Zero hours reforms risk increasing employment costs while cutting jobs for young people, CIPD consultation response warns

Complex new rights for zero and short hours contract workers risk increasing employment costs and employers’ reliance on temporary workers, the CIPD has warned in its response to the government’s consultation on the proposed measures which closes today.  

The CIPD is calling for tripartite discussions - involving Government, key employer-side organisations, and trade unions - to discuss the consultation in order to agree areas where changes can be made so the regulations are workable in practice. 

The CIPD’s consultation response advises that unless changes are made to some key measures, the regulations will undermine the Government’s objective of boosting growth and will have damaging unintended consequences for both businesses and workers, and young people especially.  

Key data points include: 

• two thirds (65%) of employers that use zero hours contracts report they expect their HR and management costs to increase as a result of the proposed reforms, while a third (31%) expect to have to make redundancies (1). 
• a third (33%) of employers that use zero hours arrangements expect to increase their use of self-employed contractors or other temporary and casual staff as a result of the planned reforms (1). 
• the reforms stand to disadvantage and reduce job opportunities for young people in particular. Nearly half a million (479,000) young people aged 16-24 are currently on zero hours contracts (2), with a quarter of a million students balancing study and work (3). 
• most people working on zero hours contracts are classified as ‘employees’ by their employer, not ‘workers’. Those working on zero hours contracts typically have comparable job satisfaction to those working regular hours in similar jobs (3). Nine in ten (89%) zero hours workers report their contractual arrangements suit them well (3), with only a minority who want more hours in their current job (18%) (2), or a different job with longer hours (7%) (2). 

Ben Willmott, head of public policy at the CIPD, the professional body for HR and people development, said: 

“Without significant compromise on some of the key measures in this consultation, there is a real risk that these regulations will disadvantage both businesses and workers and undermine efforts to boost employment and growth.  

"Overall, the evidence shows that zero hours contracts provide valuable flexibility for businesses dealing with fluctuations in demand, enabling people to balance working while juggling studying or caring commitments, for example. 

"Unless there is agreement on a longer reference period and the appropriate hours threshold, implementing these regulations will be costly and raise so many compliance challenges that many employers will simply stop using zero hours and variable hours contracts altogether. 

"Employers are also unlikely to replace zero hours contracts the with more permanent, guaranteed hours jobs, and will instead increase their use of temporary workers, short-term casual staff, and freelancers. This will mean that a policy designed to reduce insecure work will actually have the opposite effect, damaging labour market flexibility and the availability of flexible jobs for those that need them, particularly young people.” 

The CIPD’s consultation response, based on focus groups and interviews with HR practitioners, a large-scale employer survey, and analysis of official UK and international labour market data, is calling for:  

• changing the reference period - over which employers would be required to measure the number of hours typically worked to establish the offer of guaranteed hours - to 52 weeks rather than the government’s preferred option of 12 weeks 
• the hours threshold - which decides how many low hours workers will have the right to guaranteed hours – should be set at the lowest level of 8 hours 
• greater flexibility on the requirement to provide advance notice of work schedules to ensure employers are not penalised for having to ask staff to volunteer to work at short notice for reasons beyond their control.