Zero‐hour contracts in the UK from 2013 to 2024
Introduction
This Chart of the Week examines the evolution of zero‐hour contracts in the UK from 2013 to 2024, revealing an unexpected trend where these flexible arrangements continue to grow despite a tightening labour market. Against the backdrop of falling unemployment and proposed legislative reforms, the analysis highlights the structural factors underpinning the persistence of precarious work and explores the broader economic implications for workers and businesses.
What does the Chart Show?
The chart presents time series analysis of zero‐hour contract usage in the UK from Q4 2013 to Q4 2024. It delineates the workforce into two categories: workers on zero‐hour contracts for under two years and those for two years or more. These series reveal the overall growth in the number of zero‐hour contract workers over the period, as well as a notable shift in the composition: while the absolute numbers in both groups have increased, the proportion of workers remaining on these contracts for two years or more has steadily risen outside of the Covid-19 period. This suggests that zero‐hour arrangements have become more entrenched as a long‐term employment model, rather than serving merely as a temporary or transitional option.
Why is the Chart Interesting?
From 2013 to 2024, the UK unemployment rate dropped dramatically, signalling a notably tighter labour market. Conventional economic wisdom would suggest that, in such conditions, precarious or flexible forms of employment would dwindle as workers gain bargaining power and demand more stable arrangements. Yet our chart, which compares the unemployment rate to the total number of zero‐hour contract workers (split between those under two years in the role and those with two or more years’ tenure), tells a different story. Far from disappearing, zero‐hour contracts appear to have become a persistent and growing feature of the UK labour market.
Between Q4 2013 and Q4 2019, unemployment fell from around 7.8% to roughly 3.8%. Over that same period, the total headcount of zero‐hour contract workers almost doubled, rising from around 580,000 to nearly 980,000. Even more striking, the proportion of individuals on zero‐hour contracts for over two years grew steadily, suggesting that these arrangements are not merely short‐term stopgaps. This points to deeper, structural factors at play. In sectors such as hospitality, retail, and care, flexible staffing may be embedded in business models, while in other cases, certain demographics (for example, students or semi‐retirees) may simply prefer the ability to pick and choose shifts.
The early phase of the COVID‐19 pandemic briefly reversed the broader economic trends. Unemployment jumped from around 3.9% in early 2020 to above 5% by the end of that year, as lockdowns and restrictions hit many businesses hard. For zero‐hour contract workers, the impact was uneven. Some were let go immediately. Employers facing uncertainty could easily terminate shifts, leaving many workers without a safety net. Indeed, there was a notable dip in total zero‐hour usage by Q3 2020. Yet by Q4 2020, numbers rebounded, partly due to employers needing to respond swiftly to unpredictable demand and partly because those laid off from other roles sometimes had few alternatives but to take on flexible work.
By 2022, unemployment had settled back near 4%. One might have anticipated a decline in precarious employment arrangements as businesses reopened and hiring picked up. Instead, zero‐hour contract usage continued to climb, passing the one million mark and, in some quarters, edging even higher. This ongoing reliance on zero‐hour workers despite a relatively healthy labour market strongly suggests that we are witnessing a structural rather than a cyclical shift. The data shows a steady increase in the number of people staying on these contracts for two years or more, indicating a long‐term role for zero‐hour work in the UK. In other words, flexible staffing appears to be embedded in certain industries, and many workers, for various reasons, remain in these roles beyond an initial transitional period.
The debate over zero‐hour contracts has taken centre stage in the wake of proposed legislation aimed at banning these arrangements, alongside extending protections to agency workers. This policy seeks to redress persistent issues in the labour market, where flexible yet precarious employment has become a feature. By eliminating arrangements that leave workers with no guaranteed hours, the legislation aims to reduce income volatility and provide a more stable framework for employment. In doing so, it could improve overall worker welfare and potentially narrow wage inequality, as greater job security typically enhances workers’ negotiating position over wages and conditions.
Yet, the economic implications of such a ban will extend beyond worker security. For industries that have long relied on the nimbleness of zero‐hour contracts, a wholesale removal of this option could necessitate a significant restructuring of operational practices. The cost and logistical challenges associated with fixed or guaranteed hours might force businesses, especially in sectors characterised by unpredictable demand, to explore alternative forms of flexible employment. This could include a shift towards part-time or fixed-hour contracts, or even a greater reliance on agency workers.
In this context, the decision to include agency workers within the ambit of the ban is particularly noteworthy. Agency workers are often caught in a double bind: not only do they face the uncertainties associated with outsourced roles, but they also frequently lack the legal protections afforded to directly employed staff. Extending the ban to agency workers would therefore provide a more comprehensive safeguard against precarious employment.
However, it is important to consider potential unintended consequences. For example, imposing stricter regulations might drive some employers to restructure their workforce entirely, potentially shifting towards informal or even unregulated forms of employment. Such outcomes could undermine the very protections the legislation seeks to enforce. Moreover, higher operating costs for agencies could eventually be passed on to businesses and consumers, affecting competitiveness in sectors already operating on tight margins.
Ultimately, the debate hinges on striking the right balance between the flexibility that modern industries demand and the fairness and stability that workers deserve. The persistence of zero‐hour contracts, even in periods of low unemployment, underscores that these arrangements are not solely a response to cyclical economic pressures. Rather, they have become a persistent element of the UK labour market. Thus, any policy intervention must account for the structural factors at play: sector-specific demands, cost considerations, and the diverse preferences and constraints of the workforce.
The challenge will be to design a framework that enhances worker protection without inadvertently stifling the flexibility that, for many industries, is essential to remain competitive in a rapidly changing economic landscape.