Small firms shun zero-hours contracts while employment costs surge

16 August 2018

The Federation of Small Businesses (FSB) has published new research which shows that the majority of small employers steer clear of hiring staff on non-guaranteed hours.

The FSB recently surveyed 559 small businesses in the UK and the overwhelming majority (84%) are not using zero-hours contracts. More than half (60%) were paying all staff £7.83 an hour before this became the National Living Wage rate for over 25s in April 2018.

FSB National Chairman Mike Cherry said:

“Very few of our members use zero-hours contracts. Where they do, they’re creating arrangements that work for both employer and employee alike. Small firms often play host to the kinds of supportive, flexible and family-centred working environments that can be found lacking in big corporates. What today’s findings show, once again, is that they also reward staff fairly.”

The FSB is calling on the Government to raise the Apprenticeship Minimum Wage rate. Apprentices under the age of 19 are currently paid £3.70 an hour. With 70 per cent of small firms saying school leavers are ill-prepared for the workplace, FSB is also urging policymakers to bring back compulsory work experience for students under the age of 16.

Among small businesses that have seen wage bills rise as the result of April’s NLW increase, seven in ten (70%) are reducing profitability or absorbing costs. Four in ten (41%) are increasing prices and one in three (30%) are curtailing investment plans.

The impact of a higher NLW is felt particularly acutely in certain sectors. A significant majority of both small retailers (60%) and accommodation & food services firms (71%) report that the new rate is putting upward pressure on wages.

Read the full report from the FSB.