Zero Hours Contracts
Resources for Unit 6: Principles of Management. BTEC Level 3 Business Studies
Zero Hours Contracts
Zero hours contracts are employment agreements in which the employer is not obligated to offer working hours and the employee is not obligated to be available for work. Managers create a shift schedule for a period of time such as for the following week. They will adapt the working hours of different members of staff depending on how much work is expected, what tasks need doing and requests for absence from staff. They can share this with staff using physical noticeboards, in staff meetings, emails or instant messages.
Benefits and Drawbacks of Zero Hours Contracts
Benefits of Zero Hours Contracts
Flexibility for employees: As employees are able to change their working hours based on their availability, they can fit their work around other commitments. This may include family, university, hobbies or other jobs.
For example, an aspiring actor may work in a restaurant but request fewer hours when they have a show.
Flexibility for employers: Employers can adjust the working hours of their employees in line with their needs. This means that they can give staff more hours in busy periods and less hours during quiet periods.
Reduced labour costs: As employers only bring staff in when they are needed, they do not need to pay them for idle time. This reduces labour costs.
Trial period: As there is minimal commitment in terms of hours employers need to offer staff, they can use zero hours contracts as a method of assessing employees before offering more permanent contracts.
Drawbacks of Zero Hours Contracts
Financial uncertainty: An employee’s income is unpredictable as it changes based on factors such as demand for the organisation’s goods and services. This makes it difficult for individuals to plan their personal finances which can be stressful and lead to them struggling to meet their basic needs.
Lack of skill development: Employees on zero hours contracts may need to work for multiple employers to earn enough money. This means they are switching roles and workplaces regularly which can limit their skill development in each role.
Workforce management challenges: Coordinating staff with varying schedules can be difficult as managers need to navigate other commitments their staff have, individual preferences on working hours and communication issues.
High turnover: Zero hours contracts tend to have a higher turnover rate than more secure contracts. This is due to factors such as the limited job security, lack of benefits and career advancement leading to lower levels of commitment.
Zero Hours Contracts at DingDong Ltd (June 2022 exam)
DingDong Ltd is attempting to overcome a shortage of reliable staff by using a combination of temporary staff, agency workers, subcontractors, and employees on zero-hour contracts. Zero-hour contracts are employment agreements in which the employer is not obligated to offer working hours and the employee is not obligated to be available for work.
A benefit of zero-hours contracts is the flexibility they provide. Employers can adjust the working hours of their employees in line with their needs. Between spring 2020 and autumn 2021, the number of staff needed to meet requirements at DingDong Ltd increased from 28 to 52. Offering zero-hours contracts provided them with the opportunity to quickly increase their staffing levels in line with the rapidly increasing demand without the need to commit to long-term contracts.
A drawback of zero-hours contracts is the financial uncertainty for employees. Driver’s income is unpredictable and driver satisfaction rating was reported as very low at 76% in Jul - Dec 2021 compared to 93% in Jan - June 2020. Staff turnover has also increased from 4% to 29% and absenteeism/declined delivery has increased from 0% to 16% in the same period. These are all indicators of low morale which can be a significant contributor to poor quality and service.
