Zero-hours contracts

Julie Elliott Excerpts

Tuesday 9th July 2013 Westminster Hall

[Nadine Dorries (in the Chair)]

Gentlemen, it is very warm outside and this is a one and a half hour debate, so if anyone wishes to remove their jacket, I am happy for them to do so. Also, because this is obviously a popular debate and we are assuming 15 minutes for the opening speech and 30 minutes for the wind-ups, I ask for speeches to be kept to 15 minutes as I suspect there will be a number of interventions.

[Julie Elliott (Sunderland Central) (Lab)]

It is a great pleasure to serve under your chairmanship, Ms Dorries. I am grateful to have secured this debate on an issue on which I and many other hon. Members have been working for some time.

Zero-hours contracts are contracts whereby a worker is guaranteed no minimum hours and no minimum pay. In this country, we essentially have a large pool of workers, and employers have no legal obligation to pay them when they are not needed.

Zero-hours contracts have a widespread and deeply damaging effect on workers, and I call them “workers” advisedly. People employed on zero-hours contracts are treated differently to employees, and as such they are second-class staff. People employed on zero-hours contracts earn 40% less than those in fixed-hours employment. A study by the Resolution Foundation shows that, before tax, people on zero-hours contracts earn an average wage of just £9 an hour, juxtaposed with £15 an hour for people with set contract hours. Among graduates, the difference is £10 an hour versus £20 an hour. Firms that use zero-hours contracts have a higher ratio of low-paid staff than firms that do not use such contracts. Zero-hours contracts have traditionally been employed in the hospitality and leisure sectors, but they are increasingly being used in the health, social care and further education sectors.

[Nia Griffith (Llanelli) (Lab)]

Does my hon. Friend agree that being undervalued not only has a cost to the individual? Not having pension contributions, for example, could lead to a much higher burden on the state in the long term than if those people were properly remunerated and were joining proper pension schemes.

[Julie Elliott]

I totally agree with my hon. Friend. In fact, there are other areas in which having such contracts costs the state money, and I will address that later.

According to the Government’s own estimates, nearly a quarter of major British employers use zero-hours contracts. The 2011 workplace employment relations study found that the number of firms with workers on zero-hours contracts increased from 11% in 2004 to 23% in 2011. The recession and the lack of recovery are hitting Britain’s lowest paid workers hardest.

Zero-hours contracts are not new, and they were not borne out of the financial crisis or the recession. The figure of 200,000 people employed on zero-hours contracts in 2012 is almost certainly an underestimate, as many people will not realise that they are on such contracts.

[Jessica Morden (Newport East) (Lab)]

Although I know from my constituency work that the use of zero-hours contracts is increasing, it is difficult to assess what the exact figure is for places such as Wales—I think Wales would be particularly hard to assess. That in itself is a problem, because it is difficult to assess the impact if we do not know the scale of the issue.

[Julie Elliott]

That is absolutely correct. In fact, a number of Departments have responded to parliamentary questions by saying, “We don’t know.”

Many people will not realise that they are on zero-hours contracts. If, as it seems, zero-hours contracts are part of the new labour market, and not simply a reaction to the recession, we need to show our willingness to combat their worst excesses. Zero-hours contracts affect only approximately 1% of the work force, but that is 1% of a very large number and cannot be ignored.

Although they are on the increase in the public sector, zero-hours contracts are still more prevalent in the private sector, which is responsible for 85% of all such contracts in the UK. It is clear why zero-hours contracts appeal to employers, as they reduce risk by conferring greater flexibility to enable them to weather fluctuating demand. We want to do what we can to make it easier and more attractive for employers to hire new people, but all too often zero-hours contracts are the answer. Staff who have worked for their employer for less than a year make up more than a third of all zero-hours contracts. Young workers, newer workers and women are shouldering the burden while employers enjoy the benefits.

[Robert Flello (Stoke-on-Trent South) (Lab)]

I congratulate my hon. Friend on securing this debate. Is not one of the fundamental issues that zero-hours contracts are about transferring the burden and the difficulty of dealing with a contract from the employer to the most vulnerable and the lowest paid? How can it be in any way fair to transfer that burden from the employer to someone right at the bottom of the pile?

[Julie Elliott]

It simply is not fair, and it simply is not acceptable in most cases.

Having a high number of employees on zero-hours contracts is also potentially damaging to employers as it can lead to inadequate staffing levels, the loss of training and skills development and an inability to attract and hold on to the highest quality staff. Too many people are living a life on call, and I hope this debate will move the conversation forward from discussing the existence of such contracts to evaluating solutions to the problem.

Zero-hours contracts can have a devastating impact on people’s lives. Workers employed on such contracts have little certainty of their expected weekly earnings and therefore cannot plan their family finances. People with employee status have several legal rights that workers do not, such as the right not to be unfairly dismissed, maternity rights and redundancy rights. The inherent variability of earnings throws into doubt an individual’s eligibility to claim various forms of benefits. The disruption to family life that results from frequent short-notice requirements to work makes so many things, from child care to the weekly shop, nearly impossible to plan.

[Mrs Mary Glindon (North Tyneside) (Lab)]

I also congratulate my hon. Friend on securing this debate. I worked for nearly two years on a zero-hours contract in retail. Will she confirm that it is often women who are in this situation? To add to what she said about people not knowing what they are going to earn from week to week, does she agree that it is also about their well-being and their sense of value in the workplace? People on such contracts do not necessarily feel that they belong to a company.

[Julie Elliott]

I totally agree. As I said earlier, people on zero-hours contracts are second-class employees—they are not employees but workers, which is a big difference.

People employed on such contracts cannot take advantage of the Government’s child care help, because they do not know when they will need child care. And they cannot take advantage of housing schemes, because without a regular income, they cannot get a mortgage. Without a guaranteed income, many cannot even enter the rental market. Some people on zero-hours contracts are having to rely on payday lenders because they have not received enough hours in a given week, which pushes them further into debt.

On average, people employed on zero-hours contracts tend to work 10 fewer hours a week than those on more conventional contracts—21 hours versus 31 hours. That is a significant factor in the level of underemployment in the UK. Some 18% of those on a zero-hours contract are seeking more hours or a different job, compared with 7% of those on a regular contract.

[Mr David Anderson (Blaydon) (Lab)]

I congratulate my hon. Friend on this worthy debate. What she has just said proves the fallacy of what we hear every day from the Government on the great job they are doing in increasing employment in this country. 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.

[Julie Elliott]

That is absolutely correct, and I will talk about it later.

The growing use of zero-hours contracts may go a long way towards explaining why such a weak economy has managed to maintain a relatively low unemployment rate. The Prime Minister often refers to the 1 million or so private sector jobs he seems to have personally created since 2010. Given the conveyor belt of awful numbers emanating from the Office for National Statistics since the election, one can hardly blame him, but it is imperative to delve deeper into that claim, because as we all know, not all jobs are created equal.

My hon. Friend the Member for Dumfries and Galloway (Mr Brown) asked some parliamentary questions on the kind of jobs that are being created, and the Government have been unable to provide clear answers.It is imperative to ascertain how many of those 1 million-plus jobs are minimum wage, how many are zero or small-hours contracts, how many are agency contracts and how many are outside London.

[Katy Clark (North Ayrshire and Arran) (Lab)]

Is my hon. Friend aware that as a result of the Postal Services Act 2011, it is now possible for other providers such as TNT to enter the mail delivery market? 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. Does she think that this is the direction that the Government have in mind for our economy?

[Julie Elliott]

At the moment, it seems to be where this Government are heading. Regulation is lacking where perhaps a little more regulation is needed.

[Anas Sarwar (Glasgow Central) (Lab)]

I congratulate my hon. Friend on securing this debate. This is a problem not just in the private but in the public sector. The Financial Times found that in the last two years, the number of zero-hours contracts increased by 24%. Does that not show that this Government have the wrong priorities?

[Julie Elliott]

Absolutely. I will move on to the public sector shortly, and particularly to some of the alarming figures on the health service that we have received through freedom of information requests.

After receiving an unsatisfactory answer from the Secretary of State for Health to my written question asking how many people in the national health service were employed on zero-hours contracts, I submitted a freedom of information request to each NHS trust in the country asking how many people had been employed by the trust on zero-hours contracts only over the past five years: that is, those without a substantive contract in addition to the zero-hours contract. I also asked for a breakdown of what positions those people held, including any bank staff. Of the 88 trusts for which I have data, 77 employed at least one person on a zero-hours contract and one third employed at least 500. Together, the top 10 trusts employed a staggering 10,800 people on zero-hours contracts. Perhaps more remarkably, thousands of NHS nurses and midwives were on zero-hours contracts.

It is imperative to point out that those figures are for workers on zero-hours contracts only. They do not include employees who hold a substantive post with their trust and choose to have a zero-hours contract in addition to their primary employment, which allows them to take advantage of extra shifts, such as nurses who work on the bank as well as doing their normal shifts. The figures reflect the number of people who hold only a zero-hours contract.

As I said, there are clearly some people for whom a zero-hours contract is an added bonus, but the majority are not in that position. For some people in some circumstances, zero-hours contracts provide the flexibility and extra work that they want, but they leave far too many people without financial security.

Zero-hours contracts in health care are by no means restricted to trusts and hospitals. The Centre for Employment Studies Research has produced a study touching on the use of zero-hours contracts in social care in five councils in south-west England. In 2011-12, more than half of all domiciliary care workers were employed on zero-hours contracts. Figures uncovered by the shadow health team have found that nationally, more than 300,000 social care workers are employed on such contracts.

[Derek Twigg (Halton) (Lab)]

I thank my hon. Friend and congratulate her on an excellent speech. The Department of Health wrote to me in an answer today that there were 4,200 adult social care workers on zero-hours contracts. Is she concerned about the impact on social care and the security of the people who work in that field?

[Julie Elliott]

Absolutely. People who work in social care work with vulnerable people, often on their own, and turnover and movement of staff in that field are not good. Stability and continuity are needed to give people the best possible care. I fail to see how calling people in—often with very little notice, so that different people attend the same person—is the best way to provide social care in this country. According to the figures that I have, 20% of all people working in social care are on zero-hours contracts, rising to 60% for domiciliary care.

[Mr Anderson]

This morning we met a Unison group and had discussions with home care workers who work in this city. Not only are they on zero-hours contracts, they do not get paid for time spent travelling between houses, they have no pension rights, their travel costs are not paid, they must pay for the phone calls when they ring in to say each client is okay and they must do training in their own time. Does that not show a huge lack of respect for some of the most valuable people in this country, who do tremendous work? Does it not show how the Government’s deregulation mania is driving such people into a serious position?

[Julie Elliott]

I could not agree more with my hon. Friend. I will come to this later, but I question whether the people working in that field on zero-hours contracts are actually being paid the minimum wage, after all the costs that they must pay themselves are deducted. If they were employed, they would not have to do so.

The numbers simply are not conducive to the world-class care that patients deserve. Reflecting on the corrosive nature of zero-hours contracts, one care worker interviewed for the CESR’s study said:

“I can’t plan my life, not knowing when exactly I am going to be working, I can’t plan things…I have gappy rotas, periods when I am not working, odd half-hours. I take a book with me. I know that I am not getting paid, sometimes it’s really depressing. One of my colleagues said she was going out from 3 pm to about 7 pm, and actually there was only two payable hours in that whole period”.

That confirms what my hon. Friend just said.

How can we expect care workers or NHS nurses to have total commitment to an organisation or company that has none toward them and puts them on zero-hours contracts? They leave nurses and carers worried and looking for other jobs instead of focusing on patient care, leading to worse care for patients.

Not incidentally, we must also look at ourselves—at the House of Commons. We should be setting an example of good employer practice. According to the House of Commons Commission, as of 31 January 2013, nearly 9% of House of Commons staff are employed on a zero-hours contract.

In their responses to my FOI request, many trusts were at pains to explain that workers on zero-hours contracts were not obliged to accept any work offered. That is absolutely right; such an obligation would be illegal. It would be servitude. That is not much of a defence. There is also growing evidence to suggest that the choice to turn down work is illusory. Often, employers will cut the hours of any worker who turns down work, a practice known as zeroing down. The Resolution Foundation interviewed a domiciliary care worker in Newcastle who said:

“When I started out at my current job, I did nine weeks without a single day off and I was regularly working anything up to 55-60 hours a week. Since putting my foot down and refusing to work every other weekend…my hours have dried up.”

For many workers, the flexibility of zero-hours contracts is a one-way street that benefits only the employer. There is even evidence that some employers zero down workers’ hours simply to avoid the costs of redundancy or as punishment for reporting unfair treatment.

What needs to be done? We need to discuss concrete solutions to the zero-hours contracts crisis. Suggestions include regulations that state that if a worker’s average normal working hours are in excess of their contracted hours, they have the right to have their real-world hours written into their contract. We also need to raise awareness of zero-hours contracts first and foremost among people employed on them. Job adverts offering positions on zero-hours contracts should say so explicitly.

My right hon. Friend the Leader of the Opposition has proposed living wage zones and tax breaks to persuade companies to pay their employees a living wage, in order to boost productivity and cut the welfare bill.

[Fiona O'Donnell (East Lothian) (Lab)]

I am grateful to my hon. Friend for securing this debate and giving me the opportunity to contribute. Does she agree that it is essential that any training that staff require should be paid by the employer?

[Julie Elliott]

Of course it should. Not paying is a complete lack of obligation by employers to the people who work for them, whether they are workers or employees. Their businesses prosper because those people work for them, and people should be looked after properly.

Paying employees a living wage would boost productivity and the welfare bill. The Institute for Fiscal Studies has calculated that for every £1 spent paying a living wage, the Treasury saves 50p on tax credits and benefits. The Resolution Foundation has calculated that if everyone now receiving the minimum wage received the living wage, there would be a £2.2 billion net saving, comprised of higher income tax and national insurance receipts. There is growing evidence that living wages boost productivity, motivation and performance, and reduce leaver and absentee rates, thereby offsetting the cost of the higher wage. The people who reject that analysis are the same people who said that the national minimum wage would lead to vastly higher levels of unemployment. They were wrong; it simply led to higher wages.

Progress has been made in the past two decades to protect those on zero-hours contracts and agency workers, who are often the same people. The working time regulations, the national minimum wage and the agency workers regulations have done much to improve the rights of such workers, but zero-hours contracts have reached a tipping point where further regulation is now required, because more needs to be done to tackle the inequalities and unfair treatment inherent in such contracts of employment. We must strengthen efforts to ensure that employers who abuse zero-hours contracts are brought to order. The tax and benefits system should be updated to reflect the changes in the labour market and to support people on zero or small-hours contracts. The contracts are merely the latest in a long line of ingenious tactics by the less scrupulous employers to keep costs down at all costs, all to the cost of their employees. Once we have addressed some of the worst excesses of zero-hours contracts, I do not want to see equivalents pop up and for us to take years to respond to those as well, with the lowest paid suffering all the while at the sharp end of the employment market.

When I asked the Minister present what the Government were going to do about zero-hours contracts, she stated that they would crack down on any abuse of such contracts. I am pleased that the Secretary of State for Business, Innovation and Skills announced last month that he was undertaking a fact-finding review of zero-hours contracts. He says that only anecdotal evidence of abuse is available, but I think that we are well past the stage of anecdotal evidence.

Many people on zero-hours contracts work fairly regular and often long hours. In such cases, zero-hours contracts are not about flexibility for the employer but about control over the employee. We could call it exploitation. Many workers start early in the morning and are expected to stay at work until late in the evening, with multiple unpaid breaks in between. That is a life lived on call. I welcome contributions from colleagues and the response from the Minister. People on zero-hours contracts, whether they treat our sick, look after our elderly or serve our food, need a commitment from the Government. I look forward to hearing it.