On Zero Hours Contracts

On Zero Hours Contracts

Summary

The graph demonstrates that the proportion of zero hours contracts within the workforce continues to grow nationwide. This growth has been seen over the period shown (Q2 2018-19) within every region bar the North East and North West. These falls of have been marginal, at 0.2% and 0.1% respectively. The biggest increases have been felt by the East Midlands and the South East at 1%. This is despite overall employment growth fluctuating. The largest regional disparity between zero hours contract percentage and employment growth was again the East Midlands with a 2.1% drop in employment. Employment in the South East generally remained stable, with the rate dropping a more modest 1.3%. Perhaps most surprisingly, it is Wales and Northern Ireland that have experienced the next largest percentage increases in zero hours contracts (0.9% and 0.8% respectively). This is combined with both regions experiencing drops in the employment rate, though Northern Ireland fell by 2.5% more. Conversely, the West Midlands experienced the least change within the dataset, with no change in the proportion of workers on zero hours (2.6%) and only a 0.04% change in the employment rate.

What does the graph show?

The graph provides a snapshot of both the employment rate and the percentage of the total workforce on zero hours contracts. The data shown is for Q2 of both 2018 and 2019. The figures originate from the quarterly ONS report ‘Regional Labour Market Statistics in the UK: August’ of each year shown.

Why is the chart interesting?

In recent years, the UK government has frequently referenced record lows of unemployment. In Q2 2019, seasonally adjusted unemployment was at 3.9% and employment at 76.1%. Whilst these figures are excellent, they perhaps mask underemployment. As of the aforementioned quarter, 896,000 people nationally were employed via zero hours contracts, an increase of 115,000 since the previous year. The real-world impact of this figure has been minimised by some as simply a reflection in the increased use of the term ‘zero-hours’ in place of what was formerly known as casual labour. Regional percentage statistics still support an overall rise in employment on zero hours contracts. Whilst they do provide labour flexibility, there is disagreement over whether including those on a zero hours contract within the full employment figures is an accurate representation of what such contracts entail.

It is interesting that most of the percentage growth in zero hours contracts appears concentrated in certain areas of the country, though it remains a consistent trend nationally. The East Midlands has seen an increase in zero hours contracts of around 1%, despite 2.1% drop in employment overall. This is also the case with Northern Ireland, where a 0.8% increase accompanies the largest drop in the employment rate (2.8%). This is indicative of a trend that favours zero hours contracts. Indeed, the UK has experienced a 0.3% increase in the number of jobs that are zero hours. In those regions that do experience a fall, the drop is so marginal that it hardly diminishes this trend. Only the North West and the North East experienced a marginal percentage fall of no more than 0.2% with only a 0.03% change in employment for both.

This should not be dismissed as just a consequence of reduced employment overall. The rise in the percentage of jobs with zero hours contracts does not always coincide with a fall in employment. Wales is the prime example, a 0.9% rise in zero hours contracts with a corresponding 0.3% drop in the overall employment rate. Relative to the East Midlands, the South East also demonstrates this, with the joint highest percentage growth in zero hours (1%) despite only a 1.3% drop in employment. Thus, significant change is not always down to employers opting to reduce full time employment in favour of a more flexible workforce. Rather it is the growth of zero-hours contracts as a form of job creation in place of full time employees.

Highlighting all the above trends, the figures for Northern Ireland warrant investigation. Despite having the fourth highest growth in percentage of zero hours contracts (0.8%), that percentage remains lower than any other regional economy. Over the same period, the region has experienced the largest drop in the employment rate of 2.8%. Despite continuing the trend of employers laying off full time employees in favour of those on zero hours, some interesting features have caused changes to the Northern Irish economy specifically.  As of March 2019, large sections of the Northern Irish workforce were employed in the healthcare (15%), education (8.4%) and administration (6.9%) sectors. Privatisation of certain areas of the public sector has driven up the percentage of employees of zero hours. Care workers are a prime example, as of April 2016, 40% nationally are on zero hours contracts. Within Northern Ireland, short term care services are largely contracted to SMEs, with a variety of larger organisations (BUPA and Four Seasons etc) providing long term care. Whilst increasing privatisation of the public sector has casualised the workforce, this change has been consolidated by the longstanding private sector. This is in large part due to a growth in the region’s services industry, which accounted for 77% of growth in the 2018 financial year. This has led to an increase in people employed in sectors such as administration, contributing to a 2.9% rise in the percentage of the Northern Irish workforce since 1996. Administration is the leading sector in terms of zero-hours employment nationally (23% as of 2018). This has come alongside dwindling employment levels overall in more traditional industries such as agriculture. Employing just 2% of its workers on zero-hour contracts nationally, agriculture has experienced a 2.6% reduction of total Northern Irish workers since 1996.

As has occurred on a sectoral level in Northern Ireland, the UK as a whole has experienced a trend towards flexible labour across the economy. This is not limited to one sector, rather businesses of all sizes appear to be laying off full time staff over those with flexible contract hours. Perhaps the most visible indicator of this trend has occurred within large businesses. As of November 2017, over 25% of businesses with 250 employees and over utilised contracts with no guaranteed hours. This is in large part due to the success of companies within the gig economy and their flexible labour models. Indeed, such companies are currently employing 4.7 million people or 1 in 10 adults in the UK. Companies such as Uber and Deliveroo have changed the employment landscape through their success, with start-up FIVERR seeing its share price rise 90% on its first day of trading. From its creation in 2013 through to 2017, Deliveroo has ‘created’ 7,200 jobs in the UK restaurant sector, increasing revenue by £460 million over the period. Deliveroo’s employment model of flexible labour has led to growth mainly of couriers, classed as ‘self-employed independent contractors’, but also of cooks, chefs and support staff preparing meals off restaurant sites in ‘dark kitchens’ to feed growing demand for deliveries. Being designated as contractors, employees are guaranteed far fewer rights than the directly employed.

Despite their undoubted impact on the labour market, large companies remain a small percentage of the economy regionally. 99.9% of UK businesses are classified as SME, accounting for 51% of business turnover and 60% of all UK employment. These are far less likely to employ on the basis of zero hours, with 84% not utilising them whatsoever and 60% paying the National Living Wage before its rise in April 2018. However, SMEs have not fully embraced labour rigidity. The vast majority are sole proprietor businesses, accounting for 71.4% of all business in the UK as of October 2018. Indeed, the number of self-employed has risen from 3.3 million in 2001 to 4.8 million in 2017. This is inherently flexible as the amount of work and hours are ultimately self-determined, as well as lacking protections experienced by employees on hours-based contracts. Moreover, flexible labour may rise as a proportion of the workforce within SMEs as the increasing accessibility of technology enables remote working. Therefore, without regulation, SMEs are likely to increasingly employ flexible labour in line with the trend seen from all sectors of the UK economy.

 

Posted by Aimée Allam