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What effect will zero hour contracts really have?

Zero hour contracts provide a call off arrangement for employers – “we call you if we need you”.  The employer has the advantage of access to a pool of labour without the fixed cost of paying a minimum sum without there being work to carry out.

This is beneficial for the employer because of the flexibility to respond to changes in demand.  Take the case of a supplier of packaged selections of fresh fruit salads which the larger retailers provide in small plastic containers, often with a fork.  Retailers look at the weather forecast, anticipate demand and place their orders accordingly, often with a lead in time of less than 24 hours.  The supplier needs the flexibility to respond, unless they happen to have a wide range of products so they can swop staff from one line to another.  At peak demand having staff on zero hours may be essential.

The approach in the short run may be easy for the employer, however it implies an employment relationship in the longer run which may be predicated on faulty thinking and may be generally variable.

Those of the population who are baby boomers or now in their late 40s may see work differently to the new generation X.

Baby boomers often see work as a reflection of value, inclusion, status and have a sense of loyalty and duty to an employer.  With this comes the psychological reward of belonging and commitment and in return place a value on security.

Zero hours may undermine this and employers may be in an illusory impression that availability of able staff will continue.

The latest forecasts by Capital Economics Chief Executive Roger Bootle indicate unemployment will continue to fall over the next three to five years.  As this occurs the part of the workforce that is on zero hour contracts (estimated by CIPD at circa 1 million people) is likely to be partly taken up by more secure work.

For Generation X employees their perception of work is different.  Flexibility to do other things without the concept of duty or loyalty being strong may in the short run be suitable.  Employers, however, who employ this group, may find that their flexibility and availability declines as more attractive options start to appear.

From a psychological perspective the key issue is control.  If control over work linked to the need for security of income is rated highly by an individual, zero hours contracts are likely to be harmful.  Many in this category may feel obliged to accept any hours regardless of the disruption to their life if they fear the loss of the future income, even though it’s not guaranteed.

For those for whom control or autonomy isn’t either a major factor or who have a range of zero hours work to choose from and have the ability to say no when offered work, without the fear of a loss of future work, then the impact may be modest.

The improving economy will begin slowly to change the options available to employees.  The smarter employers will be ahead of the curve, looking at talent retention for 2014-15, creating a range of employment offers.  Where the quality of work is highly dependent on discretionary effort (such as in the care sector) organisations may well find that not only will they have capacity issues but simultaneously quality ones.

One practical route is to examine carefully the capacity and capability of the employer to forecast what demand levels look like over the next 2-5 years.  If it is a complex and uncontrollable demand (say weather driven) then that is one thing.  In the care sector better analytics are an investment worth considering.

As an example, in one Midlands hospital they are investing in a very detailed matching exercise of activity levels against staffing profiles against predicted absence levels to provide a more precise allocation of staff availability.  Interestingly this was prompted by an observation that in surgery the busiest days were Mondays, the same day as the highest day of absence, creating a need for staff on zero hours contracts to be brought in at the last moment – not a recipe for the best care levels!

The DrummondHR Wbi predictive well-being tool provides an organisation with a range of data of how differing types of employment contracts affect productivity and absence and shows the likelihood of staff leaving for other roles!

For further information or to have access to a demo of Wbi please contact jacqui@drummondhr.co.uk or enquire via our contact form.

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