What is your opinion on zero-hour contracts? Does your business use them? Do you feel strongly for them or against them? Well you should find what Jonathan Key from #ORBMember Labour Xchange Ltd has to say really very interesting and insightful. Do leave us a comment to let us know what you think:
Are zero-hour contracts a symptom or cause of a dysfunctional economy?
When discussing any issue regarding business conduct it is important to outline, at the forefront, that I personally believe businesses are fundamentally a force for good and although they can occasionally act in way that is detrimental to society it can often be traced back to a failing in the structural economy.
With this pro-business pre-disposition in mind; why is it that it seems there is a new negative media story every day, highlighting how another large business is exploiting the rights of workers through poor employment practices. Moreover, there seems to be an unstoppable trend of businesses putting all the risk onto the workers through insecure work; either zero-hour contract, limited hour contracts or the gig economy.
Whilst these employment trends are highly unsavoury it is arguable that they are in fact a logical extension of the “just in time” methodology and a possible result of hyper-functioning markets.
The modern-day consumer has a greater ability to assess the cost and quality of products/services in comparison to competition than at any point in history. Either through online reviews/marketplaces or simple search engines a consumer has never better informed of what good value looks like. Consequently, consumers have never been more mercenary and ruthless with their purchasing decisions, with all relevant research showing brand loyalty to be a historical concept.
Therefore, for a business to survive it must be equally ruthless in its ability to produce goods/services for the best possible price. Since the early 1980s we have seen all businesses on a relentless drive to improve efficiencies and lower their cost bases to better compete. We have witnessed high streets across the UK obliterated as the lower cost base of online shopping has eroded the sales and viability of previously perceived unstoppable retail giants such as Woolworths and BHS.
This continuous process to improve the value offering of businesses has resulted in all areas of operations becoming increasingly lean, leaving little or no fat in operations/staffing for a business to adjust to demand. Historically, a business would pass on to the consumer the cost of over staffing in order to be ready for demand fluctuations however, with the current hyper-functioning markets this is no longer possible as there will always be a competitor who will undercut their prices.
Businesses are therefore faced with an impossible set of circumstances:
- Due to competitive cost pressures, operational models cannot allow for a staffing surplus to cover changes in demand.
- Failure to meet changes in demand will immediately result in being lambasted for poor service.
- Flexibility through traditional temporary staffing options such as agencies is either too expensive or unreliable.
Through the use of zero-hour contracts and the gig economy, companies have found a way to create a staffing surplus that can cope with changes in demand; however, it is one which will not impact their operating costs, as when demand drops the worker hours are cut.
For a business zero hour contracts represent the perfect solution to the demands of a hyper functioning market. The causal effect is that all the risks are borne by the people carrying out the work, for when the business has reduced demand they simply cut the hours and therefore wages on offer to the workers.
My belief is that zero-hour contracts are a direct consequence of our structural economy and the demands put upon businesses to reduce costs. More importantly, through my pro businesses ideology, I firmly believe that should a cost-effective alternative be offered which is fair to workers, the vast majority of businesses would gladly ditch zero-hour contracts.
Subsequently I predict that in five years’ time zero-hour contracts will be obsolete and this will not be due to government legislation/intervention but through new innovative business start-ups and natural market adjustments.
Jonathan Key, Labour Exchange, www.labourxchange.uk