Policy Responses to New Forms of Work

Chapter 6. Variable hours contracts

A number of countries reported policy action with respect to “variable hours” (or “on-call”) contracts. These are typically part-time contracts that include a clause stating that hours worked can vary from one week (or day) to the next. The employer and employee may agree a minimum number of guaranteed hours, and in some countries, there may be no guaranteed hours (called a “zero hour contract”). Countries where zero hour contracts exist tended to report that these contracts have been subject to public debate in recent years. Other countries where variable hours contracts are permitted described the rationale for such contracts, i.e. enhancing flexibility within the range of available employment contracts and thereby enabling employers to meet variable labour needs.

In most OECD countries (and all EU member states1), individuals on part-time employment contracts – including those with a variable hours clause – have access to similar rights and benefits (e.g. regarding pay, annual leave and dismissal) as full-time employees under the principle of non-discrimination. Workers on part-time contracts and variable hours contracts alike may face difficulties where hours worked (and therefore overall earnings) are lower than desired. At the same time, part-time contracts play an important role in providing flexibility for workers that desire it, boosting labour market participation.

The main additional concern associated with variable hours contracts is in the unpredictability in working hours, and the consequences on overall earnings, earnings volatility, and the worker’s ability to plan ahead. Most policy responses reported dealt with this aspect. Other policy actions (such as removing exclusivity clauses and obligations for employees to accept work) may be intended to tackle potential imbalances in bargaining power between employer and employee – and may indirectly help employees to deal with some negative consequences if they can combine multiple jobs.

The proposed EU Directive on Transparent and Predictable Working Conditions, which would give the right to advance notice for shifts and set restrictions on exclusivity clauses, is intended to cover all workers in all forms of work, including those on variable hours contracts and in other casual work.

The policy responses covered in this section include:

• Introducing variable hours contracts;

• Addressing unpredictability in working hours;

• “Banning” zero hour contracts; and

• Removing exclusivity clauses from zero hour contracts.

6.1. Introducing variable hours contracts

Some countries have considered introducing variable hours contracts for the first time. In Estonia, amendments were discussed in 2018 that would introduce on-call work contracts, with a specified minimum and maximum number of hours. The Estonian questionnaire response stated that the intention was to allow more flexibility within the existing framework of employment contracts in order to provide employees with adequate social protection. In Lithuania, a draft version of the new Labour Code indicated that zero hour contracts would come into force from 1 January 2017. However, in both countries, the proposals were shelved following discussions with social partners. The introduction of zero hour contracts is under review in Saudi Arabia at the time of writing, with the Ministry of Labour and Social Development considering options for ensuring pension coverage.

6.2. Addressing unpredictability in working hours

In Finland, following public debate on the subject, new legislative amendments concerning variable hours contracts (including zero hour contracts) entered into force on 1 June 2018.

“A key objective of the legislation on zero hours contracts and other variable hours contracts was to improve the status of affected employees and safeguard proper compliance with the regulations on protection against unjustified termination, including sick pay, pay for the notice period as compensation and unemployment security. Another objective was to allow employers to use different kinds of variable hours contracts to meet unforeseeable and temporary need for labour. However, variable hours contracts may not be used to circumvent the requirements laid down to protect employees.” – Finnish questionnaire response

As of 1 June 2018, employers can only propose variable working hours if they have a variable need for labour and the minimum number of hours cannot be lower than the employer's actual need for labour. Employers must provide in writing the key terms of the contract, describing when and to what extent the employer has need for labour. The intention is to ensure that both parties have the same expectation of the relationship. Other aspects of the Finnish amendments on variable hours contracts concern rostering, sick pay for days when the employee would have otherwise worked, and termination of the employment relationship, as described in Box 6.1.

Box 6.1. Finnish amendments on variable hours contracts

Finnish amendments concerning rostering, sick pay and termination of the employment relationship include the following:

• Shift rosters must be provided at least a week in advance and employees cannot consent to work unlimited additional hours on top of the minimum.

• An employee is entitled to sick pay if the illness falls on a day when the employee would have otherwise been at work at the time.

• Where a contract is terminated and the employer offers a lower number of hours in the notice period than the previous average, the employer must compensate the employee for loss of income.

• Where an employee on a zero hour contract decides to resign, having been offered fewer than 18 hours of work during the previous 12 weeks, there will no longer be a gap before the individual can receive unemployment benefits. It was already the case that an employee on a zero hour contract could already receive adjusted unemployment benefits if fewer than 18 hours were offered.

In the UK government’s response to the Taylor Review (2018[12]), it accepted the recommendations regarding variable hours contracts. One recommendation was that the government ask the Low Pay Commission to consider introducing a higher rate of National Minimum Wage for hours not guaranteed as part of a contract. Another recommendation was to give those on zero hour contracts for over a year the right to request a more predictable contract. In this case, the government committed to establishing this right for all workers, including those on zero hour contracts and agency workers.

In Ireland, following public debate on the subject of variable hours and zero hour contracts, the Employment (Miscellaneous Provisions) Act 2018 was enacted and is scheduled to come into force in March 2019. The intention behind the legislation is to put stronger protections in place for employees who, not by choice, are working in less secure or variable hours arrangements and, while not prohibiting outright all flexible arrangements, to prevent the abuse of such arrangements. The Act will force employers to provide the most essential terms of employment (including what they reasonably expect the normal working day and normal working week to be) on or by the fifth day of employment or face fixed payment notices or criminal prosecution. The Act will introduce banded hours contracts for employees who habitually work more hours than their contracts state and will provide for compensation for low-paid employees called in and then sent home without work. The Act also strengthens anti-penalisation provisions to protect employees who invoke their rights under this legislation.

“[This] is a response to the Programme for Government commitment to tackle problems caused by the increased casualisation of work and to strengthen the regulation of precarious work” – Irish questionnaire response

In Australia, many workers with variable hours fall under the broader definition of “casual employee”, which accounts for approximately 25 per cent of all employees in Australia. Most occupations and industries have a set of minimum standards that apply to casual work (as well as part-time work), including clauses on minimum engagement periods (e.g. three hours in the fast food industry), ordinary hours of work and overtime, and procedures around providing and changing rosters. In addition, in exchange for not having access to the full set of employment benefits as permanent employees (specifically, paid leave entitlements), casual employees receive a pay loading of 15-25% of the equivalent hourly permanent rate. In Australia, as a result of a 2017 decision by the independent Fair Work Commission, some eligible casual employees with 12 months of regular service have the right to request conversion to permanent employment. Employers may only refuse this request on reasonable grounds. The Government has committed to extend this right to all eligible casual employees.

In New Zealand, the Employment Relations Act 2000 contains some protections for employees with variable hours. For instance, an employer must give reasonable notice to cancel a shift or must provide compensation if the notice specified in the employment agreement is not given. An amendment to the Employment Relations Act that is set to come into force on 6 May 2019 requires that all employees are provided rest and meal breaks (with limited exceptions where employees work in essential services or are in engaged in New Zealand’s national security),with the duration based on the number of hours worked.

Canada has also recently taken action to address unpredictable schedules. In 2017 and 2018, Canada made significant changes to the Canada Labour Code to address unpredictable working hours, including: requiring employers to provide written work schedules at least 96 hours in advance; giving employees the right to refuse a shift if this notice was not observed (subject to exceptions); setting minimum rest periods between shifts; and giving employees the right to refuse overtime if they are required to deal with family responsibilities. These amendments were expected to come into force over in 2019 once necessary regulations had been drafted and outreach with employers and employees had been conducted.

The Norwegian Parliament has recently adopted a legislative amendment in the Working Environment Act (which will come into force in January 2019), which includes an obligation to provide information about working time (including when the worker is required to work) in the employment contract for workers who have a variable work schedule. The response from Norway noted the impression that "zero-hour" contracts and lack of predictability in working time is particularly extensive in the Temporary Work Agency (TWA) sector and to a lesser extent in other sectors.

6.3. “Bans” on zero hour contracts

New Zealand and Ireland have taken actions in relation to zero hour contracts which, in both countries, have been announced in the media as “bans” on zero hour contracts.

In New Zealand, following a large union-led campaign, a 2016 amendment to the Employment Relations Act prohibited any employment agreement that does not provide guaranteed hours but obligates employees to make themselves available for work for a certain number of hours every week. Employers and employees must record any agreed hours in the employment agreement, and if an employer wishes to require an employee to be available above those agreed hours they must provide an availability provision in the employment agreement that sets out reasonable compensation for the employee being required to be available to work. If an employment agreement does not provide guaranteed hours, the employee is free to decline any work offered and protected from any adverse treatment as a result of refusal.

In Ireland, the Employment (Miscellaneous Provisions) Act 2018 (scheduled to come into force in March 2019) prohibits zero hour contracts in most, but not all, circumstances. Zero hour contracts will still be allowed in situations of genuine casual employment and where they are essential to allow employers to provide cover in emergency situations or to cover short-term absences. “If and when” contracts2, which describe arrangements in which an employer is under no obligation to provide guaranteed hours and the worker is under no obligation to accept any hours offered, will continue to be allowed, although employees in such arrangements will be covered by the regulations under the Employment (Miscellaneous Provisions) Act 2018.

6.4. Removing exclusivity clauses from zero hour contracts

In New Zealand, the 2016 amendment to the Employment Relations Act also regulated the use of secondary employment provisions (in all contracts) unless they have genuine reasons based on reasonable grounds and declared in the employment agreement.

In the Dutch government’s 2017 coalition agreement, a stated intention was to prevent zero hour contract workers being subject to permanent availability requirements where the work does not warrant them. The reasoning being that this may make it difficult for workers to accept other part-time jobs. It was noted that in many sectors, good arrangements had already been made in this respect. Other proposed solutions were to remove the requirement to respond to work calls immediately (generally, at least 4 days’ notice should be given) and to introduce an entitlement to payment of wages if a shift is cancelled.

“Employers, client organisations and workers need the labour market to offer flexibility. There are different types of flexible working arrangements that meet different needs. However, it is important to prevent organisations using these arrangements to compete unfairly on employment conditions and to avoid excesses in which employers’ and clients’ need for flexibility undermines workers’ opportunities on the labour market” – 2017–2021 Dutch Coalition Agreement (2017[14]).

Notes

← 1.  Within EU member states, EU directive Directive 97/81/EC applies a principle of non-discrimination, requiring that part-time workers be treated in a manner no less favourable than comparable full-time workers are (unless objectively justified).

← 2.  A study carried out in 2015 found that such contracts were actually more common in Ireland than zero hour contracts (O’Sullivan et al., 2016[25]).