What the Coalition wishes it could ignore: the hidden scandal of zero-hours contracts

11 July 2013

By Sarah Glenister, IER staff

It’s been one of the most important employment law issues to hit the news this year, yet no Conservative MPs even turned up to debate zero-hour contracts in Parliament on Tuesday (09 July 2013).

Across the hall, the opposition benches were full, which many MPs said reflected the seriousness of the issue at hand.

The debate was secured by Julie Elliott, Labour MP for Sunderland Central, who told attendees she hoped the time would be spent not only discussing the wide-ranging problems associated with zero-hour contracts, but also sharing ideas for possible solutions. The Institute of Employment Rights commends the efforts of the Labour Party and Julie Elliott in particular for bringing this important issue to the fore, but we are astonished that no member of the Conservative Party bothered to attend. We hope Business Secretary Vince Cable’s review into zero-hour contracts will lead to a public consultation and legislative proposals, which may impress on the minds of Conservative MPs that the increasing vulnerability of hundreds of thousands of people across the UK is worth acting upon.

People employed via a zero-hour contract are not guaranteed any work at all. Their employer may call them into work at any time, and will pay them only for the hours actually worked. For some this may be 60 hours per week. For others it may be nothing at all. Legally, individuals are well within their rights to refuse to attend the workplace when called in by their boss, as they are not obliged to work the hours they are offered. However, there is an increasing body of evidence showing that workers who exert their rights in this way are often punished by employers for not bending over backwards for their jobs. They receive fewer offers of work, and some may in fact see their hours ‘zeroed-down’ to nothing at all – an effective dismissal. They also work a lower number of hours a week on average compared with those on conventional contracts, get paid up to 50% less, are not protected against unfair dismissal and do not have redundancy or maternity rights. Their earnings are often unpredictable and barely cover their expenses. Indeed, being paid at minimum wage on a zero-hours contract can often leave workers with less than the minimum wage to live on after they have paid for sometimes significant travel to and from work (particularly in rural areas). These employees are also less likely to be able to save for their retirement in pensions and often find it difficult to take on extra work seeing as they are essentially on call at all hours.

“Is not one of the fundamental issues that zero-hour contracts are about transferring the burden and the difficulty of dealing with a contract from the employer to the most vulnerable and lowest paid?” Labour MP Robert Flello stated. “How can it be in any way fair to transfer that burden from the employer to someone right at the bottom of the pile?” he asked.

Indeed the issue of zero-hour contracts does bring up the question of where the power lies in Britain’s labour market and, perhaps more importantly, Britain’s economy. With zero-hour contracts, employers can pick up and drop low-paid staff at the drop of a hat with no legal duty to ensure they are provided with a wage on which they can feed themselves and their families. It is difficult for such people to access benefits or tax credits as it is often impossible to accurately report how much they earn, seeing as this changes rapidly and unpredictably. Even where staff are able to access to benefits to top up their wages, this is a prime example of the state essentially subsidising unethical employers who refuse to provide an acceptable level of pay to their workers.

There is an increasing number of people employed on zero-hour contracts in the UK, although as it was pointed out several times during the debate, all figures are currently suspected to be underestimates partly due to the fact there are workers who do not even know they are on a zero-hours contract. According to government estimates quoted by Elliott, the number of people on such contracts more than doubled between 2004 and 2011.

Labour MP Lisa Nandy gave anecdotal evidence provided by some of her constituents in Wigan:

“One women told me an absolutely astonishing story about a co-worker, who had been told that if she did not take a series of jobs put on to the rota at short notice, she would not be offered hours next time. She had two children, so she had to take them with her on a series of shifts lasting for more than eight hours. The young children had to sit locked in the car for most of that time. The firm did not even factor in a lunch break for the worker, which apparently is standard practice. On top of that, she had the children with her, although they were unable to go outside and play; they did not eat and were locked into the car for several hours, which she was absolutely distraught about, but she was left between a rock and a hard place—she has to feed her children somehow, and that was the job she had been offered,” she recounted.

Nandy argued that employers which engage in widespread use of zero-hour contracts and which fail to properly reward and value their employees, “it is likely that they are poor employers across the board”. She made an example of care home provider Cherish, which operates in her constituency. Nandy reported that she had written to the employer after discovering the firm was breaching minimum wage requirements by refusing to pay for the substantial travelling time of their staff, not factoring in any time of a lunch break, and providing wage slips which are “confusing and incomplete”. “When I wrote to the firm I received what can only be described as a sarcastic letter thanking me for my interest in the company,” she said, adding: “I was astonished at the lack of response from the CQC and the local authority.”

Zero-hour contracts have been a problem since well before the financial crisis, but some businesses cut corners in order to save money during tough times, and so the recession and the subsequent stagnation of the economy are likely to be factors in the rise of these flimsy workplace agreements. Yet this time of economic instability has seen draconian approaches to employment law by the Coalition, and the representation and protection of vulnerable workers by trade unions has been shamelessly attacked. As Nandy said: “I have been dismayed by the Coalition government’s attack on the trade union movement in the last few days, which can only hinder the situation … and not help it.”

In fact, many of the Coalition’s policies have actually encouraged the use of zero-hour contracts. Privatisation policies are one of the biggest offenders, with Labour MP for North Ayrshire and Arran Katy Clark noting that the Postal Services Act 2011 has seen large companies take over a formerly state-controlled service and treat their workers badly in the process. “In London, TNT workers on zero-hours contracts now deliver our mail. Many are sent away every day because there is no work for them,” she said.

Although the government attempts to show it is getting people back into work by citing statistics on an increase in private sector jobs (which the Coalition is banking on replacing the hundreds of thousands of public sector jobs it is cutting), ever-increasing figures of employees on zero-hours contracts calls into question just how suitable these roles are. As Labour MP David Anderson said: “What they are really doing is taking people from secure, well-paid jobs, particularly in the public sector, and putting them into jobs where absolutely no respect is shown for their life or for anything else.”

Although most employers using zero-hours contracts are in private sector, it was reported during the debate that 15% of such contracts have been made for state-employed individuals including thousands of nurses, midwives and a significant proportion of those employed within cardiac services and psychiatric therapy. As privatisation within the NHS goes ahead (despite the scorn of a very vocal and large number of voters), there is a danger this situation could become much worse. Private sector healthcare contractors working within the NHS may not be able to accurately predict the workloads they will be commissioned, encouraging them to take on a bank of zero-hours clinical staff. What’s more, Julie Elliott quoted House of Commons Commission statistics showing that almost nine per cent of House of Commons staff are employed on a zero-hours basis as well. “We should be setting an example of good employer practice,” she stated.

Proposed solutions to the issue ranged from legislating so that if an employee works on average more hours than they have been contracted for, they have the right to have their real-world hours written into their contract; to banning zero-hour contracts altogether. Andy Sawford, MP for Corby, was particularly vocal in his backing of the latter solution, presenting a private Members’ Bill called the Zero Hours Contracts Bill to abolish zero-hours contracts altogether.

Other suggestions included persuading companies to pay the living wage, raising awareness of the risks involved with zero-hour contracts, and forcing employers to make it explicit in job adverts when they are advertising zero-hours vacancies.

MP Ian Murray concentrated on the complexities of employment law affecting zero-hours workers, including the difficulty in classifying them as a “worker” in a legal sense. “Many would argue that someone on a zero-hours contract is, in fact, a worker, but that worker needs to have some kind of mutuality of obligation, and there cannot be a mutuality of obligation if the workers has to turn up for work at their expense, but the employer has no need to give them any hours”.

“There is an argument about whether zero-hours contracts are currently unlawful, but mutuality of obligation is case-law terminology and is therefore not written in statute,” he added.

The Institute of Employment Rights will continue to report on the zero-hours contract debate and will release our recommendations in the coming weeks.