Zero-hours contracts

Alison McGovern Excerpts

Tuesday 9th July 2013 Westminster Hall

[Ian Murray]

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. That is how, over many years, the case law has built up about the definition of employment tribunals, in terms of whether someone is in work or, indeed, whether they are a worker, an employee or self-employed. So there is a definition. My hon. Friend the Member for Wansbeck has said that what we are talking about is not a job. It perhaps is not a job. It cannot be right for people to be in this situation and not end up with any hours.

Let us consider some of the damaging effects. For staff, zero-hours contracts have huge drawbacks compared with permanent regular work. There is no guaranteed level of regular earnings that provides any certainty with regard to meeting bills, meeting rent or planning for the future. The need to respond to calls to attend work, frequently at short notice, disrupts life outside work and places a particular strain on families in terms of arranging care for dependants. The Government have put a heavy emphasis on being family-friendly, but we have yet to see any evidence of that. Zero-hours contracts fly in the face of the flexible working legislation that the Minister, to be fair to her, has pushed through and championed in government. They slightly contradict that aspect of employment.

There is a detriment to business as well. That is why I cannot see why business wants to use zero-hours contracts, particularly in some of the areas that have been spoken about. There must be reputational damage to employers who use these contracts. There must be an inability to attract and to retain high-quality staff. There is undoubtedly a direct correlation between continuity and the quality of the services involved. Some hon. Members have spoken clearly about health and social care and how continuity and quality of services are significantly affected. A loss of training and skills development tends to accompany zero-hours contracts, particularly if people have to pay for their own training, which is a huge issue with these contracts.

There is an overarching ethos and ideology. The Government have a one-track mind on this issue. They look at regulation and employment law as a burden on business. We have seen that with the Beecroft report. I am delighted that my hon. Friend the Member for Wansbeck used the phrase “Beecroft by the back door”—we have copyrighted that now. This is Beecroft by the back door. There are all these ideological moves, in terms of the legislative programme that the Government are pushing through at the moment, that are simply an attack on workers’ rights and the ability of people to earn a living. Their central argument about removing workers’ rights in order to encourage businesses to grow surely cannot be right. It flies in the face of the evidence. Let us say that we accept that the Government have created 750,000 private sector jobs in the past two years as a fact, whether it is challengeable or not. Those jobs have been created under the current framework of employment rights, so that flies in the face of what they are saying.

[Alison McGovern (Wirral South) (Lab)]

I apologise to fellow hon. Members for not being able to be here at the start of the debate. Does my hon. Friend agree that good regulation could protect employers who do not want to see this sort of practice? It could prevent a race to the bottom, which is what I think we are seeing in the care sector.

[Ian Murray]

That is a valuable intervention because that is what many employers are telling us and what many business organisations are saying: when we undermine workers’ rights, we are undermining as well the businesses that are looking after their staff. I ran my own business before coming into this place. Any business person—any person running a good business—gets up every morning of every day and wants to look after their staff; they know that their staff are their greatest asset. There is a danger here for the Government, and the hon. Member for North Norfolk (Norman Lamb), the Minister’s predecessor, said this quite clearly in a newspaper. Admittedly, it was six weeks before he got the job as the Minister responsible for employee relations, but he said that there was a real danger of undermining job security, which undermines consumer confidence, which sets us up in a spiral of economic decline.

Let me pick up some of the issues that my hon. Friend the Member for Sunderland Central raised. She referred to the disproportionate effect on women. Clearly, we have to look at that. The explosion in the number of zero-hours contracts has had a disproportionate effect on women, and that is probably because of some of the sectors in which we have seen this, such as the care sector and the hospitality sector. These are industries with high percentages of female employees. It is difficult to know whether it is a response to demand for flexible hours, better enabling female professionals to return to work after maternity leave, but it cannot be viewed as a positive trend at a time when equality in the work force is becoming more vital than ever. The Government have to consider whether what is happening is consistent with some of the other policies that I have mentioned in relation to flexible working.

There is also the issue of tax credits. The Government have been very clear about resolving some of the issues in relation to welfare. Their view was that the tax credits bill was too high, but the tax credits system was put in place to ensure that work paid, so again the reality flies in the face of some of the rhetoric and ideology. How exactly does the working tax credit issue interact with some of these zero-hours contracts? How often should HMRC update its system for someone who is on a zero-hours contract? Must they be on a zero-hours contract for a certain number of months? What happens when they get an injection of hours at the last minute? How is all that put together? There are also issues in relation to Jobcentre Plus. If someone is on a zero-hours contract and by law they are neither an employee nor a worker, are they actually in employment; can they claim jobseeker’s allowance? All those issues must be dealt with.

We have heard about the number of staff in this place who are on zero-hours contracts. A press release was issued this morning by my hon. Friend the Member for Paisley and Renfrewshire North (Jim Sheridan). He said that 155 staff in this place were on zero-hours contracts. There are a number of case studies. This issue does not just involve the hospitality or care sectors. Edinburgh university, in my own constituency, has recently done an analysis that shows that 47% of lecturers in the college of humanities and social science are on zero-hours contracts, so there is a real problem there. I know that the University and College Union is taking it up with the university of Edinburgh.

Many hon. Members have spoken about the NHS, so I will not cause delay by making further comments on that, but may I turn to the Government’s recently announced review of zero-hours contracts? The announcement that the Secretary of State and the Minister were to look at this issue was very much welcomed. We must congratulate the Minister on at least going that far, but we need to know whether the Government will issue a call for evidence. Many trade unions have done so much work on this issue. My hon. Friend the Member for Corby (Andy Sawford) mentioned USDAW. It has done a tremendous amount of work on pushing this issue forward. The Government really have to issue a call for evidence. I believe that their review involves only three officials in the Department for Business, Innovation and Skills, so it would be good to issue a call for evidence.

Will the review consider the issues in relation to tax credits? Will it consider specifically the interaction of zero-hours contracts with young people and women in particular? The Minister may not be aware, but there was unanimous agreement from panellists at the Work Foundation’s recent conference on this topic that the review, in its current form, was too lightweight and would not provide the Government with the hard data that they needed to reform the system. I would be interested to hear the Minister’s response.

You have heard from Labour Members, Ms Dorries, the real concerns about zero-hours contracts and the impacts that they have on family life, on income and on people’s ability to plan their daily lives. This is simply an issue of fairness. It cannot be right to demand that someone travels to their place of work and then tell them that they do not have any work. I will be very interested to see whether the Minister will put together a body of work that looks at the mutuality of obligation and whether this is a case in which someone is not an employee, a worker or self-employed and therefore is deemed to be unemployed.

--- Later in debate ---

[Jo Swinson]

I take the hon. Gentleman’s point, but for some people that flexibility is very much tied to the zero-hours contract, because they can work a significant number of hours some weeks and perhaps not at all other weeks. I shall give examples of people who that arrangement might suit. I appreciate that there are different ways to achieve flexibility, but zero-hours contracts are one such way, and if used properly, they do not need to be a problem. The hon. Member for Sunderland Central mentioned flexibility being a one-way street, which is a good way to put it. If there is only a one-way street, that suggests that the contract is not equal on both sides. Genuine two-way flexibility can work very well for employees and employers.

I was touching on some of the problems and areas where zero-hours contracts do not work well. Perhaps an individual took on such a contract but, because they had other work commitments, such as a part-time job or other responsibilities, had to turn down work fairly regularly, which leads to them not being offered work because they were seen as inflexible. That situation is a two-way street not working as a two-way street, which is not right. The hon. Member for Wigan (Lisa Nandy) raised the case of a lady who had been told that if she did not work a particular set of hours, she would not get work in future. The hon. Lady mentioned the rather horrendous suggestion that the lady had to leave her children in a car park, and my heart goes out to someone in that situation. That scenario—an implied threat hanging over someone, if they do not take on particular work—is not right. On a zero-hours contract, the employee should be genuinely free to turn down work.

As has been mentioned, people rely on income to prove that they can take out a mortgage, for example, or to prove that they are able to make regular rental payments to rent a flat, so zero-hours contracts can be problematic, if people cannot prove that regular income. For those reasons, officials in the Department for Business, Innovation and Skills are looking into such contracts, to gather further information over the summer to better understand how they work and the issues involved. It is important that we establish what the problems are before we change policy.

Lots of figures have been mentioned today, particularly on the recent sharp increase in zero-hours contracts since 2004. Those figures are accurate, but it is important for context to point out that zero-hours contracts are not new. Hon. Members have talked about them today as if they are an evil invention of the current Government, but they have been around for many years. According to the graphs from the 2000 labour force survey, the overall number of people and the percentage of the work force using such contracts was slightly higher in 2000 than for the same quarter in 2012. I know Hansard does not allow graphs, but the graph shows that the use of zero-hours contracts was high in 2000, gradually reduced towards 2004 and has risen since then, with a couple of blips along the way where the graph is slightly spiky. That is the pattern, so, although the recent increase has brought some problems into sharp relief, these contracts are not a recent issue.

The Labour Government looked at zero-hours contracts. Their White Paper said:

“The Government wishes to retain the flexibility these contracts offer business and believes that the National Minimum Wage and Working Time Directive will provide important basic protections against some of the potential abuses.”

Some of those abuses have been outlined today, and I will shortly come to the points raised, but it is important to challenge the assumption that such contracts are always a bad thing. They can be helpful if an individual and an employer genuinely want to come to an agreement about a contract. For students, who might not be able to commit to a fixed work pattern due to their timetables, zero-hours contracts may be helpful in giving them good work experience. They can also be useful for semi-retired people who want to work occasionally, but not on a fixed weekly basis. Zero-hours contracts are useful in some situations, but it is important that they are not abused.

The Government want to ensure that people on jobseeker’s allowance are in no way forced to apply for zero-hours contracts. I want to stress that that is not happening. It is not the case. There is no sanctioning of benefit if people do not apply for such jobs, because decision officers at the Department for Work and Pensions cannot mandate claimants to apply for them. If jobseekers wish to take one, they are free to apply, but the decision-maker guidance sets out clearly that

“if a claimant refuses or fails to apply for or accept employment that is for less than 24 hours a week, the claimant will have good cause”,

if that is the reason for not applying.

I shall turn to some specific points that Members raised. We will obviously work alongside the DWP in the Government review, to address the eligibility for support issues. Universal credit should make it easier for people to get Government support based on the number of hours they work, without, for example, the cliff edge of 16 hours, but we need to work closely with other Departments on that. The hon. Members for North Tyneside (Mrs Glindon) and for Sunderland Central and for Edinburgh South (Ian Murray) raised the impact of zero-hours contracts on women. Resolution Foundation research shows that the use of such contracts is fairly evenly distributed between men and women: women have about 53% of the contracts and men have 47%, so the figures are perhaps not quite as skewed as suggested.

[Alison McGovern]

Will the Minister give way?

[Jo Swinson]

I am sorry, but I want to respond to the points raised.

The hon. Member for Sunderland Central mentioned living life on call. If an employee is on call at their place of work, they should be paid; the legislation is clear. Some of the cases raised today are breaches of legislation. I will come on to the pay and work rights helpline. The provisions in the working time regulations on breaks proportionate to the time spent working give some protection to workers. Although lunch breaks are not paid in zero-hours contracts, that does not mean that people should not get time to take a break at work, and the working time regulations set that out clearly.

Care workers not being paid for the time spent travelling between houses was raised. If care workers have wages deducted for that time or have to pay for photographs, uniforms and so on, they might be working for less than the minimum wage, particularly if they are not on a high wage. It obviously depends on the case. Employers of people who are very well paid may not be in breach of national minimum wage guidance and legislation, but where employers are in breach, I urge people to contact the pay and work rights helpline on 0800 917 2368 or search for “pay and work rights helpline” online. HMRC can enforce the legislation, and it takes breaches of national minimum wage guidance and legislation seriously. It is important that such cases are reported, because employers need to be taken to task if they are exploiting workers.

Four out of five people on zero-hours contracts are not looking for another job, which suggests that not everyone on such contracts is unhappy. There are clearly cases where that is the case, but the figures suggest that it is not true that people are trapped on the contracts. They can terminate the contract in the usual way. I agree with the hon. Member for Wigan that employers who abuse zero-hours contracts are likely to be poor employers, but “employers who abuse” is not the same as employers who use zero-hours contracts. There is a difference.

Various hon. Members mentioned a ban on zero-hours contracts. Although we need to look at the evidence, there are immediate challenges to that proposal. The hon. Member for Wigan mentioned small-hours contracts. If we ban zero-hours contracts, what would be the minimum—one hour, two hours, four hours, eight hours? If someone genuinely wanted to work for a small number of hours, should we stop them from being able to do so? When we look at the suggestion, it begins to unravel. It is useful to look at international examples, and the hon. Member for Corby (Andy Sawford) cited some.

Business, Innovation and Skills officials are speaking to a variety of stakeholders, including industry bodies that represent sectors where such contracts are used and trade unions, which, as was mentioned, have a lot of information, to examine the extent of the use and the abuse of zero-hours contracts. We will work with other Departments. There is no call for evidence at this stage, but we do not rule it out for the future. Research shows that doing our homework before issuing a call for evidence is useful. I welcome the interest the debate has sparked, and I am sure that we will return to the topic when we have the further information from the BIS fact-finding review.