The CBI supports the principle that if the employer is not able to guarantee any working hours then the individual should be free to turn down hours when they are offered. There is also a need for effective and timely communication

1310/04/2023

Helps UK businesses compete internationally and create jobs

● However, regulation that goes beyond setting a strong floor of rights risks jobs - a ban on offering shifts at short notice, or a requirement to justify shifts being offered at short notice would discourage employers from offering these hours to zero hours employees and make them more likely to be offered to agency workers or as overtime to the existing workforce

● An intervention which creates a simple formula for compensation due to zero hours employees when a shift is cancelled at short notice - two hours pay for example - would be better targeted

● Caution is also needed in seeking to ensure that employees have the security of guaranteed hours where there is longer-term demand from their continued employment

● That employers' need for flexibility is permanent should not however, mean that individuals are less able to meet their working ambitions. The best way to help them meet their ambitions is the combination of growth and opportunity, which is why businesses and government should focus on building effective routes to career progression while maintaining a strong floor of rights rather than extending to growth-reducing regulations which seek to legislate for best practices beyond minimum standards.

1410/04/2023

The evidence

1510/04/2023

Key outcomes that business wants to see

● A zero hours contracts policy should ensure flexibility suits both parties and not impede it where this is the case

● Individuals on zero hours contracts should only be restricted in who else they can work for where there is a clear and strong business need to do so. If not, and in the context of the GB consultation outcome, we would support a ban on exclusivity clauses

● Individuals on a zero hours contract should be free to decline work that is offered to them

● Employers should provide a short summary of the key terms of the individual’s zero hours contract

● The common law test of employment status should be protected● Specifying a minimum notice period for offering working opportunities would

be counterproductive● A right to have fixed or minimum hours would jeopardise jobs

1610/04/2023

Reflecting on Farry statement of 23 June

● We welcome that the Minister stated that such contracts ‘have been used responsibly, in many cases, for years’

● Further, the Minister’s reflections on flexibility are ones that CBI members echo – especially in the context of other forms of flexible working, forming a significant suite of positive working practices that reflect on the success of how our labour market is structured

● We acknowledge there has been a lot of concern aired publicly in respect of zero hours contracts and, while some of it is open to debate, there is an undoubted need to provide clarity to the situation but without unnecessarily impacting on the flexible model that exists. However, where there exist flagrant abuses by employers of the principle of zero hours contracts then there is no question from industry – bad practice must be tackled

● Given the lack of definition, there is also significant debate as to the actual number of zero hours contracts currently in operation in NI. With this is mind, it is a very welcome step by the Department to conduct NI specific research on the matter…

1710/04/2023

Reflecting on Farry statement of 23 June

● As the Minister said in his remarks, ‘If people are to have confidence in the use of zero hours contracts, then we need to consider how best to regulate them in ways that promote the interests of employers and employees’. That is a sentiment with which we agree

● It is also welcome, given some of the public debate, to hear the Minister clarify that those employed on a zero hours contract do indeed have protection under domestic employment law

● Whatever the outcome of the consultation and subsequent legislation/regulation that may or may not be introduced, it must be set against the backdrop of continually benchmarking our employment laws against those of our competitors

● We need to do as much as we practically can to enhance our competitiveness and attractiveness as a region to do business and invest in and our employment law framework, including zero hours contracts, is a critical piece in attracting inward investment and encouraging indigenous employers to grow

● We would also urge that any changes attempt to minimise further complexity in employment law and are as straightforward to implement as is practicable for employers

1810/04/2023

The consultation - exclusivity

● As the consultation lays out, and as we have referenced previously, there are some circumstances in which exclusivity clauses may be ‘useful’ and ‘justifiable’ – primarily conflicts of interest

● However, with exception to these, and in the context of what is proposed in Great Britain, we would be content with a ban on use of the clauses in zero hours contracts where an employer is unable to provide a clear, strong rationale for doing so

● We take the view that a ban would be a proportionate response to some of the issues that have been highlighted as it focuses on poor practice rather than demonising flexible work in general

● Keeping individuals informed of the nature of the contract which they are being offered will be critical to this process and, if suitable information is provided by the employer and the individual chooses to accept the contract, then it should be taken that they understand the terms and conditions that therefore come with the contract – albeit within the context of a proposed ban

1910/04/2023

The consultation – right to move to, or request, a move to a fixed term contract

● In our view such a proposal, and providing for it in a regulatory/legislative environment, would put jobs at risk

● A right for zero-hours staff to request fixed hours would be riven with difficulties – particularly around defining qualifying periods and regular working patterns, given that businesses most often use flexible contracts to manage fluctuations in demand

● Flexibility will always lead to peaks and troughs in the number of hours employees work in certain industries. Many such jobs do not have established working patterns and, therefore, we believe such a proposal would be unworkable and counterproductive in respect of the flexibility that is currently provided for

● If an employer chooses to, after any period of time, offer an alternative contract which may or may not be one that is fixed term, then that should be their choice and not one that they are prescribed to take

2010/04/2023

The consultation – provision of a minimum payment when work is not available

● We see no need to mirror what is being done in the Republic of Ireland on this matter

● If an employer has made an employee/potential employee fully aware of the terms and conditions of a zero hour contact and the employee/potential employee then accepts then we do not think a ‘compensatory arrangement’, as the consultation notes, should be provided for

● All employers should however, without the need for further regulation, be able to choose at their own discretion if they wish to follow a minimum payment model

2110/04/2023

The consultation – provision of annualised hours

● In respect of whether a worker on a zero hours contract should have the option to move to an annualised hours contract we take the view much the same as in our previous point – this should be left to the discretion of the employer, especially in the context of an individual accepting the terms of a zero hours contract whose terms and conditions have been properly detailed to them

2210/04/2023

The consultation – improving transparency

● In the context of ongoing public debate in respect of zero hours contracts we believe it would be in the best interests of all involved for improved transparency in their operation. The research the Department is conducting will be helpful in that regard – but we can and should do more

● Therefore businesses who offer contracted employees or potential employees zero hours contracts should provide a short summary of the key terms and conditions of the zero hours contract, if not already doing so

● If the Department wishes to develop and provide further guidance for contracted individuals/potential employees on what a zero hours contract constitutes and what it entitles you to in terms of employment rights then it should do so

2310/04/2023

The consultation – improving transparency

● In respect of an employer led Code of Practice, we have no issue with the development of this in principle. Like many other areas of joint working with DEL and other government departments we would be happy to engage on the development of a draft, and indeed final, code. We would however urge that such a code be as simplistic and straightforward to understand as is practicable in the context of the complex employment law picture that already exists. Further, we do not think it necessary that such a code should be set in statute. In our view a voluntary code would suffice as the overwhelming majority of employers would take the proper cognisance of it in exercising their duties. Would welcome LRA involvement in this

● Similar to our point on further guidance, if the Department wishes to develop, produce and promote model clauses for zero hours contracts then it should do so. As the consultation indicates, it should be left to each individual employer to decide whether they wish to use the clauses or not

David Fry, Senior Policy Adviser

e: david.fry@cbi.org.uk t: +44 (0)28 9010 1102

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