Zero hours contracts for SMEs: A problem or an opportunity?


Zero hours contracts are a controversial subject that some would describe as flexible while others would describe as insecure. The issue is a bit more complicated because zero hour contracts are not the same thing to all workers. Although zero hours contract make up a relatively small proportion of the workforce in the UK (2.4% according to the Office of National Statistics), that does represent about 750,000 employees. That proportion is growing and as zero hours contracts become more prevalent, they are becoming a symbol of shifting relationships between employers and employees.

The question about zero hours contracts needs to be reframed to discuss motivation. The distinction between “flexible” and “insecure” is less useful when talking about motivating individuals or teams. The real question should be: are the employees motivated by security or flexibility?

The security argument

Some employees want job security. They may need the steady source of income for themselves or for their family. They may be more motivated and focused in an environment where they feel their job provides a sense of security and continuity.

In Motivation and Performance we explain how job security tends to be a motivation that is most important for people on low incomes with insecure employment. Younger people are much more likely to be on zero hours contracts (6.7% of 16-24 year olds) than older workers (3.6% for those over 65). Contrary to popular myths about what motivates young people and millennials, these younger workers are more likely to value job security because they are more likely to be in lower income or less secure work.

Many of these workers want to work more than is provided by the zero hours contracts. The government statistics show about a quarter of workers on zero hours contracts want more hours in their current job while 12% want a different job with more hours.

Of course, employers cannot always offer more hours or afford to pay more. Small or medium sized businesses in particular may not be able to offer job security in a growing, shrinking, or unpredictable business climate. Many zero hours contracts may be for work where the employer, too, would like to offer more hours or more job security.

Insecure working arrangements are fine for some, but are most demotivating for those who need the job security or reliable source of income. Understanding what an employee’s key motivators are for doing the work will explain whether an insecure zero hours contract is demotivating or not.

The flexibility (autonomy) argument

Plenty of workers like flexibility in their working hours, some only want to work part time. Others might relish that a zero hours contract gives them the ability to turn down work. Students, parents, semi-retired workers, carers or a range of other life circumstances may make flexible work desirable. Indeed, a majority of those on zero hours contracts report satisfaction with the amount of work they do.

Autonomy is an extremely important motivator, and agile small and medium sized businesses can often use that flexibility to provide more opportunities for their employees. Stretch assignments, flexible working conditions and development opportunities fit well in businesses that may not be large enough to employe a full time marketing, HR or sales team. Or perhaps a worker wants to partially retire, but remain available to assist with certain projects on a flexible basis with a zero hours contract.

Zero hours contracts can be beneficial for both employers and employees if both the employer and employee can agree on a working arrangement that is mutually fair and benefit. The employer has greater capacity to grow or meet demand, but only pays for the extra work on an as-needed basis. The employee can work on their own terms and on their own schedule. Sounds like an ideal situation when it is a fair arrangement for both.

When workers want autonomy and flexibility in their work, getting it can be hugely motivating. When that motivation matches the conditions it leads to happy, engaged and productive workers.

Problem or opportunity?

To understand how zero hours contracts affect motivation, ask what is the employee motivated by? If the terms of the zero hours contract fit with employee needs and motives, it will have a positive effect on motivation. If they conflict, it will be demotivating.

See if you are more motivated by security or autonomy at other work, and how your motivation compares to the general working population You can take a free test of motivation and receive a report of your results at:

Ian MacRae is the co-author of new book Motivation and Performance: A guide to motivating a diverse workforce, published by Kogan Page, priced £19.99.