The proposed changes to zero-hours contracts are part of a major shake-up of workers’ rights outlined in the government’s Employment Rights Bill.
This piece of legislation, set to take effect in 18 months to two years’ time, proposes a raft of changes on everything from unfair dismissal claims and flexible working to parental leave.
It is part of Labour’s commitment to be both ‘pro-worker and pro-business' and following their general election win Deputy Prime Minister, Angela Rayner, made a commitment to deliver the bill within their first 100 days in office.
Labour duly delivered that pledge – after 98 days. However, due to the new huge amount of change proposed in the new bill, much of the detail in the current strategic overview requires fleshing out or tweaking.
The government is currently conducting a consultation as part of its attempts to do that. One of the first people to meet with Ministers was Reed’s Chairman and CEO, James Reed, and we aim to remain central to the ongoing conversation between Westminster and business as it continues.
What are the proposals around zero-hours contracts?
Zero-hours contracts are those where workers are not guaranteed hours from employers – but under which they also do not have to work when asked.
The new legislation proposes that organisations would be required to offer a zero-hours worker a guaranteed-hours contract based on those hours they work during a 12-week period.
It does allow those employees who prefer having a zero-hours contract to remain on it if they want to. The change is that under the new rules they would have the right to guaranteed working hours. Those on zero-hours contracts would also be entitled to ‘reasonable’ notice ahead of changes to their shifts, and compensation if a shift is cancelled.
How a simple solution doesn’t solve a complex problem
The Labour government’s theory is that rather than having zero-hours contracts, employees have greater rights and guaranteed hours.
Take the example of someone who works behind the bar at a pub on a zero-hours contract. They have no guaranteed shifts or working hours, but what happens is that they will end up working a standard 20-hour week, and they will do that for months on end. The government is saying that in such a scenario, it is not right for that worker to be on a zero-hours contract where they lack stability and could be jettisoned at any time.
Labour want to implement a system whereby that employee would be on a 20-hours employment contract, with the stability, protection and guaranteed income that comes with it.
The idea is to remove the potential for one-sided flexibility, where everything is loaded towards the employer.
However, this is only one scenario and what many leaders are asking is what happens when it comes to temporary working when using a recruitment company.
Ultimately, zero-hours contracts play a crucial role in the operation of the labour market, for both recruitment companies and those hiring access to a flexible pool of talent.
Furthermore, temporary workers can consist of everyone from consultant doctors to supply teachers and factory workers. It is a very broad church of people in very different situations. The business model of recruitment agencies is to find as much work as possible for a temp, because that’s how recruitment companies succeed.
Are consultant doctors really in insecure work and in need of greater protection?
Suddenly, you have a philosophical problem around how to deal with an issue when you have a range of employees grouped under one category.
The conversations which are adding nuance to policy
What we want to do now is have a really constructive discussion with government on a range of questions around the Employment Rights Bill, including zero-hours contracts.
So far, we have had some very positive conversations, and there is an ongoing process of debate and discussion. There is clearly an appetite from the government to engage with business and with organisations such as Reed.
What we really want to get across is how they can avoid the unintended consequences of the legislation they are looking to bring in. New rules which are aimed at one group of workers can create unwanted problems for others and the questions currently being debated don’t necessarily come with simple answers. Legislation clumsily implemented could do more harm than good.
Let’s look again at the example of the pub worker. Some people have said one solution to the questions around agency workers is simply to exempt them from the new legislation. Bingo, problem solved. However, the worry is that if you do that, what is to stop a pub chain from setting up their own on-house agency, putting in their workers into that and calling them agency workers, and then effectively doing the same thing they currently do now.
Suddenly, by exempting agency workers, you have created a loophole.
James Reed and I talked to the minister about supply teachers, many of whom register with a range of recruitment companies. They might not know until the morning they are required whether they will have a shift on any given day, but they also have the power to turn that work down.
That is not insecure work. These people do not necessarily need guaranteed hours. Furthermore, supply teachers are generally registered with a number of different agencies, so which one would be required to offer them guaranteed hours?
Another question we have been asking is who, on day one, writes and guarantees hours? If it is the end hirer, the fear is that will have an impact on the overall attractiveness of temporary and project working. Ultimately, will clients start saying does everyone need to go perm?
That would not be a good thing. There are a host of reasons why temporary work is important, from flexibility and cost control to quickly scaling up teams. What effect would these changes have on organisations which need to scale their workforces up and down quickly depending on the peaks and troughs they will naturally experience?
We can’t have too rigid a system where businesses are not able to scale their workforces based on the market.
Room for compromise – but perfection must not be the enemy of progress
What I must say is there has been recognition by the government of these issues and that they need to find solutions.
The challenge they have is in avoiding creating a solution which deals with a problem that only exists in part of the labour market. Many commentators believe the solution in the Employment Rights Bill is cracking a nut with a hammer.
One way of approaching it, and this is something we are examining with ministers, is to remove the loopholes the legislation could potentially create. If, for example, we could take away the loophole that would allow a pub chain to create their own internal recruitment agency to circumvent the rules, would that then allow everyone to look again at exempting agency work from the legislation?
That’s one approach. Another option would be secondary legislation that drills down into the detail and addresses all these points. Ideally, it would be possible to find a solution that provides the flexibility that improves the situation for those workers being treated exploitatively by zero-hours contracts without, say, shooting a big hole in the side of the supply teaching system that is so important to our schools' system.
Ultimately, what everyone wants is an outcome which helps to provide the growth the economy needs, while addressing abuses in the current system.
There is one final factor in play though, and that is that the worst possible outcome of these plans is that employing temporary workers becomes too difficult and too costly. If you make it too hard for big organisations to take people on in the UK, you risk them deciding to employ them elsewhere or using technology instead of people.
At the end of 2024, The Bank of England released a survey which showed more than half of British employers' plan to raise their prices and cut jobs as a result of Labour’s first Budget. That is a real challenge for them to consider.
There is no point having excellent rights for workers, but no work for anyone to do.
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