How restrictions on zero-hour contracts could impact sectors including hospitality and logistics

The King’s Speech on 17 July introduced the government’s new Employment Rights Bill, initiating a series of consultations in which decisions are made about any changes to employment law. In the next few months, there will likely be much discussion about what shape these changes will take.

As part of the Labour government’s manifesto, it announced a plan to end zero-hours contracts, in which workers are hired without a set number of hours of work guaranteed. The government also plans several other changes to employment law such as increasing the minimum wage, as well as banning ‘fire and rehire’ practices where the terms and conditions of a worker’s contract are changed unilaterally.

However, after backlash from business leaders, Labour indicated in May that it would no longer be an outright ban. Mohammad Jamei, Director of Economic Policy at the Confederation of British Industry (CBI), told the magazine Business Matters the view that “Any proposed changes to employment laws must be balanced against the potential loss of opportunities. Businesses need to be able to take risks to open new premises and grow without excessive concerns about significant changes in employment law.”

Other business leaders have expressed fears that companies that were highly seasonal would be negatively affected by restrictions on hiring flexible staff.

The party altered its language around the subject and began to specify that only “exploitative zero-hours contracts” would no longer be allowed, with a focus on removing “one-sided flexibility”. The definition of exploitative is currently unclear, as is the context in which zero-hours contracts would still be permitted.

It seems that going forward, businesses would now be obligated to offer a contract based on a set number of hours, but workers would be able to choose a zero-hours contract if preferred. The party also said this would protect seasonal workers whose jobs might otherwise be affected.

If zero-hours contracts are outlawed or limited in the UK, we estimate that these changes will particularly affect hospitality and logistics businesses.

John Dawson, Vice President of Customer Success at Coople, comments: “All companies who rely on workers on zero-hour contracts should pay close attention to the coming changes. It may be that businesses will have to find new ways of working in order to remain compliant with UK employment law.”

Hospitality

Hospitality is an industry that is particularly reliant on support from workers on zero-hour contracts. According to this year’s Office for National Statistics data, 22% of those whose work was categorised as ‘Accommodation and Food’ were on zero-hours contracts at the end of 2019, before the Covid pandemic. In January-March 2024, this percentage had risen to 27%.

Business leaders in this space were among the most vocal critics of Labour’s original plan to scrap zero-hour contracts entirely. Their reasons included the fact that zero-hours contracts make it easy to quickly onboard temporary workers for the time you need them, and that the industry will often experience busy periods, when lots of support is needed, followed by quieter periods, when fewer staff are required.

Students in higher education have a long history of working in hospitality alongside their studies, balancing evening and weekend shifts alongside daytime studies during term time. Recent research from UWE Bristol and University of Cardiff found that hospitality employers appreciate student workers’ flexibility, and students working in the industry found the experience to be useful for their future careers.

In the event that zero-hours contracts were restricted, hospitality businesses might need to find another way to employ staff members who would prefer some degree of flexibility, including students. Our interpretation of the proposals is that workers who would prefer to be employed on a zero-hours contract will still be able to choose this option, as long as their employer also offers them the alternative of a contract with guaranteed hours – or guaranteed minimum hours.

Logistics

Logistics companies, particularly warehousing, delivery and fulfilment firms often experience fluctuations in staffing requirements. At peak times of year such as the run up to Christmas, these companies need to boost their staff numbers in order to meet higher targets due to increased demand.

These companies often need to find staff who are able to work night shifts, which limits the pool of candidates available. According to the latest Office for National Statistics data, less than a third of the labour force work at night at least some of the time and this number is decreasing: falling from 9.5 million workers in 2016 to 8.7 million in 2022.

If zero-hours contracts were restricted, logistics companies might find it harder to find staff who are able to commit to these unsociable hours, sometimes at short notice and for limited periods of time.

Predictions regarding how hiring might change

If zero-hour contracts were made illegal in the UK, or somehow restricted, businesses could look to other countries that have similar laws, to find out how they manage flexible work. In Germany, employers must offer a minimum number of hours per day or per week.

Several alternatives to zero-hour contracts have been proposed by think tanks and research groups. For example, guaranteed hours could still be offered for a casual job where a member of staff is not going to be needed on a consistent basis. The contract could offer a set number of hours, spread out over a year rather than over a shorter period like a week. This would mean it would still be possible to offer a much higher number of hours some weeks than others, allowing for busy periods.

Flexible staffing, as offered by Coople, is one alternative by which companies could still access the temporary support they need, without employing workers on zero-hours contracts.

John Dawson comments: “Although zero-hours contracts may no longer be as common in the future, there is still definitely an appetite for flexible work – in the UK, we have more than 400,000 talented, skilled Cooplers who are looking for temporary or flexible positions.”

“By using flexible staffing agencies, employers can still hire temporary workers for as short or as long a period as they are required. While some businesses might be worried about an increase in paperwork and having to change the way that they hire, working with Coople means that all of this work is handled for you, including payroll, admin and HR. It’s easy to post a job advert on our platform, and our algorithm can quickly recommend suitable candidates with appropriate experience.

Labour announced in May that zero-hours contracts would not be scrapped altogether.

It seems likely that zero-hours contracts will instead be restricted in some way.

To learn more about how flexible staffing can be an effective business tactic in these uncertain times, read our blog post on Flexible staffing: an effective business tactic while the UK economy remains unstable. Discover how integrating flexible staffing into your business strategy can help you remain successful and competitive in a challenging economic environment.