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Insight

Taylor Review and zero hour contracts

Nick Thorpe
13/07/2017
The Taylor Review includes a number of recommendations on the use of zero hour contracts. It attempts to take a balanced view on the use of such contracts in the UK labour market, but it is questionable what impact (if any) its recommendations will have if enacted.

The Taylor Review includes a number of recommendations on the use of zero hour contracts.  It attempts to take a balanced view on the use of such contracts in the UK labour market, but it is questionable what impact (if any) its recommendations will have if enacted.

The review recognises the importance of flexibility, and accepts that businesses should still have the ability to offer zero hour contracts, but it concludes that the Governments needs to do more in this area to ensure that flexibility is not at the unreasonable expense of workers and is genuinely a mutually beneficial arrangement. 

Its recommendations are perhaps more practical and, potentially, easier to legislate than some of its other recommendations, for example on 'dependent contractor' status, but it is difficult to see how any of the recommendations will result in a significant change in approach.

One of its key recommendations is for the Low Pay Commission to consider introducing a higher rate of National Minimum Wage (NMW) for hours that are not guaranteed as part of a contract.  This is an interesting proposal and may prompt some businesses to review their current arrangements and offer workers guaranteed hour contracts.  But in many cases, the costs / benefit analysis is likely to support the continued use of zero hour contracts – i.e. the costs of offering workers guaranteed hour contracts will outweigh the costs of the enhanced NMW rate.

The review also missed the opportunity to recommend changes to the NMW legislation in relation to annualised hour contracts – contracts that give flexibility, but importantly provide workers with regular pay.  John Lewis recently fell foul of the NMW legislation in this respect and had to set aside £36 million to rectify its breach.

Other changes are going to be less easy to legislate – for example, allowing rolled-up holiday for zero hour workers – and these changes may have to wait until we have left the European Union.  So, no immediate change there.  

The much reported right to request a guaranteed hours contract also seems limited and, potentially, toothless.  It would only apply if a worker has been in post for 12 months.  It is also a right to request, not an automatic right to, guaranteed hours.

But the real question is whether any of this is likely to end up on the statute books given the current legislative calendar.  The Government has clearly got other priorities and zero hour contracts is one political hot potato that it may choose to drop.  

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