Majority of businesses set to rethink zero hours contracts, RSM UK finds
As the government admits its plan to ban zero hours contracts could cost businesses up to £3bn a year, RSM’s UK Workforce survey indicates most businesses will scale back their use, with over a third turning to agency workers instead – driving up the cost of flexible labour.
Research from RSM UK has found that over three-quarters of businesses (78%) are making changes to zero hours contracts, while almost a third (32%) will instead offer guaranteed hours, 21% will reduce their use of zero hours workers and 17% will no longer use them at all.
Interestingly, over a third (38%) will look to use more agency workers to deliver flexible resource in an attempt to circumnavigate their obligations to provide guaranteed hours, which almost a quarter of businesses (24%) are concerned about. This jumps to almost half (48%) of retailers drawing on agency workers and almost a third of retailers (32%) being concerned about new obligations to provide guaranteed hours. However, that indicates a misunderstanding of the new legislation as the right will still apply to agency workers and the end user may still carry the liability for compliance.
Charlie Barnes, head of employment legal services at RSM UK said: “The new legislation is leading businesses to essentially stop using zero hours contracts by either offering guaranteed hours, reducing the use or not using them at all. Without banning the use of such contracts, the complexity of the new rules has essentially led to the same end result.
“Employers trying to do the right thing risk being burdened with increased administration, alongside an obligation to provide a set number of hours, even where demand isn’t there. This will ultimately drive-up costs and push businesses to explore alternative ways to fill labour gaps, rather than hiring more staff – reducing opportunities for those who value or rely on flexible work.
“The government’s consultation document indicates that there may be some exemptions for businesses using seasonal workers or to cover a particular event, which will be welcome. However, where flexible resource is required, many businesses, particularly retail, appear to be turning to agency workers and taking on additional costs to avoid the administrative burden of using zero hours contracts. However, that won’t mitigate all the legal risks of this new legislation. As a result, retail, leisure and hospitality employers already struggling in the current economic environment, following employment and rate cost rises, will bear the heaviest burden.”