Sunday, 11 August 2013

The awful Zero Hours Contract

This eminent and good friend has often remarked that I have turned into a socialist (even a communist) in my old age. He claims my writing in this blog is veering constantly to the left. Other readers of my blog ,might wonder, if this is left leaning then what will the true loony left be called. But I know I am going to get a mouthful from him for this post, which is admittedly leftwards tilting.

On matters relating to labour and worker law, I have often argued that countries have brought excessive legislation defending the existing worker and making it expensive to employ any more.Who in his right mind will employ a worker in France, for example. All this misguided legislation only keeps out a large portion of the young out of the workforce. Companies need some flexibility to ramp their worforce up or down based on conditions of their business and marketplace. Minus this flexibility, no modern company is going to hire.

But companies have gone to the other extreme and misused the flexibility to create completely unfair job practices. Take the case of the "Zero Hour Contract" - a British invention and used to the hilt by a wide swathe of so called respectable companies. As a worker you enter into a contract with the employer . but there are no working hours guaranteed, hence the name zero hours contract, You are expected to sit glued to the telephone. When they want you, they'll call you. You have to jump like a jackrabbit and run to the office or factory or store or whatever and you work for the hours they tell you to. You get paid (often the minimum wage) for the hours that you do. Then off you go without knowing whether you have to return tomorrow or not. Back to the vigil by the telephone. During this time, you cannot accept any other employment, even if the phone never rings. And when it rings, if you cannot come to work, you've really lost it and won't get an opportunity for quite some time.

Sports Direct has become the notorious poster boy for this with apparently 20,000 of their total 23,000 employees on Zero Hour Contracts.

This sort of behaviour is why companies and businessmen are hated by the general public, who think they have no scruples or morals in the eternal quest to make more money. Flexibility in the labour pool is one thing. But to keep 90% of your workforce 'flexible" and not even telling them whether they have to come to work tomorrow or not, is surely extreme. There is no business in the world which cannot know how many workers it needs for the next one month at least.  Some sort of rostering is surely possible. And preventing the guy from finding work elsewhere when you have nothing for him, is positively outrageous.

In such an atmosphere, how can there by any training or skills building. What sort of employee commitment can you expect.  Will the worker have one good word to say about the company. And you think this is an efficient business model. And this is a sustainable approach for success . Only a moron can think so.

Peculiarly, one of the organisations discovered to be using this rather widely is Buckingham Place !!  Pip Pip, Your Majesty - this is just not cricket !

Employers have to understand, and demonstrate, that if they want softer laws, they will have to behave reasonably and not exploit. If they can't, or won't, then they should stop moaning about excessively rigid labour laws.


The Million Miler said...

Ah! chicken and egg. The employment laws in some countires like NZ, Canada etc., that have been ruined by bleeding heart, left leaning, tree hugging liberal is so draconinan and in favour of the employee, the response is escape clauses like zero hour contracts! Here in NZ for instance,if I write a casual email to a colleage of mine about a one of my direct reports mentioning him or her not sor favourably, I can get into real serious trouble! The pendulum has swung from one end (the sweatshops of the early 20th century) to something that is so so pro labor that it makes no sense to have anyone reporting to you!

Sriram Khé said...

the topic is way outside my bullshitting abilities for me to BS here ;)
so ... why leave this comment, right?
existential question!!!

Asha said...

Firstly hats off to you sir, for that beautiful tribute to your mentor in that linked post and the comments in that post equally awesome.

Regarding this post, i thought this is one of those posts related to business and i would be unable to relate to it, then your 3rd paragraph seemed familiar to me. So, is this a British practice?

As a freelancing employee of a company, have experienced that situation and i quit the company recently for the same reason.

Vincy said...

oh God! I am not able to comprehend how this model can even work looking at the massive number of workforce at Sports direct, on Zero hours contract, simply from angle of logistics of hiring 20000 employees on a random timeperiod. I guess even our construction labourers are better off compared to these folks. Truly disgusting way of employee exploitation.

Do we have zero hour contracts here in India? I am sure if it exists in the west we would quickly follow suit.

Ramesh said...

@kiwi - yes either extreme is crazy. Cannot a sensible equilibrium be found ??

@sriram - Its by no means outside your sphere, but yes, it is rather dry !!

@Asha - Yes, this term is British, but some variant of this exists in many places.

@Vincy - Its bad, isn't it. I knew you would have a special perspective, being in the HR profession. No we don't have this exactly in India, but some casual labour practices are at the borderline of sensibility.

Ravi Rajagopalan said...

@Ramesh: I fear for our children. As the relationship between labour and capital grows more and more unequal, we will see more and more of this. There is already a frightening divergence between productivity and employment (See In a place like SportsDirect the latitude given to employees by the highly automated sales systems do not call for highly trained employees. Increasingly this seems to be the model that seems to become prevalent.

In deference to the Marxism that Sundaram could (rightly) accuse you of, let me remind him of the fact that the increasing inequality of labour and capital during the Industrial Revolution and the resulting dehumanisation of individuals is what caused Marx and Engels to write "The Communist Manifesto".

It is something we should all feel worried about.

Sandhya Sriram said...

i feel your first part and second part are very interlinked. if you make it easy for companies to hire and hold permanent work force, they would be more than willing to do that. The principle of Going Concern is as much important for the people that run the business as it is for the business itself.

But in the name of employee right protection, if you make very complex retrenchment processes, super expensive medical and retirement packages and make it so expensive, why would businesses not tend to go the other way.

I dont blame the companies while it is unfair (atleast in the part of the world that you refer to in this post). i blame the curb on the freedom to employ people at a reasonable price at the centre of this

sandhya sriram said...

and b.t.w, you have reminded some one very special on the post. Thank you for this:-)

Ramesh said...

@Ravi - Yes, I have been worried too about the inequality and relative importance of capital and labour. You've put it very elegantly. My view is that labour is not priced fully - there is a social cost to unemployment and there is also a human cost. Definitely something to be worried about - and a clear manifestation of what Deng Xiaoping has done for China and why I am still flabbergasted how under appreciated it is.

@Sandhya - True, but see when the freedom is given, how companies misuse it. And yes, he is a special man of course.

Ravi Rajagopalan said...

@Ramesh I put it to you that companies will wilfully misuse any resource that is not priced correctly: Labour is the obvious one, and the second is the Environment. In both cases conventional accounting methods cannot price in the long term cost of misuse into the annual accounts. Nor is it fair to think that the few reporting companies alone should bear all the costs of long term misuse or inefficiencies - else capital formation will simply cease.

There has to be government intervention. I think that as we challenge the earth's environment and its resources more and more, the conventional mechanisms to mediate between greater and lesser government participation in social costing need to be upgraded.

Why dont you and SUndaram - two of the brightest minds of this generation - take this up?

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