A presentation given by David Fry from the Confederation of British Industry (CBI) Northern Ireland to a public consultation event on zero-hours contracts, hosted by the NICVA Centre for Economic Empowerment on 19 September 2014.

1. PRESENTATION TO NICVA
ON ZERO HOURS
CONTRACTS
FRIDAY 19 SEPTEMBER
DAVID FRY

2. 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.
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3. The evidence
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4. 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…
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5. 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…
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6. 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
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7. 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
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8. The evidence
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9. 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
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10. 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.pd
f
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11. The evidence
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12. 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
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13. 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.
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14. The evidence
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15. 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
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16. 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…
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17. 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
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18. 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
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19. 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
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20. 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
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21. 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
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22. 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
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23. 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
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24. CONTACT US
David Fry, Senior Policy Adviser
e: david.fry@cbi.org.uk
t: +44 (0)28 9010 1102
www.cbi.org.uk
linkedin.com/company/cbi
@CBItweets