Could a ban on zero-hours contracts backfire?

With party conference season drawing near, political parties are beginning to trail specific manifesto commitments. One such commitment came this week from the Labour party, with Angela Rayner providing a “cast iron guarantee” to the adoring TUC annual conference that Labour would ban zero-hours contracts within 100 days of a new Labour government.

But could this latest plan to squeeze flexibility out of the workforce inadvertently result in workers being deemed as self-employed – despite being treated like employees?

Zero-hours contracts – exploitation or providing vital flexibility?

Unfortunately, we’ve all heard stories of unscrupulous employers using zero-hours contracts to exploit workers. Many of those employed on zero-hours contracts tend to be in lower-skilled jobs, more vulnerable to income shocks, and younger or female.

However, it is worth noting that some workers prefer the flexibility and control that the a zero-hours contract provides. For instance, many with caring or childcare responsibilities may choose this model so that they can work around these commitments.

Ultimately, whether zero-hours contracts can be classed as exploitation should come down to whether the worker has the power to choose when to work. As soon as an employer using a zero-hours contract threatens to withhold future work, punishes the worker for not taking work or acts in anyway that can be deemed as one-sided flexibility, it is then clear that that contract is not working in the interests of the worker.

IPSE’s Director of Policy, Andy Chamberlain, went on LBC with Iain Dale this week to discuss Labour’s plans on zero-hours contracts – listen from 14:00 and you will need to be logged in to Global Player.

Is banning them the solution?

Would banning these contracts remove the terrible practices adopted by immoral employers? Arguably not. Rather than seeking to squeeze even more flexibility out of the workforce at a time when the UK is crying out for flexible talent to drive the economy, it should be these rogue employers that we seek to clamp down on.

The proposed ban may also not work in practice. Employers could circumvent the ban by guaranteeing just one hour of work per week in the contract whilst continuing to exploit the worker.

At IPSE, we’re also worried that such a ban could lead rogue employers to try and classify their workers as self-employed, when it’s clear that they are operating as an employee – so-called ‘bogus self-employment.’ Instead of implementing an outright ban on zero-hours contracts, proactive action from the government on abusive employers would be preferable.

The Labour Party has talked a great deal about bogus self-employment in recent years and the need to clamp down on it. Indeed, this was a central recommendation made in a recent Labour green paper titled a ‘New Deal for Working People.’

They have also pledged to introduce a single ‘worker’ status, which would replace the current three statuses used in employment law so that it becomes just two. This would see any engagement that is not deemed ‘genuinely self-employed’ fall into the worker status.

For more information on the single worker status idea, we wrote a few weeks ago about how it could impact IR35 going forward.

A squeeze on flexibility

The recent proposals from Labour have, unfortunately, seen the self-employed overlooked. Aside from promising to extend sick pay to the self-employed, there is relatively little in the plans that would benefit them.

Earlier this year, IPSE submitted a written response to the Labour Party’s National Policy Forum, where we recommended the adoption of IPSE’s Self-Employment Matrix to accurately define and determine the genuinely self-employed. Alongside this, we also called for reform on IR35, an end to MSC investigations and action on late payment and training for the self-employed.

Whilst it’s encouraging that Labour are interested in providing some clarity on employment status and clamping down on abuse of zero-hours contracts, we’re worried about the potential implications for the flexible workforce.

Let’s not forget that many umbrella company workers are operating on contracts with no guaranteed hours…