Concept of Zero-Hours Working and Its Prevalence, Challenges Associated with Zero Hours Contract - Case Study Example

Zero-Hour Contracts: A Case of Sports Direct Name Institution Course Date Executive Summary Zero hour Contracts has become a common form of hiring workers in the UK. Under this hiring process, an employee is not guaranteed any work or working hours and the employee is not obliged to accept the job. Sports Direct is one of the UK companies that adopt this hiring method as 90% of the company’s employees are currently on zero hour contracts. Despite the benefits that firms gain from this hiring method, such as greater flexibility of workforce, low wage cost, avoidance of agency cost and employment laws, companies that adopt this hiring process face the challenge of low productivity and motivation, as well as staff retention challenges. However, these challenges can be effectively addressed by adopting effective leadership and human resource techniques that focus on increasing the satisfaction and motivational level of the employees on zero hour contracts. Table of Contents Executive Summary 2 Table of Contents 3 Introduction 4 Concept of Zero-hours working and its Prevalence 5 Zero-Hours Contract: Sports Direct Case 5 Challenges Associated with Zero Hours Contract 6 Use of Leadership and HR Techniques to Address the Challenges 8 Conclusion 10 Recommendations 10 References 12 Introduction Zero-hour contract has become a common form of employment contract in the United Kingdom. A survey conducted in the UK found that more than 744,000 people in the UK are employed on zero-hour contract (Walker 2015). The growth in the number of people being employed on zero-hour contract has raised hot political debate in the UK. The increased adoption of this form of employment by the employers is mainly linked to the flexibility that zero-hours contracts provide both to the employer and the employee. Sports Direct is one of the UK companies that employee the majority of its staff on zero-hours contract. Sports Direct is a British multinational retailing company founded in 1982. The company provides sport-goods and services and currently operates more than 670 stores across the globe. According to Cooper (2016), more than 90% of the retailer’s employees are on zero-hours contract. Despite the increased popularity of zero-hours contracts in the UK, hiring people on zero-hours contracts have certain challenges that employers must understand and deal with to ensure successful operations. First, low productivity and motivation is the first biggest challenge associated with zero-hours contract (Croner-I 2015). Secondly, zero-hours working are associated with staff retention problem, which is detrimental to a company that adopts this method (TUC 2014). This report analyzes the use of zero-hours contract at Sport Direct and the challenges associated with this form of employment contract. It will also describe how leadership and human resource tools can be used to address the challenges. Concept of Zero-hours working and its Prevalence Zero-hour contract (ZHC) is a form of employment contract where the employee is not guaranteed any work or working hours by the employer. Under this employment arrangement, the employee has the right either to accept of decline the work offered. Deakin ( 2014) took the definition further by defining ZHC as a form of employment arrangement in which the employer agrees to pay an employee for the work done, but does not guarantee the worker a specific number of hours of work daily, weekly or monthly. ZHC has become a common form of work arrangement that is being adopted by employers in the UK and in most developed countries. According to Deakin (2014) report, about 580,000 individuals were on ZHCs between October and December 2013. This accounted for about 2% increase compared to the same period the previous year. The numbers rose again in 2014 with about 744,000 people being employed on ZHC in the UK (Walker 2015). Projections by ONS indicate that there are about 1.4 million people in Britain that works on contracts that do not guarantee the minimum working hours. Zero-Hours Contract: Sports Direct Case Sport Direct is one of the largest employers in the UK. The company currently employs about 20,000 people in its 670 plus stores across the globe (Cooper 2016). However, out of the 20,000 employees of Sports Direct, up to 90% are on zero hour contracts (Cooper 2016). The over 20,000 employees who are classified as zero-hours contracts are not aware of the number of hours that they are supposed to work every week. Besides, they are not entitled to holiday pay or sick pay and are not guaranteed by the company of regular work. This implies that these workers only perform their work depending on how they are assigned by Sports Direct managers and can leave the workplace at any time when the employer feels like doing so (O'Hara 2015, p. 77). Although unions and politicians have been advising Sports Direct to introduce part time work with guaranteed working hours, the company has not done so because of the benefits that it believes accrues from the adoption of this working contract. First, Sports Direct like many other companies that adopt this working arrangement argues that ZHC is beneficial because it provides Sports Direct with greater flexibility of its workforce (Cooper 2016). ZHC allows employers to realize cost efficiencies by enabling a firm to retain a pool of flexible workers who have good knowledge of their business and who can be called upon fast when need arises in a company. Besides, Sports Direct defends its move to introduce ZHC working arrangement arguing that this form of work arrangement not only provides the company with greater flexibility, but also to the employees of the firm. According to Cooper (2016), ZHC working arrangement allows its staff to enjoy greater flexibility that enables then to attend to personal and family issues. Besides the flexibility that comes with ZHC working arrangement, Sports Direct use ZHC as adopted this hiring strategy as a way of cutting wage cost, avoiding agency costs and evading the tough employment law obligations, such as paid leaves and job security rights (Capify 2015). Challenges Associated with Zero Hours Contract Despite the growing prevalence of ZHC in the UK, this form of employment arrangement has certain challenges that managers needs to address effectively to ensure the success of a company using this form of employment contract. The first major challenge associated with ZHC is low productivity and motivation. According to a study conducted in the UK, it was found that employees on ZHC work for an average of 24 hours weeks per week which is very low considering that full time employees work for weekly average of 34 hours (Capify 2015). Besides, more than 75% of workers on ZHC say that their work hours keep changing every week while the majority is not even sure whether they would be assigned work so they could earn some wages. This is notwithstanding the fact that between 25% and 40% of ZHC employees state that they want to work more hours and be provided with job security that includes paid leaves reports Deakin (2014). These factors results in motivational level among employees on ZHC, which in turn results in low productivity among the employees, thus resulting in poor performance. This implies that, as much as employers like Sports Direct might be adopting this form of employment contract, it also plays to the disadvantage of the company, thus needs to be addressed to help the company maintain a competitive advantage in the industry. Retention problem is another challenge that is associated with ZHC. For a company to perform and compete effectively in an industry, it must be able to attract and retain its skilled workforce. However, evidence gathered by Williams (2016) found that staff retention ranks among the top challenges associated with this form of employment contract. The retention problem associated with ZHC is linked to the fact that, whenever a company has no work to be done or in cases where work offered is too little, they may opt to go elsewhere where they are guaranteed work hours (Croner-I 2015). Sports Direct is an example of a company that faces staff retention problem as the British sport-goods retailer experiences high rates of turnover of employees because of ZHC. Use of Leadership and HR Techniques to Address the Challenges It has been demonstrated above that, as much as many UK companies are increasingly adopting zero hour contracts, this form of hiring has challenges, that include low productivity and motivation among employees and staff retention problems. However, these challenges can be effectively addressed by adopting effective leadership styles and human resource techniques. First, leadership has been cited as one of the most important element in organizational success. Leadership has to do with the ability of a person in authority to exert positive influence on the subordinates. As illustrated, low productivity and motivation is one of the greatest challenges that a company like Sports Direct that adopts ZHC faces (The Week 2015). The low productivity and motivation is partly linked to lack of job security and low pay, the best way to address this challenge is to provide good leadership style that focuses on productivity and motivating the staff in the company. Although there are different leadership styles that can be used to influence followers, transformational leadership is one of the best leadership approaches to adopt. Transformational leader is that leader who has a vision for the company and rallies followers towards the achievement of those visions (Winkler2010, p. 3). Therefore, through transformational leadership, the leaders at Sports Direct Company can effectively address the low productivity and motivation by making the employees employed on ZHC terms understand what is expected of them by communicating to them the vision and mission of the company, then inspire them to work towards the realization of the goals (Barnett and Scrope 2008, p. 56). The strategy is effective because when employees who appear to have low morale are inspired by their leaders, this not only increase their morale, but also make them feel valued, thus enhancing their morale, which in turn results in increased effort and productivity. Sports Direct and other companies that experience low productivity and motivation among their employees on ZHC can also use HR techniques to address the challenge. As regards motivation, the HR managers of Sports Direct can address low morale among its staff on ZHC by providing benefits such as free gifts and foods whenever there is too little work for the employees or whenever the company lacks work to be done. Offering such little gifts will go a long way in motivating its staff on ZHC due to the satisfaction of their physiological needs in line with Abraham Maslow’s hierarchy of needs theory. According to Maslow’s hierarchy of needs theory, once an employee has met the low level needs, it is them that they seek the satisfaction of higher level needs (Maddock and Fulton 1998, p. 32). However, most employees hired on ZHC are those that seek the satisfaction of their physiological needs (MacRae and Furnham 2014, p. 45). This implies that, by providing gifts, free meals and some tokens will help address the motivational issue, thus resulting in increased employees’ productivity. Staff retention problem being experienced at Sports Direct and other firms that adopt ZHC can also be addressed using leadership and HR techniques. In this respect, the leaders should consider adopting democratic kind of leadership, coupled with transformational leadership. Democratic leadership is a kind of leadership that allows subordinates to participate in the running of an organization through delegation of duties (O'Hara 2015, p. 91) Therefore, by adopting democratic and transformational leadership, this would not only help increase employees level of satisfaction and the company, but also their motivational level. For instance, Richard Branson of the Virgin Group is that kind of leader who not only adopts transformational leadership style, but is also a democratic leader (Shelton 2012, p. 64) This style has enabled him achieve the trust of his subordinates, motivation and working relationship, which in turn has enabled Virgin to succeed despite the high competition. In addition to leadership, the staff retention problem can be addressed through HR techniques that include using different strategies to increase the motivation and satisfaction level of the ZHC employees. Among the HR strategies that would be appropriate include motivating staff through engagement, training and development, providing competitive wages, as well as praising employees for their efforts in the company (Boudreau, Jesuthasan and Creelman 2015, p. 21). Conclusion Zero-hour contracts have become common in most UK companies with about 744,000 people currently employed on ZHC. Sports Direct is one of the companies that adopt this hiring method. However, as much as ZHC provide many benefits to Sports Direct, such as providing greater flexibility, provide away of cutting wage cost, as well as avoiding legal issues and agency costs, the adoption of this hiring technique is associated with declined productivity and low motivation, as well as staff retention problems that the company must address to ensure success with this employee hiring technique. Recommendations As demonstrated above, ZHC brings many benefits to Sports Direct, such as greater flexibility, provide away of cutting wage cost, as well as avoiding legal issues and agency costs. However, for the company to succeed, its leaders and HR managers must ensure that the low productivity and motivation, as well as staff retention problems are addressed. As such, to address low production and motivation, Sports Directs’ management should ensure that they adopt an effective leadership style, particularly transformational leadership as this would help motivate and inspire the employees, thus enhancing their satisfaction, which in turn results in increased morale and productivity. However, to address staff retention problem, the management of Sports Direct should consider increasing staff satisfaction level using motivational strategies, such as engagement, training and development, providing competitive wages, as well as praising employees for their work. 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The Guardian 9 June, viewed 8 August 2016 https://www.theguardian.com/commentisfree/2016/jun/09/zero-hours-contracts-staff-exploited-businesses-inequality-workplace Winkler, I 2010, Contemporary leadership theories: enhancing the understanding of the complexity, subjectivity and dynamic of leadership. Springer Science & Business Media, Oxford. Top of Form Bottom of Form Read More