It is fair to say that zero-hour contracts get a lot of bad press. While there are instances where they can be exploitative, the flexibility they provide to both employers and employees cannot be overlooked. So understandably, when Labour announced its plans to ban zero-hour contracts, there was quite a lot of backlash.
A key point of contention was the increased costs to businesses. After all, it can be difficult for many businesses to predict their labour requirements and it does not make sense financially to hire people full-time. So, how much will the proposed changes potentially impact businesses?
Is Labour Banning Zero-Hour Contracts?
Labour has consistently promised to ban zero-hour contracts, where employers are not required to offer a minimum number of working hours. However, their proposals have been softened, allowing zero-hours contracts to continue, but only if they are not "exploitative." For example, contracts where workers must be available without guaranteed work may be banned. Additionally, workers on zero-hour contracts who work regular hours for 12 weeks or more will gain the right to a regular contract. To learn more about Labour’s plans, read our guide on the employment law changes employers need to be aware of.
How Will The Changes Impact Employers?
Recent research conducted by our employment lawyers has revealed the potential financial impact of Labour's proposed reforms to zero-hour contracts on various industries, particularly hospitality, construction, and finance. The study estimates the costs businesses in these sectors could face if they are required to offer regular employment contracts to workers currently on zero-hour arrangements.
The hospitality industry, which includes sectors such as wholesale, retail, hotels, and restaurants, is highlighted as one of the most affected. With an average weekly wage of £447 and 64,000 employees on zero-hour contracts, the cost to employers could reach up to £1.49 billion if regular contracts must be provided.
In the construction industry, where 41,000 workers are on zero-hour contracts, and the average weekly pay is £773, the potential cost to employers could rise significantly to £1.65 billion.
However, the financial and business services sector might bear the greatest financial burden. With an average weekly wage of £949 and approximately 43,000 zero-hour contract workers, employers in this industry could face costs of up to £2.12 billion to comply with the new regulations.
These figures highlight the significant financial implications of Labour's proposed changes, highlighting the challenges that key sectors could face if they are required to transition a substantial number of zero-hour workers to regular contracts.
In response to the findings, Qarrar Somji, Director and Solicitor-Advocate at Witan Solicitors, says: “Zero-hour contracts get a lot of bad press and while there are instances where they can be exploitative, it's crucial to recognise the benefits they offer both workers and employers.”
“For individuals with other commitments, such as caregivers or parents with young children, the flexibility of zero-hour contracts can be invaluable. Similarly, small businesses like pubs, which may not have the financial capacity to offer fixed, full-time positions, can effectively manage their staffing needs by employing workers on short notice. This flexibility is especially vital in industries where demand can be unpredictable.”
“Although Labour’s proposed reforms are not yet finalised, it’s evident that change is on the horizon. We strongly advise employers to proactively review their current employment contracts and explore ways to provide regular hours. This will help minimise the potential costs associated with relying on alternative flexible working arrangements, such as agency workers.”
For more detailed advice on how to prepare your business for Labour’s employment law pledges, get in touch with us today.
