The Labour Party has backtracked on its proposal to ban zero-hours contracts, instead claiming “flexibility can’t all be one way”.
The proposed ban of zero-hours contracts had formed part of Labour’s New Deal for Working People, a series of reforms to “strengthen workers’ rights”, including banning fire and rehire practices and introducing the ‘right to switch off’. However, it has now faced criticism that it is being watered down following the U-turn.
In a speech to the Association of British Insurers, shadow chancellor Rachel Reeves said: “After 12 weeks if you’ve been working regular hours, you’ll be able to get that permanent contract. But if you want that flexibility as a worker, you can remain on the contract you’re on.”
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She said businesses have “nothing to fear”, stating: “There’ll be nothing in Labour legislation that would stop employers from using overtime, or taking workers on on a seasonal basis to fulfil demand at Christmas or during summer.”
The UK needed a “reform of employment rights”, she said, adding: “There is now a mountain of economic evidence that fair pay and in-work security are crucial, not only to fairness and dignity but to our productivity too.
“More secure work results in a more motivated workforce, but also workers who are more willing to move jobs because they can be guaranteed the security of work.”
However, Labour’s green paper, published in January, said it would “end ‘one sided’ flexibility” and “ensure all jobs provide a baseline level of security and predictability” by banning zero-hours contracts and contracts without a minimum number of guaranteed hours.
“Not every employer will want or need to have all its staff on fixed, full-time contracts, but these proposals will ensure workers do not have to shoulder the sole burden for unexpected and last-minute changes to working schedules,” it said.
So what would Labour’s proposal to regulate zero-hours contracts mean for employees and businesses? People Management asked the experts for their verdict.
Should zero-hours contracts be banned?
Steve Nicholls, managing director of Executive Connexions, says Labour’s proposal reflects a “nuanced approach to balancing flexibility and stability in the workforce”.
“By offering workers the option for a permanent contract after 12 weeks of regular hours, they aim to provide a safety net without completely eliminating flexibility,” he says. “This acknowledges the diverse needs of both workers and businesses, potentially easing anxieties for workers while maintaining some flexibility.”
Samantha Mullins, director at Latitude HR, says zero-hours contracts “have their place” and can be useful for those who want greater flexibility or who have intermittent availability.
“However, when used over an extended period even though employees are consistently working regular hours, or to drop shifts at short notice, they don’t seem fair,” she tells People Management.
Mullins says a complete ban on zero-hours contracts could have a negative impact on availability of work: “Companies may be less likely to advertise vacancies or cut contracts short through fear they will be forced to offer permanent contracts.”
Rather than implementing a ban, she says the government could “be more creative” in how they prevent exploitation, such as requiring businesses to give notice of work rotas and cancellation of shifts, as well as stating a ratio of permanent zero-hours contracts permitted within a company.
Nicholls further highlights challenges that could arise if legislation were implemented: “It may impose financial burdens on businesses, leading to reduced job opportunities or increased automation. Moreover, loopholes or circumvention tactics could undermine the intended protections for workers.”
Guidelines, support mechanisms and ongoing evaluation will all be needed if the proposals are introduced, he adds.
Matt McBride, employment partner at Freeths, has concerns about the proposals outlined by Reeves, telling People Management that the proposed retention of “flexibility” could lead to a “risk of employers putting pressure on employees not to apply for permanent contracts”.
He adds that they could also make sure the detail of a permanent contract means it “isn’t an attractive alternative” to prevent employees from taking them up.
“Any legislation may seek to prevent employers acting this way, but it might be very difficult to cover every angle where a business might seek to discourage applications for permanent contracts,” says McBride.
Shazia Shah, legal director at Irwin Mitchell, notes another loophole for employers to exploit in the proposals: “Employers that want to continue to exploit staff on zero-hours contracts will be able to avoid this ban by ensuring that their work stays irregular and unpredictable.
“In practice, therefore, workers who might otherwise expect to receive a certain number of minimum hours could be worse off.”
Shah suggests that Labour could instead improve the Workers (Predictable Terms and Conditions) Act, expected to come into force this autumn. It will require employers to have business grounds for turning down a request for a predictable work pattern.
“As currently drafted, an employer can turn down requests on a number of business grounds that won’t be difficult to establish,” she explains. “Workers won’t be able to challenge the reasonableness of the decision, only the procedure that sits around the process.”
However, Henry Chango Lopez, general secretary of the IWGB Union, which represents gig economy workers, says the move represents a “watering down” of commitments made by Labour, and is “disappointing but unsurprising as the party continues to pander to businesses rather than standing with working people”.
“Workers are often forced to accept poor conditions and precarious contracts across sectors due to desperation and extreme power balances between employers and employees in the UK,” he adds.
He says the new proposals would enable this power imbalance to “persist”, adding: “It is becoming increasingly clear that a Labour government will allow these exploitative practices to continue.”