Zero-hours Contracts

Wednesday 19th March 2014 Westminster Hall

16:00

[Alison McGovern (Wirral South) (Lab)]

It is a pleasure to open this debate under your chairmanship, Mr Dobbin. My contribution will not be terribly lengthy, which will enable other hon. Members to intervene or contribute, and to hear the Minister. I would like to start by referring to an e-mail that was sent to me recently. Knowing that I had secured this debate, quite a number of people got in touch with and wrote to me, as they feel so strongly about zero-hours contracts.

One gentleman who got in touch explained his life, saying that he lives to work and enjoys work, and wants to feel good about himself and perhaps own a house one day. He is signed up with an agency and has had various problems. Anyway, the agency felt that it could get him a job as a refuse collector. He has written me a long e-mail, explaining how he has turned up for work only to be turned away. He has had the odd day here and there, and he feels that the situation is like something from many years ago, where someone turns up not knowing whether he will be given work. He said that, when it started, he was “a little annoyed”, but “confused more than anything”. He said there were

“about 50 lads in that day and only 40 had work.”

He continued:

“It just carries on like this. I have been here two months now, and only ever had one full week; to cover a holiday, it looks like. And you daren’t take a sick day; not like I would anyway if it could be helped…you would just lose your place and start at the bottom of the pile.”

Reading that, as I did last night, brought it all back to me as to why my hon. Friend the Member for Liverpool, Wavertree (Luciana Berger), my right hon. Friend the Member for Knowsley (Mr Howarth) and I started a campaign and a discussion on zero-hours contracts last summer. I will go on to talk about the numbers of people whom we do not know are on zero-hours contracts.

The issue is about people who are facing a difficulty in the workplace. It is about how that makes them feel. The indignity of feeling useless through unemployment is very bad, and we must never let up on our passion to get people into work and see the difference. However, it is no better to feel the indignity of turning up for work and being turned away. Zero-hours contracts can be used to make people feel as if their efforts are for no good at all and that they are not wanted. The issue is not just a fact of economics, but a moral question about how people are made to feel by certain features of our labour market. That is why we need real action. I want to say a couple of things about understanding the phenomenon of zero-hours contracts; about what the Government are or are not doing, and what they might be doing; and about such contracts as a symptom of other developments in the labour market.

Regarding counting, the Office for National Statistics said that the most recent labour force survey suggests that there are close to 600,000 people—I think the exact figure is 582,000—on zero-hours contracts in the United Kingdom. That is up from its previous estimate earlier this year of around 250,000. We knew that there was a problem with the survey’s counting of zero-hours contracts, because in a parliamentary response to me, the Minister of State, Department of Health, who has responsibility for care, explained that a national survey of care workers estimated that more than 300,000 people working in social care were on zero-hours contracts. There cannot be 300,000 people on zero-hours contracts in the care sector when there are only 250,000 nationally across all sectors. Therefore we knew that there was a problem, and now the ONS has said that there is.

[Ian Lavery (Wansbeck) (Lab)]

I congratulate my hon. Friend on bringing this important issue to Westminster Hall. Does she agree that the recent figure of 500,000 zero-hours contracts is quite conservative? Other analysis suggests that there are more than 1 million people on such contracts. For those 1 million people, there is no production or wages, and they have no economic input whatever. If we have 1 million-plus people on zero-hours contracts, is that not a way of fiddling the employment or unemployment statistics that we are currently being fed by the Government?

[Alison McGovern]

My hon. Friend has pre-empted exactly what I am going to say. It is interesting that a Department for Business, Innovation and Skills Minister will respond to the debate, but we could do with having the Health Minister here, given how rampant zero-hours contracts are in the care sector. We could also do with the Minister of State, Department for Work and Pensions, the right hon. Member for Wirral West (Esther McVey), who has responsibility for employment, because I want to know exactly how many people we have forced to take jobs with zero-hours contracts to get them off the claimant count.

[Mr Andrew Smith (Oxford East) (Lab)]

I join the congratulations to my hon. Friend on securing this enormously important debate. On the care sector, does she agree that such vulnerable contracts are exactly the opposite of what we need to build the status, training and career structure of care workers? Is it not a scandal that care workers are often not paid for travelling between one job and another, and are therefore being paid below the minimum wage for the hours they are working? Does Her Majesty’s Revenue and Customs not need to start enforcing that?

[Alison McGovern]

My right hon. Friend has hit the nail right on the head. There is no better word for that than “scandal”. I will come on to say a few things about the care sector. He and I are as one in thinking that we need to develop the skills of our care work force.

[Mr Jim Cunningham (Coventry South) (Lab)]

I congratulate my hon. Friend on securing the debate. It strikes me that we are going back to a 19th century approach with zero-hours contracts. Going back to the ’30s, or even before the first world war, dockers or miners would turn up at the gates of a factory or the docks, a tallyman would throw something in the middle of them, and whoever was lucky enough to pick it up got a job. Whoever did not get it did not get a job. Zero-hours contracts are a 19th century approach. I was disappointed that nothing was said in today’s Budget to address zero-hours contracts and the cost of living. People on zero-hours contracts are badly affected by the cost of living.

[Alison McGovern]

I agree with my hon. Friend. Given the plethora of things that found attention in today’s Budget, it was a surprise that the Chancellor did not want to talk about zero-hours contracts, which seem to be at the heart of the Government’s approach to economic recovery.

I want to return briefly to the numbers. If the Minister has not yet clocked the problem, she ought to. The ONS has effectively said that previously it was undercounting due to the definitions in the labour force survey and/or a problem with people’s awareness that they are on zero-hours contracts. We now cannot tell what the trend is. The latest statistics may or may not represent a massive spike in the use of zero-hours contracts—I do not know. We cannot tell whether the statistics show a rise or a fall, because it is clear that the ONS has been undercounting previously. I would therefore like to know what further research DBIS has commissioned. As policy makers, we are in an awful situation—there is a phenomenon in the labour market, but we do not know what is happening. What further research has been or will be commissioned by DBIS, because unless we know whether the phenomenon is radically and exponentially increasing, how can we know what measures should be taken to tackle it?

Secondly, I would like to know what the Government are doing. The Minister will probably stand up and say that they have talked about preventing exclusivity clauses, which is okay and fine, but there is a raft of other ways in which the Government need to tackle the phenomenon, not least the one mentioned by one of my hon. Friends in relation to the Work programme and jobcentres. For example, are jobs on zero-hours contracts routinely being advertised through Jobcentre Plus and are claimants then sanctioned if they do not take them? I am afraid that it will not be enough for me to know whether a policy document exists. I would like to know whether the Minister believes that people are routinely being sanctioned for not taking jobs on zero-hours contracts, because it would be terribly serious if that were the case.

I have always said that if a small business offers opportunities on a zero-hours basis, as and when, and the person taking that job is in no way penalised if they turn down the hours—either they are a student or they just want to keep their hand in with a job but do not want lots of hours—that would be okay in my book. However, the problem is that we are in a world in which Jobcentre Plus is being directed to get the claimant count down, and we know that there are significant problems in the DWP and in that organisation. I am very worried about the idea that my constituents and others are being forced into employment on a basis that they do not really want or feel comfortable with because of current policy decisions.

I stand in this Westminster Hall debate today, proud of Wirral council, the local authority in which I am a Member of Parliament, because it has tried to adopt Unison’s ethical care charter. The council has said—to respond to the points made by my right hon. Friend the Member for Oxford East (Mr Smith)—that in its commissioning, it wants to adhere to standards to ensure that, in the very important work of looking after older people or those who are vulnerable and need a bit of help, it is not participating in a race to the bottom. That involves moving away from zero-hours contracts, paying properly for travel time, trying to get to the living wage and ending 15-minute appointments.

Without going deeply into the care sector, we need to look at the role of central and local Government in preventing zero-hours contracts, in both their commissioning and procuring roles. We can try to lead from the front. I would like to know what conversations the Minister has had across DBIS on procurement and commissioning, and across the Government on moving away from zero-hours contracts and saying, “In general terms in our economy, it is not a hugely helpful phenomenon to have people with unpredictable levels of income at the end of each month.” Will the Government lead the way in trying to set the standard in the labour market? What conversations has the Minister had about that?

This issue has been mentioned, but I would also like to know what the Government are doing to enforce the minimum wage properly. It seems to me that there is a group of—not universally, but broadly—women in society who are at risk of not being paid the minimum wage. They are in a workplace in which they are not necessarily powerful, and they often have child care or other caring responsibilities alongside their job, and cannot be expected to expend the time and effort to take their cases forward. It falls as a duty on us in this House and on the Government to ensure that we stand up for those people and ensure that they get the minimum wage.

Without focusing universally on the care sector, there was further new evidence this week that it is becoming more difficult to have a predictable or the same carer all the time. Part of that is about the use of zero-hours contracts and their unpredictability. I repeat my question to the Minister: what cross-Government conversations has she had to find out what actions DBIS needs to take to lead in response to the phenomenon?

I do not know whether the Minister is aware, but zero-hours contracts are not the only problem in this sphere. Often, they go alongside the use of agencies and other ways in which people find loopholes to get around their responsibilities. I would not want us to bear down on the use of zero-hours contracts only to see the problem pop up in another guise. The Minister should be aware of that problem as we move forward. It should not be about closing down one way of getting around employers’ responsibilities, only for the problem to raise its head under another definition. The Minister needs to think carefully about that.

[John McDonnell (Hayes and Harlington) (Lab)]

Before my hon. Friend concludes, I want to congratulate her not only on today’s debate, but on the significant work she has done over the past two years. She has concentrated to a certain extent on the care sector, but may I point her towards the fast food industry? With the bakers’ union, we have just launched a campaign in the fast food sector not only for the living wage, but to oppose the imposition of zero-hours contracts, because they are used by managers to intimidate workers. For example, if a worker seeks to join the union or seeks to exercise or make representations about their rights, they will be denied work under zero-hours contracts for the following week. We are seeing them being used as an intimidatory tool, as well as one of exploitation.

[Alison McGovern]

My hon. Friend is right. One of the worst things about zero-hours contracts is what I call “zero-hours contracts as a management tool”. People have brought cases to me where, for whatever reason, somebody’s face did not fit and they did not end up getting any hours. That is no replacement for the usual practices of good management and all the rest of it, so it is something that we absolutely need to be aware of.

Another thing that employers can practically do to help us to deal with the situation is encourage people to join a trade union—I would say that, being a Labour MP. People will not always have the capacity to raise such issues themselves, but with workplace representation, they can, and we can help on low-paid work issues, such as getting people skills and boosting their abilities. I am sorry to be so predictable—being a Labour MP and supporting people joining a trade union—but there is a reason for joining a union. A union is a practical bit of infrastructure that can help businesses to give their workers a sense of being involved in the leadership, and help to tackle some of these problems. I think good employers would agree with me on that.

I want to take the opportunity to thank parliamentary colleagues who have taken the time to come along to today’s debate. Most importantly, however, I thank every single person who has been in touch with me over the past week or so since I was awarded the debate. I also thank all the people who have been in touch with me over the past six months to share their experience. I felt the experiences of people working on that basis were totally hidden. They are not hidden now. The question is: what can we do about it?

16:18

[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jenny Willott)]

I thank the hon. Member for Wirral South (Alison McGovern) for securing this debate. It is a very important issue, which has been widely discussed in the media, online and in both Houses of Parliament. She raised some important points.

The term “zero-hours contract” encompasses many different forms of employment relationship, in which the employer does not guarantee any work and the individual does not have to accept it when offered. Such contracts can be direct contracts of employment or can cover people working for agencies and so on, so they include a wide variety of different models of employment. The Government, and indeed most people now, believe that zero-hours contracts have a place in today’s labour market, but we need to make sure that people get a fair deal when they are employed on such a contract. The Government have always been clear that we will crack down on any exploitation of individuals in the workplace and the zero-hours contract consultation that has just closed is an important part of the process.

As the hon. Lady highlighted, there has been some inconsistency in the statistics on zero-hours contracts. The picture has been very mixed. That is primarily because there is no legal definition of a zero-hours contract, so it has been difficult to gather good statistics. The labour force survey, as a survey of individuals, provides an estimate of the number of people who identify as being on zero-hours contracts. The greater media coverage in 2013 is likely to have increased awareness of zero-hours contracts. The Office for National Statistics believes that that has led to the estimate rising from 250,000 people in the final quarter of 2012 to more than 500,000 people in the final quarter of 2013; in other words, it more than doubled. We do need to gather information and analyse it sensibly if we are to know exactly what is going on and to achieve the right balance between the opportunities and the risks that zero-hours contracts provide. The hon. Member for Wirral South asked what is being done on that. The Office for National Statistics has been looking at the issue and will release the results of its new survey in April. That will, I hope, give us more clarity about the current figures and the number of people working in this way.

Let me put the issue in a little bit of context. Zero-hours contracts can give growing companies the opportunity to grow in a relatively safe way and can be used to increase flexibility in the range of services that businesses are able to give their customers or clients—for example, by employing people in specialist roles and in different geographical locations that a permanent staffing model could not provide for.

The contracts are sometimes portrayed as simply a way for businesses to try to reduce labour costs, to the detriment of the people who work for them, but we have also heard in evidence that we have received that the contracts sometimes offer positive work opportunities to people who would find it difficult to take regular work at fixed times. For example, one quarter of all zero-hours contracts are taken up by students, who cannot necessarily commit to a fixed working pattern, as their timetables change. The contracts can allow them, for example, to be more flexible around exams and so on. Zero-hours contracts offer them an opportunity to gain useful work experience and to progress on to other forms of employment when they wish to do so. That is also true of many other people with responsibilities outside work—in particular, caring responsibilities. The additional flexibility that zero-hours contracts can provide can be greatly valued.

Having said that, we must be clear that although zero-hours contracts suit some people, they do not suit everyone and there are people on zero-hours contracts who would prefer to be in full-time, permanent work. I am sure that, as constituency MPs, we have all seen people in that situation.

[Ian Lavery]

Does the Minister agree with the comments from Lord Oakeshott, the Liberal Democrat peer, who said:

“A zero-hours Britain is a zero-rights Britain in the workplace—Beecroft by the back door. Being at the boss’s beck and call is no way to build a skilled, committed, loyal labour force”?

[Jenny Willott]

As I said, zero-hours contracts can have a place in the labour market. They can suit some people—students, people with caring responsibilities and others—but clearly they are not appropriate for everyone. Anecdotal evidence, including that highlighted by the hon. Member for Wirral South and by the hon. Member for Hayes and Harlington (John McDonnell), suggests that some individuals are being pressured into working when it does not suit them and have the implied threat hanging over them of being denied future work, which removes the flexibility for those individuals.

[John McDonnell]

I will give hon. Members just one example. The bakers’ union convened a meeting of fast-food workers a month ago, and a Costa worker turned up. Because he had not smiled enough that day, he was not going to get any work for the following week. These contracts are used as an intimidatory tool by managers, and we all have to condemn that, do we not?

[Jenny Willott]

I completely agree. The behaviour that the hon. Gentleman describes is not right and is not appropriate for a responsible employer. I am sure that hon. Members on both sides of the House completely agree with that.

Some individuals have been working regular hours for long periods only to find that they are “zeroed-down”—their hours are brought down—when demand falls, perhaps due to the loss of an order. Clearly, that dramatic change in working hours and the resultant income loss will have a significant impact on the individual, especially if they are the only person working in the household. When individuals have their income supplemented by benefits, an increase or decrease in hours and income can have quite a significant impact on their benefits, which can be very difficult to manage in terms of household income.

Hon. Members raised issues about the link between jobseeker’s allowance and zero-hours contracts. Clearly, the Government’s priority is to help people on benefits to move off them and into work as soon as possible. However, as the hon. Member for Wirral South highlighted, some media reports suggest that people claiming jobseeker’s allowance are being told that they must apply for vacancies that are advertised as zero-hours contracts. I must stress that that is not the case. In such cases, someone’s benefit would not be sanctioned. DWP decision makers cannot mandate claimants to apply for zero-hours contracts, although they are obviously free to apply for such a job if it would suit them. The uncertainty about the hours of work offered by the employer and about the amount earned and so on can present difficulties for individuals, so someone would not be sanctioned for not applying for one of those jobs.

It is very important that individuals make informed choices when applying for or accepting work, and employers must ensure that both job adverts and employment contracts are transparent. People have the right to know up front that a contract does not guarantee work, if it is a zero-hours contract, so that they know what they are signing up to. The evidence that we have received in the Department is that that certainly is not the case for everyone on a zero-hours contract, and that needs to be resolved.

Hon. Members have also raised issues about the care sector and the entitlement to payment for the time spent travelling between jobs. I want to be clear that employers must ensure that their workers are paid at least the national minimum wage for the hours that they work. Time spent travelling on business, including between house calls, counts as time worked for minimum wage purposes. Where the travelling time is time for which the minimum wage should be paid, any associated expenditure incurred by the worker in respect of that travelling is classified as being in connection with the employment. A worker who is paid at minimum wage rates would therefore need to be reimbursed the expenses for the travelling in order for the employer to be in compliance with minimum wage legislation.

[Mr Andrew Smith]

What will the Government do to ensure that HMRC’s enforcement unit steps up enforcement in this area of the minimum wage, because it is being abused?

[Jenny Willott]

I was about to come to exactly that point. We are aware that low pay is an issue for workers, particularly in the care sector, as hon. Members have highlighted. As the right hon. Gentleman just pointed out, HMRC enforces the minimum wage on behalf of the Department for Business, Innovation and Skills, and it has been conducting enforcement activity in that sector. In November, it published a social care evaluation, which highlighted a very worrying level of non-compliance. In 51% of the cases that it inquired into, the minimum wage was not complied with, and it identified more than £400,000 of pay arrears.

The Government are trying to improve compliance partly by significantly increasing the penalties so that they act as a more effective deterrent, and HMRC is currently targeting enforcement activity on the care sector in particular. We have also revised the naming-and-shaming scheme—the most recent batch of names was published a couple of weeks ago—and it is now much simpler to name and shame employers that break national minimum wage law. We are trying to ensure that we are taking more targeted action, but also that the penalties are greater, both financially and in terms of naming and shaming, so that they will act as a more effective deterrent.

The hon. Member for Wirral South asked about working across Government on the issue of zero-hours contracts and procurement. Officials have spoken with the Cabinet Office in relation to Government contracts, procurement and zero-hours contracts. We are also working with the Department of Health regarding the use of zero-hours contracts in social care. The discussions are ongoing, and the information gathered during them is also being fed into our consultation response. This is a very complicated issue and, as hon. Members have highlighted, it is of great importance to tens of thousands of people throughout the country. We had more than 36,000 responses to the zero-hours contracts consultation, which closed last week, so people clearly feel very strongly about the issue. We are looking at the responses to the consultation and will publish our response very shortly. I hope that that will respond more broadly to some of the issues highlighted by hon. Members today. I congratulate the hon. Member for Wirral South on securing the debate, because it is a very important issue. We all have constituents who have it right at the top of their agenda, and the Government are working on it.