Firms use flexible employment contracts – including temporary,
variable- and zero-hours contracts – for a wide range of reasons,
including managing customer demand and because they say staff
prefer them. But there are real costs for some workers with
one-in-four firms reporting using them to reduce their wage bill,
according to a new Resolution Foundation report published today
(Thursday).
While there is plenty of research on the impact of flexible
contracts on workers, the report Firm
foundations – supported by Unbound Philanthropy – draws
on a survey of more than 750 employers to explore a far less
understood but equally important question – why firms use
flexible contracts, and what might affect their use of these
contracts in the future.
The report finds that around 3.8 million workers nationwide are
on some form of flexible contract, and that they are widely used
by firms. Three-in-four employers – equivalent to 1.7 million
across the UK – report using them.
For many firms, only a small share of their workforce are
employed on these contracts. However, over half (53 per cent) of
firms surveyed reported using them for at least a quarter of
their workforce. These ‘high use' firms are most commonly found
in the transport, logistics and comms, retail and wholesale, and
hospitality sectors.
Among firms using flexible contracts, the main reason for doing
so was to manage uneven demand, which reduces firms costs and can
reduce prices for consumers. Half of firms (51 per cent) listed
this as a reason, with a quarter (24 per cent) of firms saying
this was the most important reason.
Specific reasons included covering high seasonal demand (23 per
cent) and smoothing uncertainty (22 per cent). In addition,
one-in-four (25 per cent) firms using such contracts said they
allowed them to reduce their wage bill directly.
Firms also report that these types of contracts are popular among
workers, with one-in-three (32 per cent) employers using flexible
contracts saying that their staff prefer these types of working
arrangements.
Current policy may have created perverse incentives for
businesses to employ staff for a limited number of hours, with
one-in-seven (13 per cent) firms surveyed using flexible
contracts to reduce their obligations to contribute to staff
pensions and pay employer National Insurance.
This shows that while flexible contracts may be popular for some
workers, they are not ‘cost-free' if it means lower wages and a
smaller pension, as well as the insecurity and volatility they
can bring, says the Foundation.
The report finds that the use of flexible contracts may well
continue to grow in the years ahead. Among employers currently
using some form of flexible arrangements, close to half (48 per
cent) say that they plan to increase the share of their workforce
on variable-hours contracts over the next five years, while just
14 per cent say they plan to decrease their use.
But this growth is not guaranteed, and there are reasons why
firms may curb their use of flexible contracts. Almost two-thirds
(63 per cent) of firms employing staff on these contracts said
they would change their behaviour if legislation gave workers a
right to a fixed-hours contract or two weeks' notice of their
shifts, while more than a third (37 per cent) would do so if
their staff no longer wanted to be employed on these contracts.
The Foundation says that this shows that new rights to give
workers a meaningful choice over their working arrangements could
help to stem over-reliance on flexible contracts, and the
problems that this can create for workers in terms of pay and job
insecurity. However, a blunt tool like outright bans would prove
unpopular for many firms, and to a substantial subset of workers
too, who continue to benefit from these contract types.
Hannah Slaughter, Senior Economist at the Resolution
Foundation, said:
“Three-quarters of UK firms use flexible employment contracts –
such as variable- and zero-hours contracts – for a wide range of
reasons, including because firms say that workers prefer them.
“But flexible contracts are not always a simple win-win-win for
firms, workers and consumers alike. A quarter of firms using them
do so to reduce their wage bill, while workers can miss out on
higher pay and job security.
“New workers' rights, rather than outright bans, could help to
stem over-reliance on flexible contracts – and the problems they
can create for workers, while maintaining flexibility for workers
and firms who value it.”
Notes to Editors
- The analysis relating to employers' use of flexible contracts
come from a survey of 891 employers, of whom 771 used fixed-term
contracts lasting less than six months, casual workers, seasonal
workers, zero-hours contracts, contracts with between one and
eight guaranteed hours a week, and/or contracts for hourly-paid
workers with variable weekly hours. The survey was conducted by
Savanta, but the figures presented in this report have been
analysed independently by the Resolution Foundation, and the
views expressed here are not the views of Savanta.
