A future Labour government should shy away from “outright bans” to flexible contracts and instead take steps to improve workers’ rights, a report from the Resolution Foundation argues.
Flexible contracts, such as temporary and zero-hour contracts, are widely used in the UK, with around 3.8m workers on some form of flexible contracts.
According to the research, three quarters of employers reported using flexible contracts – although for a variety of different reasons.
Just over half of firms (51 per cent) which used flexible contracts said a reason was to manage “uneven demand”. This helps to reduce costs for firms and prices for consumers.
The report showed that the firms which most often used flexible working arrangements were in the transport, retail and hospitality sectors, sectors which often deal with volatile demand.
A third of employers also said that their workers preferred using flexible contracts.
However, a quarter of firms said they used flexible contracts to help to reduce the wage bill. 13 per cent of firms surveyed said they used flexible contracts to reduce obligations to pay staff pensions and National Insurance contributions.
“Flexible contracts are not always a simple win-win-win for firms, workers and consumers alike. A quarter of firms using them do so to reduce their wage bill, while workers can miss out on higher pay and job security,” Hannah Slaughter, senior economist at the Resolution Foundation, said.
“New workers’ rights, rather than outright bans, could help to stem over-reliance on flexible contracts – and the problems they can create for workers, while maintaining flexibility for workers and firms who value it,” she continued.
Ahead of an election later this year, Labour has made reform to workers’ rights a central part of its pitch and a key point of departure from the Conservatives.
The party has pledged to give workers “day-one” employment rights, ban to zero hours contracts and end “fire and rehire”. In her Mais lecture, Rachel Reeves argued that the reforms would help to improve labour market flexibility by giving workers the “security to change jobs”.
However, a number of businesses have cautioned that Labour should not take a ‘one-size-fits-all’ approach to flexible contracts, warning that it might push away investment.
“Any incoming government should consider carefully whether a package that reduces flexibility, makes it more costly to hire people, and seeks to bring unions back into the workplace will help attract new investment,” Archie Norman, chair of M&S said earlier this month.
The Resolution Foundation’s research suggested that policy changes would have a significant impact on changing employers’ behaviour. Two-thirds of firms said they would change their behaviour if legislation gave workers a right to fixed-hours contract or two weeks’ notice of their shifts.