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Zero-hours work: Facing the ethical challenge

Zero-hours work: Facing the ethical challenge

How ethical investors can show leadership by promoting a corporate social conscience

The Covid-19 pandemic has exposed the vulnerability of millions of UK workers employed on zero-hours contracts or within the gig economy. For them, self-isolation means a sudden loss of income, often without access to redundancy payments, sick pay or universal credit.

Covid-19 has highlighted the economic reality of working conditions for employees in insecure, precarious, low-paying and temporary jobs. According to the Office of National Statistics, a record 974,000 people had zero-hour contracts as their main job at the end of 2019 – some 130,000 more than one year earlier.

The challenge to ethical investors is clear – how can they encourage powerful corporations to offer fair conditions of employment for honest work?

What are zero-hours contracts?

Although there is no clear legal definition, zero-hours work generally means an absence of guaranteed employment hours. It covers a wide range of casual and precarious working arrangements. While the employee has no obligation to accept any work offered, the employer is not obliged to provide a minimum number of paid hours. Use of zero-hour contracts has increased exponentially in recent years and particularly since 2011, partly because of the financial crisis. A 2020 report by the Health Foundation shows that 36% of UK workers (approximately 10 million people) work in poor-quality, precarious or low-paid jobs.

Profits and hidden costs

Companies face intense cost and efficiency pressures in today’s volatile globalised economy, making zero-hour contracts a tempting proposition. Employers can minimise their financial and contractual obligations while transferring risks to employees and vastly reducing labour costs. Yet, these contracts take a substantial physical and mental toll on employees. Research has linked precarious work with poor mental health, rising stress levels, depression and even suicide. Economist Guy Standing regards the “precariat” as a new social class of the 21st century. They lack even the most basic stability, are unable to gain a foothold in society, and move in and out of jobs that give little meaning to their lives.

The regulatory response

The UK labour model sees flexibility as a key strength. The perception is that zero-hour contracts get the unemployed into work. The government’s 2017 Taylor report on modern working practices criticised the proliferation of zero-hours work as offering “one-sided flexibility” – placing demands on employees but offering few guarantees. The report states: “Being able to work when you want is a good thing; not knowing whether you have work from one day to the next when you have bills to pay is not.” While the report emphasises the quality rather than just the quantity of work, it supports the principle that labour market flexibility should remain. It concludes that it helped businesses create jobs in record numbers, supporting many millions into work. The strategy for tackling zero-hours work was not through regulation, but through encouraging companies to improve their employment practices.

Ethical investment

The UN’s Sustainable Development Goals include decent work (SDG8), aiming to “promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all”. Such principles are crucial but can be challenging to translate into regulation that will prevent employers from using exploitative forms of labour.

Food services company Aramark is one of many companies that responded to the Covid-19 crisis by sacking its zero-hour contract employees. Without rights to statutory redundancy payments or unfair dismissal compensation, employees cannot challenge such treatment.

Conclusions

Ethical fund managers engaging on work-related issues need to ensure tangible results. Firms that deny or evade employee or social responsibilities can be avoided or their shares divested. By treating staff fairly during challenging times, companies can develop strong relationships with clients, customers, suppliers and business partners. These actions earn them loyalty that will help them recover strongly once the current crisis passes.

Zero-hours work has enabled a socially unacceptable degree of worker exploitation, veiled as freedom of choice, and created an economically vulnerable class, hard pushed to protect themselves against economic or health crises. Conscience dictates that corporations and political leaders must accept their responsibility to protect employees against such disasters, including Covid-19.

Ethical investors can show leadership by promoting a corporate social conscience. As shareholders and custodians of bond capital, they can emphasise to company boards that during the current Covid-19 pandemic, companies should accept their social responsibilities to protect employees and stakeholders. After all, companies form part of a broader society that supports them with resources, employee talent, customers, clients, business partners and (not to forget) financial capital.

Prof Sarah Waters
PhD, MA, BA (Dublin)
Professor of French studies, University of Leeds

Dr Quintin Rayer
DPhil, FInstP, Chartered FCSI, SIPC, Chartered wealth manager
Head of research and ethical investing, P1 Investment Management

Image credit | iStock

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