Contracts that do not guarantee a minimum number of hours: September 2017

Estimates of the number of employment contracts that do not guarantee a minimum number of hours are derived from our twice-yearly survey of businesses. They are complemented by estimates from the Labour Force Survey (LFS), a survey of households, of the number of people who report that they are on a “zero-hours contract” in their main job. This report includes the latest figures from the LFS for April to June 2017, first published in August 2017, as well as new estimates from the survey of businesses for May 2017.

The results from the May 2017 survey of businesses indicated that there were 1.4 million contracts that did not guarantee a minimum number of hours, where work had actually been carried out under those contracts. This represented 5% of all employment contracts. The equivalent figures for May 2016 were 1.7 million and 5%. The number of contracts that did not guarantee a minimum number of hours has fallen on the year; however, their share of total contracts used is unchanged.

According to the LFS the number of people employed on “zero-hours contracts” in their main job, during April to June 2017 was 883,000, representing 2.8% of all people in employment. This latest estimate is 20,000 lower than that for April to June 2016 (903,000 or 2.9% of people in employment).

People on “zero-hours contracts” are more likely to be young, part-time, women or in full-time education when compared with other people in employment. On average, someone on a “zero-hours contract” usually works 26 hours a week. Just over a quarter of people (26.6%) on a “zero-hours contract” want more hours, with most wanting them in their current job, as opposed to a different job which offers more hours. In comparison, 7.2% of other people in employment wanted more hours.

This article updates our previous analysis on “zero-hours contracts” published on 11 May 2017. It contains the latest figures from the Labour Force Survey (LFS), which cover the period April to June 2017 and the latest results from the survey of businesses relating to May 2017.

What are “zero-hours contracts”?

There is no single agreed definition of what “zero-hours contracts” are. While some contracts are explicitly called “zero-hours contracts”, there are other definitions available and used in published statistics. The common element to the definitions is the lack of a guaranteed minimum number of hours.

When developing the survey of businesses, we consulted on the definition to be used and decided on the lack of any guaranteed hours. To provide clarity and prevent confusion with the other estimates of “zero-hours contracts” the remainder of this article refers to estimates from the Office for National Statistics (ONS) business survey as no guaranteed hours contracts.

When comparing figures from the ONS business survey with the LFS estimates a number of issues need to be considered:

• the LFS counts people who report that their main employment is a “zero-hours contract”
• the estimate from businesses is counting contracts; this will be greater than the number of people as people can have more than one contract
• estimates from businesses will include contracts that cover a variety of working arrangements; this will include instances where people in their main employment are working a regular number of hours a week (although these hours are not guaranteed by their contract) as well those who work on an irregular basis due to personal choice, availability of work or to fit in around their main employment
• employers are likely to be more aware of their employees’ formal contractual arrangements and this may differ from the perception of employees if their normal working hours are relatively stable or if changes in hours are mainly as a result of personal choice
• there may be multiple contracts for each job in the business survey

This section looks at the latest estimates from the Labour Force Survey (LFS) for the period April to June 2017 and the business survey for May 2017. Estimates from surveys are, due to sampling error, subject to a degree of uncertainty. Where available, an indication of the level of uncertainty is provided in Annex 1.

Labour Force Survey

The LFS samples around 40,000 households a quarter and collects information about people’s employment status. One of the questions on the LFS, asked of people in employment, relates to special working arrangements that vary daily or weekly. Respondents can choose up to three different arrangements from a list of eight options, one of which is “zero-hours contracts” defined as “where a person is not contracted to work a set number of hours, and is only paid for the number of hours that they actually work”.

As the LFS is based on respondents’ views about their working arrangements and counts people rather than contracts, it is likely that any estimate of “zero-hours contracts” from the LFS will be less than an estimate obtained from businesses. The number of people the LFS classes as being on a “zero-hours contract” will be those who:

• are employed (have done at least 1 hour of paid work in the week before they were interviewed or reported that they were temporarily away from their job)
• report that their working arrangements in their main employment include some form of flexibility
• recognise that the flexibility of their working arrangements is a result of being on a “zero-hours contract”

Therefore, the people identified by the LFS as being on a “zero-hours contract” will be those in employment who are aware that their contract allows for them to be offered no hours. This might exclude some people who select another option, such as on-call working, although they have the opportunity to report a “zero-hours contract” as well.

The latest estimate from the LFS shows that 883,000 people reported that they were on a “zero-hours contract” in the period April to June 2017, representing 2.8% of people in employment. This is 2.2% lower than the reported figure from the same period in 2016 (903,000 or 2.9% of people in employment). This fall in the number of people reporting to the LFS that they were on a “zero-hours contract” breaks the upward trend that was observed since 2011. The upward trend that we saw between 2011 and 2016 was likely to have been affected by greater awareness and recognition of the term “zero-hours contract”. Figure 1 shows the number of people in employment on a “zero-hours contract” from 2000 to 2017. Comparisons with 2012 and earlier years are complicated by a large increase between 2012 and 2013 that appeared to be due mainly to increased recognition of “zero-hours contracts”. This change was covered in a previous ONS report published on 30 April 2014.

When looking at the length of time in current job, the fall in “zero-hours contracts” on the year is driven by a fall in the number of people being in their job for less than 5 years. The fall in the three categories (less than 12 months, 1 year but less than 2 and 2 years but less than 5) comprising people in employment in their job for less than 5 years is only partially offset by increases on the year in the number of people who were in their job over 5 years (5 years but less than 10 years and 10 years or more) (Figure 2).

The business survey for May 2017 asked a sample of 5,000 businesses how many people were employed on contracts that do not guarantee a minimum number of hours and received approximately 2,150 responses. The estimates from the business survey indicate that there were 1.4 million contracts that do not guarantee a minimum number of hours (NGHCs) where work was carried out in the fortnight beginning 15 May 2017 (5% of all contracts). This total excludes contracts that do not guarantee a minimum number of hours where work was not carried out in the reference period.

As well as the number of contracts, the business survey also estimated that 6% of businesses make some use of NGHCs. However, the share of businesses using NGHCs varies between industries and business sizes. Figure 3 shows the share of businesses using NGHCs by size of business. It shows that 24% of businesses with employment of 250 and over make some use of NGHCs, compared with around 4% of businesses with employment of less than 10.

The share of total employees on NGHCs across industries varies considerably (Figure 4). In administration and support services just under a quarter of employees (24.1%) were on a NGHCs in May 2017, compared with public administration where only 0.2% of employees were on NGHCs.

The Labour Force Survey (LFS) can provide additional information about the type of people who report that their main employment is on a “zero-hours contract”.

Who are they?

Looking at the type of people who report that they are employed on a “zero-hours contract” compared with other people in employment shows that there are differences in the type of people on “zero-hours contracts” (Figures 5a, 5b, 5c and 6) and the industries in which they work (Figure 7a and 7b). For April to June 2017:

• women make up a bigger share of those reporting working on “zero-hours contracts” (57.7%), compared with their share in employment not on “zero-hours contracts” (46.7%)
• people who report being on a “zero-hours contract” are more likely to be at the youngest end of the age range; 33.8% of people on “zero-hours contracts” are aged 16 to 24, compared with 11.4% for all people in employment not on a “zero-hours contract”
• 17.9% of people on “zero-hours contracts” are in full-time education, compared with 2.4% of other people in employment
• 65.4% of people on “zero-hours contracts” are working part-time when compared with 25.4% of people who are in employment not on a “zero hours contracts”
• 23.1% of people in employment on a “zero-hours contract” are in the health and social service industry
• 10.5% of people employed in the accommodation and food industry are on a “zero-hours contract”

Most of these characteristics have shown little change over recent years with the patterns partly reflecting the groups most likely to find the flexibility of “zero-hours contracts” an advantage, for example, young people who combine flexible working with their studies.

Figure 5a: Comparison of percentages (%) of people who are in employment on a “zero-hours contract” and who are not on a “zero-hours contract” by sex, April to June 2017

UK

Source: Office for National Statistics

Download this image Figure 5a: Comparison of percentages (%) of people who are in employment on a “zero-hours contract” and who are not on a “zero-hours contract” by sex, April to June 2017

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Figure 5b: Comparison of percentages (%) of people who are in employment on a “zero-hours contract” and who are not on a “zero-hours contract” by educational status, April to June 2017

UK

Source: Office for National Statistics

Download this image Figure 5b: Comparison of percentages (%) of people who are in employment on a “zero-hours contract” and who are not on a “zero-hours contract” by educational status, April to June 2017

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Figure 5c: Comparison of percentages (%) of people who are in employment on a “zero-hours contract” and who are not on a “zero-hours contract” on full-time and part-time basis, April to June 2017

UK

Source: Office for National Statistics

Notes:

1. Sum of percentages do not equal 100 this is because the total includes missing cases that did not specify their employment status.

Download this image Figure 5c: Comparison of percentages (%) of people who are in employment on a “zero-hours contract” and who are not on a “zero-hours contract” on full-time and part-time basis, April to June 2017

.png (17.3 kB) .xls (32.8 kB)

The actual hours recorded are the hours worked by an individual during the survey reference week. The majority of people on “zero-hours contracts” (65.4%) reported that they worked part-time, compared with 25.4% of other workers. This means that the average actual weekly hours worked in their main job, by someone on a “zero-hours contract” is lower at 21.4 per week compared with the average actual weekly hours for all workers at 32.5. This shows a similar pattern to usual hours worked, that is, the weekly hours usually worked throughout the year, which were 25.7 and 36.4 respectively.

In April to June 2017, there were 17.9% of people on “zero-hours contracts” who worked no hours in the week before their Labour Force Survey (LFS) interview compared with 8.6% of other workers.

Comparing usual and actual hours, Figure 8 shows the differences between actual and usual hours worked for people on “zero-hours contracts” and other workers. For April to June 2017:

• 37.9% of people on “zero-hours contracts” worked their usual hours compared with 56.0% of other workers
• 36.1% of people on “zero-hours contracts” worked less than their usual hours compared with 29.4% of other workers
• 17.6% of people on “zero-hours contracts” worked more than their usual hours compared with 11.1% of other workers

There are two different ways in which the percentage of people wanting more hours can be calculated. It can be calculated as a percentage of the total people on a “zero-hours contract”, which includes people who did not specify whether they want more hours, or it can be calculated as a percentage of people who have stated their preference for more hours. The two approaches produce different values but the underlying messages are unchanged. Under the first calculation approach just over a quarter (26.6%) of people on “zero-hours contracts” want more hours compared with 7.2% of people in employment not on a “zero-hours contract”, though this could be linked to a higher proportion of “zero-hours contract” jobs being part-time. Looking in more detail, 6.1% of people on “zero-hours contracts” would like a different job with more hours compared with 0.8% for other people in employment (the remainder would like more hours in their current job or an additional job) (Figure 9).

Under the second calculation approach (which was used in the previous edition of this article) just under a third (31.7%) of people on “zero-hours contracts” want more hours compared with 8.9% of people in employment not on a “zero-hours contract”, though this could be linked to a higher proportion of “zero-hours contract” jobs being part-time. Looking in more detail, 7.2% of people on “zero-hours contracts” would like a different job with more hours compared with 1.0% for other people in employment (the remainder would like more hours in their current job or an additional job).