Number of workers on a zero-hours contract hits record high of 905,000

But slowdown in last six months suggests firms’ appetite for ZHCs may be waning

The number of people on a zero-hours contract (ZHC) hit a record high of 905,000 in the last three months of 2016, according to new analysis of official data published today (Friday) by the Resolution Foundation.

The analysis finds that the number of people on a ZHC grew by more than 100,000 between the last three months of 2016 and the last three months of 2016 – an increase of 13 per cent.

However, it finds the growth of ZHCs slowed markedly in the second half of 2016 – rising by just 2,000, or 0.2 per cent. This is well down on the 7.7 per cent growth recorded during the second half of 2015 and slightly slower than employment growth across the economy during that period. This is the first time that ZHCs haven’t grown substantially faster than overall employment since they first entered the public debate back in 2013.

The Foundation points to three reasons why the zero hours juggernaut may have come to a halt.

Firstly, it says that with the employment rate at a record high and the first inklings that firms may think the supply of labour from the EU could be limited after Brexit, employers may be finding it harder to fill roles without guaranteeing hours of work.

Secondly, it says that the reputational damage that some firms using ZHCs have received over the last year is also likely to have played a part.

Thirdly, it says that the initial rapid increases, which were driven by raised awareness of zero-hours contracts, may have reached its limit, with most ZHC workers now aware of the kind of contract they’re on.

The Foundation says that no employer wants to be the next Sports Direct, which has experienced widespread negative publicity in the wake of its use and abuse of ZHCs. It notes that big companies such as Homebase, Wetherspoons and McDonalds have announced that they no longer plan to use ZHCs or will offer workers the chance to move to a fixed-hours contract, while other firms are likely to be doing so behind the scenes.

The Foundation says that with workers on ZHCs facing a significant pay penalty – typically earning £1,000 a year less – as well as being more likely to be under-employed, this slowdown will be welcomed by many workers.

However, it also says that it’s too soon to call time on ZHCs, not least because they remain at a record high and are popular among some workers and employers. The analysis shows that approaching half (46 per cent) of the net increase in ZHCs in the last year has been among workers aged 55-64. For some of these workers, ZHCs may offer a flexible transition from full-time work to retirement, allowing them to top up their income.

Finally, the Foundation says that with almost a million people still on ZHCs, firms also using short hour contracts and the number of agency workers rising – and with all these dwarfed by the huge jump in self-employment – the debate around insecure work is still one of the most pressing living standards issues facing Britain today. The uncertainty of work available, big fluctuations in earnings and the pay penalty associated with insecure work have a major impact on household incomes. The Foundation welcomes the fact that the government is seeking to address them through the Taylor Review of modern employment practices.

Conor D’Arcy, Policy Analyst at the Resolution Foundation, said:

“The most recent figures confirm record numbers of people are now on a zero-hours contract, with 905,000 people currently employed on one. This is a significant proportion of the workforce.

“While the growth in these contracts has continued, beneath the surface there are signs of change, with a marked slowing of their uptake in the last six months of 2016.

“This is about more than just the general slowdown in employment growth, with a bigger drop visible in the growth of zero-hours contracts. The negative publicity these contracts have attracted may well have played a role in their slowdown, as firms rethink their use. Not providing guaranteed hours of work for those who want it, especially those in low paying roles, can have a huge negative impact on the living standards of workers and their families, as budgeting becomes near impossible.

“The challenge now is to ensure that these still-popular contracts are reserved for cases of genuine desired flexibility for worker and employer.”

Notes to Editors

  • By industry, ‘Accommodation and Food’ sees the highest share of ZHC workers with around a quarter of all ZHC workers based there, followed by ‘Health and Social work’ with one in five ZHC workers based in this sector.