Department for Business, Innovation and Skills
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Government crackdown on zero hours contract abusers

Business Secretary Vince Cable announces plans to ban exclusivity clauses in zero hours contracts. 

Employees on zero hours contracts will have the freedom to find work with more than 1 employer after Business Secretary Vince Cable announced plans to ban exclusivity clauses.

Exclusivity clauses prevent an individual from working for another employer, even when no work is guaranteed. The use of exclusivity clauses in zero hours contracts undermines choice and flexibility for the individuals concerned.

The ban, set to benefit the 125,000 zero hours contract workers estimated to be tied to an exclusivity clause, is part of a bid to clamp down on abuses in the workplace by less scrupulous employers. It will allow workers to look for additional work to boost their income.

Business Secretary Vince Cable said:

Zero hours contracts have a place in today’s labour market. They offer valuable flexible working opportunities for students, older people and other people looking to top up their income and find work that suits their personal circumstances.

But it has become clear that some unscrupulous employers abuse the flexibility that these contracts offer to the detriment of their workers. Today (25 June 2014), we are legislating to clamp down on abuses to ensure people get a fair deal.

Last December (2013), I launched a consultation into this issue. Following overwhelming evidence we are now banning the use of exclusivity in zero hours contracts and committing to increase the availability of information for employees on these contracts. We will also work with unions and business to develop a best practice code of conduct aimed at employers who wish to use zero hours contracts as part of their workforce.

This action follows a government consultation into zero hours contracts which received over 36,000 responses. 83% were in favour of banning exclusivity clauses in zero hours contacts.

The Business Secretary also announced that the government will:

  • consult further on how to prevent rogue employers evading the exclusivity ban, for example through offering 1 hour fixed contracts
  • work with business representatives and unions to develop a code of practice on the fair use of zero hours contracts by the end of the year (2014)
  • work with stakeholders to review existing guidance and improve information available to employees and employers on using these contracts

Tim Thomas, Head of Employment Policy at EEF, the manufacturers’ organisation, said:

Zero hours contracts occupy an important space in the labour market where, properly used, they provide flexible employment in job roles where open-ended contracts are unsuitable.

For manufacturers where skills are in scarce supply, zero hours contracts can help employers to tap into specialist skills when they are needed, such as drawing on the experience of older workers.

The way forward set out in the Small Business, Enterprise and Employment Bill treads a fine line between supporting the majority of workers who want to continue to work on their zero hours contracts and limiting their use where they are neither necessary nor appropriate.

The ban will be part of the Small Business, Enterprise and Employment Bill, which is being introduced to Parliament today (25 June 2014).

Notes to editors:

  1. For more information please refer to the WMS which will be laid in the Houses of Parliament today (25 June 2014).
  2. The BIS consultation into zero hours contracts (ZHCs) was launched in December 2013 and closed in March 2014.
  3. The Summer Review into ZHCs was conducted in August 2013. It identified 2 clear concerns, both supported by recent ACAS research
    • the use of exclusivity clauses which leave employees tied exclusively to 1 employer even if no or little work is available
    • lack of transparency and information on the employment contract, leaving individuals unaware of their rights
  4. The ONS analysis from April 2014 highlighted that ZHCs can provide important and flexible employment opportunities that suit most people in these jobs and provide an average of 25 hours work a week. It also indicated that these types of contracts are most widely used by students, older people and people wanting to increase their income and fit work flexibly around their other commitments.
  5. Recent CIPD research found those on ZHCs are equally satisfied with their job, happier with their work-life balance and less likely to think they are treated unfairly by their organisation, when compared to the average UK employee (November 2013).
  6. There is no current estimate on the number of people on ZHCs. The ONShave the following figures:
    • the ONS Labour Force Survey found 583,000 people self-identified as being on ZHCs
    • ONS estimated that employers held 1.4 million contracts that do not guarantee a minimum number of hours (April 2014)
    • the Business Secretary wrote to the ONS in the autumn (2013) asking them to assess the strength of current estimates and definitions and develop a new methodology for calculating the number of ZHCs. TheONS have committed to looking at the strength of previous estimates and definitions of ZHCs and to help develop a more rigorous methodology. They will undertake further research over the summer (2014).
  7. Our provisional estimate is that around 125,000 are covered by exclusivity clauses. This estimate is derived from a CIPD employer survey on the use of ZHCs which estimated that 9% had exclusivity clauses. The ONS have provisionally estimated that there are 1.4 million contracts with no guaranteed hours. Combining these 2 pieces of information suggests that there are around 125,000 contracts with exclusivity clauses. However, given the provisional nature of the estimates and the fact that they are measuring slightly different things this estimate should be seen as a broad order of magnitude.
  8. The UK is a great place to set up a business and more people than ever are beginning new enterprises. The Government is backing business every step of the way and introducing legislation to help make the UK the most attractive place to start, finance and grow a business. The Small Business, Enterprise and Employment Bill will help to build a stronger and fairer economy by supporting small businesses as they compete, and ensure they are not disadvantaged by those that do not play by the rules. It will foster and back the entrepreneurial spirit and build on the UK’s reputation as a fair and trusted place to do business. The Bill sets out measures to help hard working people have confidence in their employers and reduce the barriers that can hold businesses back from growth.
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