Workers with zero-hours contracts are being exploited by employers and earn significantly lower wages than those on conventional deals, according to the first major study of their impact.
The Resolution Foundation think- tank found that many people on the contracts, which put employees on standby with no guarantee of any work, live with “almost permanent uncertainty”.
They struggle to balance their family budgets and fear that, if they turn down the chance to work, employers will punish them by not offering it in future.
The study, published today, shows that zero-hours workers earn on average £9 an hour (gross) compared with £15 an hour for people on more conventional contracts. Graduates on zero hours average £10 an hour, compared with £20 for those with set hours.
Workplaces using zero-hours contracts have a higher proportion of low- paid staff than those which do not. People on zero-hours contracts work less on average – 21 hours a week, compared with 31 hours for more conventional contracts. This suggests the shift towards zero-hours working is contributing to the rising rates of “under-employment” since the start of the recession.
More people on zero-hours contracts would like to work more or are looking for another job (18 per cent) than those not on such contracts (7 per cent).
The shift may explain why the UK has combined relatively high employment levels with a severe squeeze on wages in recent years, according to today’s report, A Matter of Time.
Use of the contracts has grown sharply in recent years, and they are particularly common in the health and social care, hospitality and administrative sectors.
Although official figures show that 208,000 people were on them at the end of last year, the foundation believes this is a huge underestimate because 150,000 domiciliary care workers alone are employed in this way.
Zero-hours contracts are most common among younger workers; almost four in 10 (37 per cent) of people on them are between 16 and 24. They are most likely to be used in the health and social care sector and hospitality industry, which account for 20 per cent and 19 per cent of them respectively. Administration accounts for 12 per cent of such contracts, followed by retail (11 per cent) and arts, entertainment and leisure (8 per cent).
As the Government launches a review of the contracts, the foundation concludes that it is too early to ban them, but suggests they should be reformed and more closely regulated.
For example, all job adverts for such posts should make the conditions entirely clear.
Although a minority of zero-hours workers interviewed for the study value the freedom and flexibility that the contracts offer, a majority feel this is “more illusory than real”. The authors found evidence that where the threat of “zeroing-down” a worker’s hours – reducing them to a few or none – is used as a management tool, it makes staff more fearful of complaining about unfair treatment or employer abuses.
Employers can “zero-down” hours as an alternative to making staff redundant, to save money.
The report suggests that, at a time of recession, employers find it easier to adjust to fluctuating demand with a pool of flexible labour and that zero- hours contracts allow them to reduce the initial costs of recruiting and training staff. Some firms appear to use the contracts to avoid giving workers full employee status, with the costs and obligations that involves.
Matthew Pennycook, senior analyst at the Resolution Foundation, said: “For many workers, zero-hours contracts mean a life of permanent uncertainty. They leave staff fearful of turning down work, unable to plan and budget for life away from work and prone to having their employment rights undermined.
“Zero-hours contracts also seem to have a negative effect on staff morale, teamwork and productivity in a way that leads to a poorer quality service.”