Small Business, Enterprise and Employment Bill

Baroness Hollis of Heigham Excerpts

Wednesday 11th March 2015 Lords Chamber

Moved by

[Baroness Hollis of Heigham]

58ZZC: Before Clause 147, insert the following new Clause—
“Employment: compensation for shift cancellations
The Secretary of State shall make regulations requiring employers to pay compensation to workers, including zero hours contract workers, whose shifts are cancelled with short notice as defined in the regulations.”

[Baroness Hollis of Heigham (Lab)]

My Lords, there are many benefits to a flexible labour market but I believe, and I am sure your Lordships believe, that exploitation of staff by employers should not be one of them. One woman who worked in hospitality on a zero-hours contract said, “I never worked no hours in a week but couldn’t find out until the Sunday before the working week began how many hours I would have in the coming week—never more than 30, sometimes as few as 13. My hours were often changed on very short notice and you would be sent home if it was quiet”. She would turn up for work and be told that, “It wasn’t busy enough for me to be needed, even before I could take off my coat”. She went home unpaid. She could not complain as she would be punished with fewer hours the next week. You could not call in sick even if you were because you would be punished with fewer hours the next week, and you could not risk leaving the job without fear of being sanctioned by the DWP.

Let me remind the House that under ZHCs you have no guaranteed hours of work. People on such contracts include cooks, cleaners, call centre and customer services staff, drivers, waiters, hotel and shop workers and domiciliary care workers—there are 300,000 of those. They are mostly women. Over 1 million people on or around the minimum wage are on ZHCs and do not usually know on Friday what hours they will be working on Monday. Three-quarters of those on ZHCs find their hours vary every week. Nearly half are given no notice at all. As one SportsDirect worker said, “Shifts are changed and cut without any notice. Shifts vary week by week”. Another call centre worker never knows whether she will work 48 hours or no hours the next week.

We all want people to work. It is right that they should but insecurity and exploitation from ZHCs can sabotage the rewards of work, including people’s efforts to build a job, a home and a life for their family. These are not temporary jobs: one-quarter of people have worked in their job for 10 years or more. Without a steady income, they cannot buy, or sometimes even rent, a home. They cannot replace a broken washing machine because the next week they may have only five hours instead of 25 hours of work. They cannot get credit or enter into a financial contract, even for a mobile phone. Instead, of course, they go into debt.

As the Government rightly remind us, ZHCs work for some—students, obviously, or the recently retired supplementing their income. But let us just imagine what it is like for the rest, particularly those with children, who work on ZHCs for hours on end and really do not know from one week to the next what they will earn and what they can feed their children, for five, or even 10, years.

I am very pleased that, in the Bill, the Government are banning exclusivity contracts, under which you are tied to an employer 24/7, whether there is work or not. That is good and right. However, there is one minor but deeply unpleasant issue that we could and should address today, if your Lordships agree. Nearly half of ZH workers get no notice when their shift is cancelled. A further 10% get up to 12 hours’ notice. Only 4% have one week’s notice.

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Given the actions already taken by the Government, the response we published today and the commitment to update our guidance, I hope that the noble Baroness will acknowledge that we are listening and will be content to withdraw her amendment.

[Baroness Hollis of Heigham]

My Lords, I am grateful to all my noble friends who took part in the debate—my noble friends Lady Drake, Lord Young and Lord Cunningham. Indeed, I am grateful for all the contributions from around the House. However, what has puzzled me a little about the contributions from around the House is the fact that most of the argument seems to have been about the need for, and virtues of, zero-hours contracts as such, and the need for a flexible labour market. I had hoped that we had been at pains to establish that of course customers, consumers, passengers and patients now live in a 24/7 economy. The issue is not about ZHCs; it is not even about codes of practice, because good employers such as Marks & Spencer do not abuse ZHCs, whereas Boots does. Pret a Manger does not abuse them, although McDonald’s does. Good employers can already decide how best to employ their staff. Whether a company does or does not have ZHCs is not the issue.

The issue is that there are some people with ZHCs, as the noble and learned Baroness, Lady Butler-Sloss, and the noble and learned Lord, Lord Lloyd of Berwick, rightly said, who are exploited and suffer because although they are summoned to work by text, often overnight, they turn up and are then sent home again without a penny. What is more, they may have spent £5 or £8 in travel costs to get there and back. They may have spent £15 or £20 in childcare to get there and back and they get not a penny of recompense for the expenditure they made to uphold their side of the ZHC contract.

All that I am asking for is fairness, as the noble and learned Lord, Lord Lloyd, said—fairness between the employer who can dispense with the services of somebody and the employee. He may need to do that—I can see the point—but it should not be the worker who exclusively and solely bears the cost of the cancellation. That is what is unfair; not ZHCs, not flexible labour contracts, but the fact that only one party, the most vulnerable, the poorest, the weakest, should bear the cost of a zero-hours contract when they turn up to work and the work is taken away from them, even though they are doing exactly what the employer requests.

The noble Lord, Lord Deben, was worried. I thought that the speech by the noble Lord, Lord Butler, was admirable in putting the simple point that the amendment would require the Secretary of State to make regulations, but keeps the content entirely open. However, we expect them to reflect the spirit of the discussion in this House tonight that zero-hours contract workers—the people we are concerned about—should be able to be protected in this way.

In Committee, the Minister said that the Secretary of State already had powers to do that. This was followed up by a letter saying that that was not the case. The order-making power does not extend to other issues around ZHCs such as compensation for late-notice cancellations. I repeat that the Secretary of State has no power presently to regulate this anomaly at best—this exploitation, bluntly, at worst—that we all agree is unfair. He has no such power. The amendment would give him that power. After consultation with the sector—it may take months, I fully accept that—he can then introduce appropriate requirements for codes of practice or whatever may be proper to defend the people of whom the noble and learned Baroness, Lady Butler-Sloss, so eloquently reminded us: the lone parent who may be £20 or £30 out of pocket because at five minutes’ notice her shift is cancelled. At the moment, the Secretary of State does not have the power to do that.

This is not about ZHCs or the flexible labour market, I am asking your Lordships to do what this House is always at its best in doing: say to the Secretary of State, “We are willing to give you the power, we expect you to handle it sensibly, in consultation with industry, but it is not fair, as the noble and learned Lord, Lord Lloyd, said, that the most vulnerable should pay the cost of the employer’s requirements”.

[Baroness Neville-Rolfe]

The noble Baroness’s amendment goes beyond zero-hours contracts. She is emphasising the zero-hours aspects, but this is compensation to all workers, as I sought to explain—and I sought to explain the perversities.

[Baroness Hollis of Heigham]

If the noble Baroness is worried that the technical quality of the amendment is insufficient, it can be overturned in the other place and replaced with an amendment that embodies what she and the Secretary of State would wish to see. There is no problem about that. When I was a Minister, I accepted amendments all the time that were technically defective but which reflected the spirit and will of this House, because it was the right thing to do. If they needed tidying up, that could be done perfectly easily in the other House. That is not a reason not to accept the amendment today.

We are talking about ZHCs; all of us have been talking about ZHCs. As the noble and learned Lord, Lord Lloyd, said, this is fair and the right thing to do. Workers who keep their side of the contract should not then find themselves out of pocket, because the employer does not. The CBI agrees. I hope that your Lordships will also agree tonight. I beg leave to test the opinion of the House.

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Moved by

[Baroness Hollis of Heigham]

74C: After Clause 151, insert the following new Clause—
“Workers: inclusion within national insurance system
All workers shall be eligible for inclusion within the national insurance system where the relevant worker’s annual earnings reach or exceed the annualised level of Job Seeker’s Allowance.”

[Baroness Hollis of Heigham]

My Lords, I hope that your Lordships will forgive an amendment that superficially seems nerdish, but it is an issue that will make or break many people’s lives. Please bear with me.

National insurance is a contributory system entitling you to sick and holiday pay, and, above all, the state pension. You come within it if, in any one waged job, you earn £5,700, which is about 16 hours a week’s work at minimum wage, which is the lower earnings limit—the LEL—although you do not actually pay national insurance until you earn £7,500. Over the years, all parties have rightly recognised that people in unwaged work—primarily women caring for children or elderly people—should be credited into NI and not lose their right to the state pension because they put their family first. All around the political spectrum, we have also respected the position of disabled people with difficult work prospects, who are also credited in, and those who are unemployed on JSA—assuming, of course, that they are properly searching for and training for work. They, too, get credited into national insurance.

Who, then, is left out? It is workers with part-time jobs, which includes two groups in particular. The first is middle-aged women. They have juggled a portfolio—to put it grandly—of part-time jobs, such as cleaning and shop work, with family care. It is a splintered workload, none of which separately qualifies them for national insurance. At least in the past married women could rely on the 60% dependency pension from their husbands. That disappears from 2016, so they will then not get a pension from their husband and currently they do not get one from their own waged and unwaged work. Depending on their back history, they will not get much from the state either. That is how we will reward them for doing what most of us believe is right: fitting their work around their family responsibilities. As a result, they lose years of state pension.

The second group is young people. They may be on JSA. They do everything that is required of them. They apply for countless full-time jobs and do not even get their application acknowledged. Going to Jobcentre Plus, nearly all of the jobs available are part time; many of them are also on ZHCs. It has been estimated that one-third of young people under the age of 30 are in short-hour or ZHC jobs. They do what we should be cheering them on to do. They come off JSA and cobble together a portfolio of perhaps three part-time jobs such as a sandwich job at lunchtime, security work in Boots of an afternoon and bar work in Wetherspoons of an evening. It is hard, risky, expensive and tiring work travelling to and maintaining several insecure jobs whose hours may change and clash with each other every week. They just hope that one of those jobs may lead to secure work but with the portfolio work they lose the NI rights they had when they did nothing but remain on JSA. Stay passively on JSA, come into national insurance and get your pension; come off JSA into several part-time jobs, work 30 hours a week or more but because no one single job is above the LEL lose your national insurance rights, holiday pay, sick pay and, above all, pensions. Can you imagine anything more morally perverse?

The national insurance problem is not exclusive to ZHCs; it affects perhaps up to 6 million people, largely women, with part-time jobs, but ZHCs make it far worse. On ZHCs you may work 20 hours in week one, 10 hours in week two, 20 in week three and, because that is all your employer wants, 10—back down the snake—in week four. So in weeks one and three with 20 hours a week you seek tax credits from HMRC to top up your wage. In weeks two and four on 10 hours you cannot, so instead you turn to the DWP for JSA, only you will probably not get it because you are not fully available for work and, as your 10 hours may suddenly become 20 hours, if that is what the employer requests, you are excluded from JSA. Simultaneously you are dealing with HMRC for tax credits, the DWP perhaps for JSA and the local council for fluctuating housing benefit payments and council tax support. It is a nightmare. It is a full-time job just applying for benefits.

Universal credit will help, and I support it, but it will take until 2020—another five years—before it is fully rolled out, if then. It should help that lone parent but not the older woman whose partner’s earnings float them off universal credit, nor the young man with the sandwich shop job, security job and bar work. Even for the lone parent, UC is paid monthly and in arrears, so what does she do in a low-pay job in a low-hour week? She goes for payday loans.

I could not do it. I could not cope, especially if I had children to care for, with not knowing my hours or my wages each week, or what the three bureaucracies of HMRC, the DWP and the local authorities might do about it either. Nor could I cope with not knowing when any or all of the money may come in and when it does, whether it is even correct. These are years when you may lose all entitlement to accrue a state pension. Lose seven years of NI and you lose £30 a week for the rest of your life. Have 10 years on a set of ZHC jobs and lose NI and you lose £45 a week for the rest of your life. What to do?

In a vote a few months ago, your Lordships agreed to allow two jobs below LEL to be aggregated to bring someone into NI. A number of Conservatives—although I do not think any Lib Dems—spoke in favour of it. I am not sure of that. The coalition Government, however, said no and overturned it. I then suggested that we should treat such people as self-employed. That was not accepted by the coalition Government. Could a part-time job or three be regarded as meeting JSA conditionality and, as with JSA, get you into national insurance? That was not acceptable to the coalition Government either. I tried in Committee on the Bill to reduce the LEL, bringing it down to about £3,000; I calculated that the cost would be trivial. That was not acceptable to the coalition Government either. So what then?

[Lord Stoneham of Droxford]

What was the noble Baroness doing for the 13 years of the previous Government, if she is accusing this Government of doing nothing?

[Baroness Hollis of Heigham]

That is a perfectly fair question. I point out to the noble Lord who sat opposite someone like me throughout the passage of the Welfare Reform Act from 2011 to 2012, with something like 17 Committee sittings, that I believe that the phrase “zero-hours contract” was not mentioned once—certainly not by me nor by the noble Lord, as far as I am aware. Therefore, in that context, the issue did not arise.

I tried to reduce the LEL but I could not. This time I suggest we again lower the LEL—the cash threshold at which you come into NI—to the cash value of JSA, which is £72.40 a week or near enough £3,750 a year. On JSA, at £72.40, you are currently credited into NI. With this amendment if you are earning £72.40 per week in any one job, 11 to 12 hours per week at minimum wage, you also get your NI stamp. It is simple and fair. If it is good enough for JSA, it should be good enough for part-time work. Get JSA and get your pension, work hard in three 12-hour jobs, each below the LEL, and do not. What sort of message is that?

The question is do we want social security to support a flexible labour market, to abate some of its risks, to ensure for workers some of its rewards such as the state pension or do we simply not care what happens to them down the line? If so, what are we saying to people about wanting to come off benefits and go into work? Why, under the system we now have, would they want to? It is not rational to do so. Too many people have more to lose than to gain and this amendment would help overcome that moral dilemma. I beg to move.

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[Lord Newby (LD)]

My Lords, the noble Baroness, Lady Hollis, is again bringing to our attention the issue of workers in multiple low-paid jobs. We debated this matter in Committee and the noble Baroness put forward a number of proposals then for dealing with the situation. We have before us today a proposal to include people with earnings at or above the annual value of jobseeker’s allowance. As contributory jobseeker’s allowance is payable for only six months and there are different amounts, I assume that the noble Baroness means to proxy the higher rate of around £4,000.

Just so that we are clear about the figures that we are talking about, I can confirm the characteristics of the workers that the noble Baroness is concerned about. They are people whose earnings in a single job fall below the threshold for paying or being credited with national insurance, that threshold being £5,700. That is the band of people the amendment is dealing with.

The noble Baroness has been very dogged on this issue and has suggested a number of other ways in which we might deal with it, such as changing the system to allow earnings to be aggregated; treating those people as self-employed and being able to pay class 2 contributions; treating them as unemployed and being able to receive NI credits; or lowering the earnings entry point for access to the NI system to £3,000 or, now, £4,000.

However, as I explained in our previous debate, I am afraid that none of those solutions is at all straightforward and there is a danger that they could all, to a greater or lesser extent, involve unnecessary administrative expenditure, perverse outcomes and possible new inequalities in the national insurance system. I know that such potential unintended consequences are not the noble Baroness’s intention, but they exist and they underline the reason for treading carefully in this area.

The proposal before us today would, for example, create a new cliff edge for those who earn below the threshold and increase the exchequer cost in terms of both administration and benefits paid, with little or no corresponding revenue. It would also bring in workers who might not need protection, such as students with weekend jobs working fewer than 12 hours a week. Such students are highly likely to gain sufficient years to qualify for a full state pension later in their working lives. The noble Baroness’s other solutions would increase the burdens on businesses, require a significant compliance regime to police people’s employment status or need to be extended to everyone with more than one job in a tax year to avoid unfair consequences.

The noble Baroness has expressed a view on the likely size of the group, the persistence of this type of work pattern and its effect on benefit entitlements. In February, the Department for Work and Pensions published updated estimates that around 50,000 people a year have multiple low-paid jobs and are not paying, or being treated as paying, national insurance that they would otherwise do if their earnings were aggregated —that is 0.2% of the workforce.

In response to concerns from your Lordships’ House during debate on the Pensions Bill last year, the DWP set up a forum of analytical experts last July, with an independent chair, of which the noble Baroness, Lady Hollis, is a member. This forum’s remit is to consider the available evidence, the characteristics of this group, the effect of zero-hours contracts and the implications for state pension outcomes. The forum has looked at a number of alternative data sources, but none was found to provide more reliable information than that available from the Labour Force Survey on which DWP based its analysis. Having been party to the forum, the noble Baroness will be aware that it has yet to draw any firm conclusions, so in our view it would be premature to legislate now.

I accept that, of this group of 50,000 people, around 80% are women. However, this population is by no means static. Many of those affected are likely to build up their national insurance record in the future through paid or credited contributions. Under state pension reform, over 80% of people would be entitled to the full pension amount by the mid-2030s. There is also no evidence that this is a growing problem. The number of women working in two or more jobs has hardly changed for the past 10 years, remaining at about 5% of those in work. Furthermore, the recent Johnson review concluded that earnings change significantly over a lifetime and most low earners go on to earn more.

I reassure the noble Baroness and the House that the Government are continuing work in this area, and the findings of the forum, once available, will help inform what, if any, action should be taken. However, I believe that it would be premature to pass this amendment now. In part, that is because the point of setting up the forum was to examine the evidence presented and then move to the next stage. Secondly, before taking any action in this very complicated area, we should undertake a full analysis of the costs and benefits of the various courses before us—something that, in general terms, I believe the noble Baroness has been in favour of.

I doubt that I shall have satisfied the noble Baroness, but none the less I hope that she will feel able to withdraw her amendment.

[Baroness Hollis of Heigham]

My Lords, I thank my noble friend Lady Drake for her superb contribution. She put it wonderfully well.

Although the noble Lord, Lord Stoneham, intervened, I thought that he might make a fuller contribution. His basic charge was that we did not do anything about this. We did. I do not normally go around shouting about this, but we persuaded James Purnell that grandparents who were caring for children and carers of older people should come into the national insurance system and be credited at 20 hours a week. Previously, carers of older people came into the system only if they worked for 35 hours a week—effectively full time—for one person only. I persuaded the then Secretary of State that a carer doing more than 20 hours a week should get, not carer’s allowance, but national insurance credit. I also persuaded him that grandparents caring for their grandchildren and thus freeing their daughter to work should benefit from what was then HRP. This was effectively transferred from the daughter, who, since in work, would be in the national insurance system in her own right. I thank James Purnell, the last Secretary of State with whom I worked on this, who agreed both those changes.

[Lord Stoneham of Droxford]

I am grateful to the noble Baroness for giving way. Now that she mentions them, I accept that there are things that her Government did. Will she also accept that there is quite a lot that this Government have been doing to look at what is quite a complex problem?

[Baroness Hollis of Heigham]

I do not accept that at all. We shall come back to that point when we talk about the forum. Apart from the wider issue of universal credit, the Government have not done anything to help these groups in the last four and a half years—I can think of not one thing. If the noble Lord, Lord Stoneham, can think of something, then we shall see whether we agree on the evidence. Not only did we persuade James Purnell, who responded generously and positively, but also, as my noble friend rightly said, women had the safety net of a 60% dependency pension. The noble Lord’s party, through his right honourable friend, Steve Webb, has got rid of that 60% dependency pension for married women from 2016 so that a group of women who would have had some pension in retirement have now lost it. I should not be too keen on boasting about that if I were the noble Lord, Lord Stoneham.

At that time we were also told that the number of people with multiple jobs was only 20,000—mostly women, so they did not count. Now we have 50,000 and apparently they still do not count. The noble Lord, Lord Stoneham, said earlier today that zero-hours contracts were a response to the recession. The increase in jobs has come largely since 2010 and has only been apparent for most of us since about 2012. We went through very many mostly happy hours in which this was never discussed when we were considering the Welfare Reform Bill.

[Lord Stoneham of Droxford]

The zero-contracts did not come about—

[Lord Popat (Con)]

Order please. We are on Report. I am afraid that intervention is limited.

[Baroness Hollis of Heigham]

It is my fault, my Lords—I tempted the noble Lord and he could not resist. The point about zero-hours contracts and short hours is that they were seen largely as a middle-aged women’s problem, but there was some degree of protection. What has happened since the recession is that a third or perhaps a half of those under the age of 30 are cobbling together 30 or 35 hours’ work a week from splintered jobs, none of which, as far as we can see at the moment, would for many of them bring them into the national insurance system. That is the new dimension. It is the very dimension that the noble Lord, Lord Stoneham, mentioned in his speech on the previous amendment.

The noble Lord, Lord Newby, said that we should be introducing a new cliff edge for those below the JSA level who might be working only 12 hours a week. However, in this case, they would be better off on JSA, which they could still receive. The first £20, or the first £5 depending on their status, would be disregarded for these purposes. The rest of the hours would not be counted up until they hit JSA level, at which point the person would get JSA. That can already be done now. Therefore it is not true that there would be a cliff edge—it is not an adequate offer back. When people work 10, 12 or 14 hours, it is deducted off their JSA and if their JSA is higher, they keep it. The argument is invalid.

Secondly, the noble Lord, Lord Newby, says that many students will not need to be within the national insurance system since in later years they will go on to build their contributions. In that case there is no cost or problem to the Government at all. The problem now is that people only know at the end of their working lives whether they have got a sufficient contribution record. If you are poor and you have got missing years you are not able to fish your earlier years. If students are building up redundant ones they are no different from anyone who works for 40 years’ worth of stamp and only needs 35 to get into the national insurance system. What we are giving them is a measure of protection that they might not otherwise have. Therefore I do not see why the noble Lord, Lord Newby, is worried.

The noble Lord’s third and final point was that this affects only 50,000 people, as if 50,000 people do not really matter. There were something like 25,000 or 30,000 women who were partners or spouses of people in the armed services who lost national insurance when they accompanied their partner abroad. I made this point. His right honourable friend in the other place, Steve Webb, conceded and brought those partners— mostly women but not invariably so—into the NI system. They were only half the number we are talking about today, but he deemed that it was appropriate and desirable. Even though it was far more complex than what we are dealing with today, he did it. I hope we are not being told that 50,000 is too trivial to bother about in one area but that 20,000 is fine in another. That argument simply will not run.

Finally, as I have said, the Minister says that we are talking about only 50,000. I reckon that that is a gross underestimate. He is drawing on the ONS and the Labour Force Survey in which people self-report their status. The CIPD figures we talked about earlier drew instead on a survey of employers who had far more accurate information about the employment status of their staff.

As he will know, the forum we set up, of which I was fortunate enough to be a member, recently has had information which suggests that if you look at the P14s, which is what the employers submit to HMRC, as opposed to what the employees submit, it looks as though something like 130,000 people additionally may come into this situation, as well as another 30,000 or so who we do not know about because the employers are too small. Therefore, the figure clearly is more likely to be 200,000 based on more reliable information coming from the employers through P14s than the 50,000 figure that the noble Lord offered us, which is based on incomplete and inaccurate information or on people simply not fully understanding their legal status as far as their contract of employment may be concerned.

Those are the arguments of the noble Lord. I do not think that any of them is true. The cliff edge argument is not relevant; the number argument is not the case; and the question of students making it unnecessary does not matter because there will be no cost or complication for us.

As for having to wait for the results of the forum, I have tried to get that forum to discuss the policy options. The civil servants have been most helpful. The forum was explicitly told by the Minister’s right honourable friend Steve Webb that we were not to discuss policy but only to try to get some accurate numbers. That is fine but we could have discussed policy on the basis of this; that was prohibited and therefore we were not able to do so. I am afraid that he attributes to this forum greater powers, greater range, greater extensiveness and greater capacity to encourage change, which is an assumption that I would have liked to share with him, than his right honourable friend permitted.

I am sorry but I do not think that anything the Minister has said tonight takes us one step forward. He does not rebut a single argument that my noble friend Lady Drake and myself made. None the less, given the time, obviously I beg leave to withdraw the amendment.

Amendment 74C withdrawn.