5 reasons why small businesses should use zero-hours contracts

posted on 16/08/2013 13:35:53 by Chris Cole

Make It Cheaper managing director Chris Cole explains the benefits zero-hours contracts can have for SMEs and workers

Bad sports? Some of the UK's biggest employers, including Sports Direct, hire the majority of their work force on controversial zero-hours contracts

There's been some very negative news about zero-hours contracts lately - and not without good reason. The Chartered Institute of Personnel and Development (CIPD) has claimed that more than one million people in the UK are currently employed on these controversial terms - although the Office for National Statistics (ONS) says the figure is 250,000.

The business secretary Vince Cable has voiced his concern that there is some exploitation of the contracts by employers, while Chancellor George Osborne has promised that the government will examine the contracts and the way they are being used very closely.

There are calls for zero-hours contracts to be scrapped altogether - but I don't think that would be the way to go. I think these employment terms are crucial to many small and midsize businesses - and that their deteriorating reputation should not mean owners are inclined to shy away from them.

Here are five reasons why:

1. The story is aboutbigbusiness

Much of the controversy surrounding zero-hours contracts has stemmed from revelations about the amount they're used by some of the country's biggest employers. News reports have claimed that both McDonald's and Sports Direct employ nine out of ten staff on zero-hours contracts, amounting to 83,000 and 20,000 employees respectively.

If those figures are true - and they do come from reputable sources - that accounts for more than 40 per cent of the total nationwide figure originally claimed by the ONS. JD Wetherspoon, Burger King, Domino's Pizza and even Buckingham Palace are among the other employers that have been singled out.

There's concern that big companies are using zero-hours employment as a means of squeezing labour costs to an absolute minimum and adding as much as possible to an already bumper profit figure. In this supersized context, workers - who have little choice but to sing to the tune of their all-powerful employers - may be being exploited.

Small business owners are by no means immune to accusations of exploitation, but the smaller scale of their operations makes it likely that they would use the contracts for very different reasons. Sure, it would still be about decreasing labour costs - but with a view to making a healthy, sustainable profit rather than squeezing every last inch out of an already eye-watering revenue figure.

2. Running a small business is risky

The bottom line in the debate about zero-hours contracts is that if they're used by employers with integrity, they are surely a force for good

It's true that zero-hours contracts come with an element of uncertainty - but there are few things less certain than running your own business. It's clearly a big risk to start out on your own - and there are often obstacles that stop people from taking the plunge. If employment laws are stacked against prospective business owners, this could be one such obstacle. It's almost needless to say that policy should encourage people to start businesses - not the opposite.

Just as significantly, uncertainty does not often stop once a business has started up. It's ongoing. For many employers, it would not seem unfair or unethical to pass on some of that risk and uncertainty to their staff - and therefore employ them on the flexible terms offered by zero-hours contracts. "There are no guarantees in business" is an old adage for a reason - and it would be most regrettable if misjudgement of prohibitive employment laws effectively led to a small business's downfall. Indeed, no one would win - employer or employee - in such a scenario.

3. Offering flexibility

Notwithstanding the bad press about the way zero-hours contracts are stacked in employers' favour, it's important to note that they don't mean a person has to work whenever their inconsiderate boss whistles. If an employer is using the contracts fairly and correctly, the times at which the employee should be available - and the notice they should have to be required for work - should have been discussed and agreed.

As CIPD chief executive Peter Cheese has said: "Zero-hours contracts, used appropriately, can provide flexibility for employers and employees and can play a positive role in creating more flexible working opportunities. This can for example allow parents of young children, carers, students and others to fit work around their home lives."

4. Providing experience

Unemployment figures have made miserable reading over recent years. Moreover, there has been - and continues to be - a significant sub-plot about the number of younger people who are struggling to find a first job. If small businesses feel prohibited from taking on employees, they may not be able to provide younger people with the experience that can help them get on the job ladder and hold them in good stead for the future.

What's more, most small businesses owners are still learning themselves. Employing on zero-hours contracts means managers can get a feel for what it's like to employ, train and pay workers. If they take to this successfully, in the future they may have the skill and confidence required to be able to build a more permanent base of staff.

5. Integrity means everything

The bottom line in the debate about zero-hours contracts is that if they're used by employers with integrity, they are surely a force for good. If they mean people can work when they wouldn't otherwise be able to - because of an inability to commit to a permanent contract from either employer or employee - then they are impacting lives for the better and making a positive contribution towards economic prosperity.

The problem comes when employers try to play the system. I am pleased the contracts are on the agenda for government scrutiny and I am sure there are many zero-hours contract workers whose employment grievances are fully justified. But I also believe there is a flip side to the coin - and that smaller businesses which employ their staff with honesty and integrity have a big part to play in repairing the damaged reputation of the controversial terms.

Image credit: Ewan-M