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Why are zero hour contracts bad?

Why are zero hour contracts bad?

1. Zero hour contracts are likely to reduce commitment and morale.

As many of us are likely to know already, the essence of a zero hour contract is that, as the term suggests, the organisation is not obliged to provide a particular amount of work for people to undertake. This approach has obvious appeal to organisations, and continues to be a popular choice for them. After all, with such a contract, a firm can simply say ‘there is no work at the moment’ and the affected staff would only be paid for work that they have done. If that were you, would you be committed to the organisation in question? Would you feel more committed if the organisation offered you some stability instead? Whilst we would all like to think that we would be dedicated no matter what the circumstances, most would answer no to question 1, and yes to question 2.

This lack of commitment may be reflected in reduced productivity, negative feedback, or perhaps a sense from individuals that what they think does not matter.

Even if we assume that there were no issues relating to low morale, and those working there remain fully committed to the place, despite the uncertainty, the people concerned may simply be unavailable for work, due to having to take on positions elsewhere to make ends meet. Either way, zero hour contracts are likely to hinder the building of a positive relationship between the organisation and its workers.

2. Zero hour contracts are likely to negatively impact on retention.

Where there is such uncertainty, there is likely to be a sense that people only work there until something better comes along. Employers may think that staff departures are inevitable and should not be a concern, after all the show must go on. There is much truth in that view: people do move on for all sorts of reasons and it is equally true that an organisation should not ever come to a grinding halt due to people leaving. However, there are also a number of reasons why departures should cause alarm bells to ring, particularly at high volumes:

  • Generally, it is cheaper to keep existing staff than to secure new ones.

Securing new staff is time consuming and costly. There are the obvious elements in the process such as the need to advertise the position, but it is also common for organisations to under estimate the time needed to properly consider what the new role should consist of. It is tempting to reuse the same advert again, but is the organisation really in exactly the same position as it was last time or is something else needed this time around?

 

In addition to advertising the position, there is then often the lengthy task of reviewing the applications, setting up interviews and devising tests/activities and a scoring system to determine who should be chosen. In addition, once the new person is in post, there is then the issue of whether any training and or shadowing is needed to ensure that the person can perform the role effectively.

 

The above is simply an overview of the elements involved. The point though is that it could have all been avoided if the person stayed and this in turn would result in considerable savings to the organisation. It is often argued that people leave a job because they are tempted by a higher rate of pay elsewhere, but that view is too simplistic. Rate of pay is undoubtedly a factor but there are many others that come into play too, such as the way that people are treated and having the uncertainty of a zero hour contract.

 

  • Departures are likely to reduce the skills and experience within an organisation.

The knowledge, skills and experience within a workplace are likely to be critical to an organisation: it is often what differentiates one business from its competition. If there were to be a large number of people leave at the same time this is likely to affect the quality of the product or service provided and/or the reputation of the company.  This situation could be described as a temporary blip, but building up the skills and experience that was lost will take time, during which standards may well fall.

  • Departures will reduce the capacity of the organisation with regard to the number of hours that it can undertake.

This is perhaps the most obvious problem. After all, if a large number of people leave within a short time how can the work in the pipeline get done? Offering the remaining staff more work may provide a short term solution but if there are a substantial number of unfilled posts that approach would be unsustainable. If the problem persists, it is likely that the  organisation finds that it has no choice other than to turn work down. This would represent a loss both in terms of the financial loss of the ‘lost’ work and also the fact that clients are unlikely to provide a second chance in future.

 

  • Departures can cause the remaining staff to feel unsettled.

If people are constantly leaving this will create a further sense of uncertainty. After all, if you don’t know who will be there from week to week it is difficult to plan who will be doing what by when. This in turn makings long term planning unachievable.

3. Zero hour contracts are often one sided.

It is often said that zero hour contracts have a value to both parties in that the flexibility is useful to everyone. For example, if an individual could not work a shift offered there would not be criticism from the organisation. However, in practice, it is common for organisations to impose considerable obligations on the individual meaning that there is no benefit to them at all, and the person has little or no control over what happens. This situation goes someway to explaining the negative coverage that zero hour contracts have received in the media.

 

4. Zero hour contracts may cause confusion regarding employment status and entitlements.

Those on zero hour contracts can feel separate from the organisation rather than a part of it. These feelings are made worse by the fact that organisations are often confused about what, if anything, the individual is entitled to. Is there an entitlement to holiday pay for example? If so, how is it calculated?  There are numerous points to be mindful of regarding entitlements and employment status. It is crucial to know what applies and under what circumstances. This is necessary not just because the uncertainty can damage trust between the individual and the organisation, but it could also cause the organisation to fall foul of employment law.

 

5. The use of zero hour contracts means that other options are often not considered.

As said at the outset, zero hour contracts can have an immediate appeal to organisations and as a result it can become the default position, without other options being considered. As has been highlighted throughout this article, there are a number of disadvantages to the use of zero hour contracts which have the potential to have a substantial and adverse impact on an organisation.

So, to answer the question why are zero hour contracts bad? They are bad because there are a substantial number of disadvantages associated with them and there are better alternatives available which properly address the needs of both parties.

At Plotkin & Chandler we work exclusively in the areas of HR and employment law. If you would like to discuss contracts and how a solution tailored to your needs can support your organisation to grow, please phone us on 020 3923 8616 or email us at info@plotkinandchandler.com.We provide such support on a standalone basis or as part of an ongoing support package. To view the range of support packages available please click on the link our fees.

 

 

 

 

 

 

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