Zero hours contracts in Scotland: Interim Report - Scottish Affairs Committee Contents

8  Public and private sector contracts

115. Zero hours contracts and other forms of casual employment are appropriate in certain circumstances and can work to the advantage of individuals. However, as the evidence we have received makes clear, there is also a large number of people who are forced to undertake casual work when their preference is for full-time permanent employment.

116. Zero hours contracts are often cited as a legitimate response to a need for a flexible labour force that enables employers to respond to peaks and troughs of demand. Too often, however, employers choose to use zero hours contracts when the workflow is regular and there is no need for flexibility. Instead they use the contracts to avoid the costs and responsibilities that come with having a permanent workforce. For the worker this means a lack of certainty over hours and income, reduced employment rights and an unbalanced employment relationship where the employer has all of the power and the worker is vulnerable to arbitrary dismissal. There are downsides for the employer as well. Relying on a casual labour force leaves an employer without a guaranteed pool of specialist labour, it can affect an employer's ability to recruit, train and retain high quality staff and can result in a reduction in the continuity and quality of services provided.[187]

Private sector

117. Many retailers, including Tesco, Asda, Sainsbury's, Morrisons, John Lewis, Marks and Spencer, Argos, Homebase, B&Q, Pret a Manger, Waitrose, Next and Greggs, have confirmed that they do not use zero hours contracts. Many of these companies face peaks and troughs in demand yet are able to manage them without zero hours contracts. Greggs chief executive, Roger Whiteside, told TheGuardian:

    To have a flexible workforce to call on for a business is obviously very attractive but we have certain values with our business, especially with looking after our staff and helping in the community. The idea of having zero-hours contracts doesn't fit in with that at all.I can understand why it would be attractive but it's not something we do.[188]

Though they may not use zero hours workers directly, or at least on their retail premises, some of the companies listed above may well have suppliers or distributors who use zero hours contracts.[189] Scot Walker explained that, in the meat processing industry, "the retailers, the supermarkets that we provide products to, many of whom claim and purport to be ethical retailers, […] allow this huge casualisation to take place within their supply chain."[190]Sainsbury's, Tesco, Waitrose and Marks & Spencer, amongst others, are members of the Ethical Trading Initiative-"a tripartite organisation of employers, trade unions and non-governmental organisations, whose aim is to try and improve the lives of workers across global supply chains".[191] Some members of the Initiative seek to implement the ETI-code in their own direct workplace while others will also try to influence the behaviour of those across their supply chain. Scot Walker suggested that sometimes UK workers were overlooked:

    If you are asking me do supermarkets that promote fair trade ensure at home that throughout their supply chains workers get a fair crack of the whip, my experience of that is no.

We welcome the commitment of many major retailers not to employ workers on zero hours contracts. We call upon them to extend that commitment to their supply and distribution chain. We do not believe that major retailers who are against zero hours contracts within their organisations would be happy to be seen to profit from their use elsewhere.

118. The use of zero hours contracts is complex. While we support the commitments made by those companies who do not use them, we must be hesitant about castigating all of those who do not make such a commitment. It has been reported that some companies, such as JD Wetherspoon, McDonalds and Hertz who employ individuals on zero hours contracts offer those workers full employment rights as well as other benefits such as entry into the company pension or bonus scheme.[192] McDonald's Vice-President for HR, Jez Langhorn, when asked to defend his company's use of zero hours contracts, pointed out that, "from a response rate of 90%, around 94% of our employees said they were happy with their hours and the flexibility of their contract".[193]Not all workers on zero hours contracts are exploited or dissatisfied, but we believe that where an individual has a regular pattern of work they should be entitled, after a specified period of time, to request a contract of employment that reflects the hours they work. This would provide individuals with the reassurance of guaranteed work which a zero hours contract cannot offer. There should be a presumption that such requests are treated favourably unless there is a clear reason to do otherwise. The Government should explore how such a system might be set up and monitored for abuse.

Public sector

119. The public sector is one of the biggest users of zero hours contracts. In addition to ensuring that workers who work directly for public sector bodies are not on zero hours contracts, the Government, the Scottish Government and local authorities can use public procurement policy to make insecure working unattractive to other employers. Through procurement legislation and guidance, public sector administrations can insist that any staff that are going to be employed as part of a particular procurement deal must be afforded certain terms and conditions, such as to be paid a living wage or to be on a fixed-term contract with set hours.

120. In our recent Report on Blacklisting we recommended"that direct employment and transparent recruitment practices should be standard for all public sector contracts in the construction industry".[194] We can see no reason why those principles should not apply to all public sector contracts. The Scottish Government's Procurement Reform Bill, currently before the Scottish Parliament, is a good example of an opportunity to do this. Dave Watson told us that through the Bill the Scottish Government could "lay down what we could call decent employment standards as part of that arrangement".[195]We recommend that the UK and Scottish Governments should have procurement policies that guarantee minimum standards for workers and which reduce the use of insecure employment practices such as zero hours contracts. We call on both Governments to set out what steps they will take to achieve this.

121. Local authorities are generally responsible for the purchase of care services from the private and voluntary sectors.[196] We have already discussed the large numbers of care workers who are on zero hours contracts and the impact such arrangements can have, both on the carer and on the quality of care he or she is able to deliver. Local authorities have to meet increasing demand for home care while at the same time their budgets have been significantly cut. The increase in the use of zero hours contracts by private and voluntary sector organisations in the care sector may be a response to this challenge, as local authorities insist they do more with less money. Dave Watson explained that some voluntary sector providers are considering revising their approach to employing carers:

    I think that one or two of the bigger ones—I cannot give you a name yet—we have been talking to might be in the situation to be able to hold themselves up as something close to an exemplar and show you how they, in a very difficult time for them in terms of budget cuts and so on, have moved, if not to entirely eliminate zero hours contracts to reduce them quite considerably.[197]

122. We recognise the financial pressures that local authorities are under but it is disappointing that the reduction in funding has prompted some to oversee a diminution in the terms and conditions of workers in the social care sector. Commissioners of care services should make good conditions of service for care workers part of their selection criteria. An improved procurement policy from the Scottish Government would send a clear message to local authorities to reduce their reliance on zero hours workers to meet their need for social care provision.

187   University and College Union (ZHC002) Back

188   Burger King and Domino's Pizza also using zero hours contracts, The Guardian, 6 August 2013  Back

189   Qq89-90 Back

190   Q180 Back

191   Q181 Back

192   Workplace Savings and Benefits, How JD Wetherspoon utilises zero hours contracts, 19 December 2013; CIPD, Zero hours contracts: myth and reality, Research Report, November 2013; and HR magazine,McDonald's VP HR defends use of zero-hours contracts, 3 September 2013 Back

193   HR magazine,McDonald's VP HR defends use of zero-hours contracts, 3 September 2013 Back

194   Scottish Affairs Committee, Sixth Report of Session 2013-14, Blacklisting in Employment: addressing the crimes of the past; moving towards best practice, HC 543, para 45 Back

195   Q253 Back

196   Q250 Back

197   Q323 Back

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Prepared 14 April 2014