A safer conversation: zero-hour contracts

One basic argument against zero-hour contracts is that the power lies with the employer, while the employee’s bargaining power is almost nil. Is it possible to have an agreement that is beneficial  to both parties?

Kurt: The tourism industry has had casual labourers for many years and it goes back well beyond zero-hour contracts. The idea was that there was no commitment on the part of the person being recruited that they had to take up the employment when it was offered and no commitment on the employer to actually give the person a certain number of hours a week.

For an industry like tourism, it works rather well when you don’t have any foresight of what is actually going to happen with the weather for example, which can have a massive impact on visitor numbers. It has been a kind of a casual relationship which has worked well for both parties. Most of the time the people who are being employed are students or people who have other commitments like being family carers and the like. They could pick and choose when to work and when not to work  and the employer could ask them to work when the demand was there.  That is the way the tourism industry  has traditionally operated and it is a slightly different situation to full zero-hour contracts as the primary source  of employment.

Tom: Like most business organisations we recognise the need to take action on exclusivity clauses and we are happy that that is being addressed. [Exclusivity clauses in zero hour-contracts will be banned as part of the Small Business, Enterprise and Employment Bill]. In addition, one thing that has changed over the last few years is the balance of power between workers and employers; as the jobs market has picked up workers in most regions and sectors now have more choice about where to work.

One of the messages to employers out there is that the change in the regulations covering exclusivity clauses is not the only driver for change. With the jobs market picking up, employers need to think about how they are managing their flexible staff because, increasingly, people will have the option of voting with their feet and getting employment elsewhere.

We often talk about zero-hour contracts or people in temporary work and the perception is that there is a huge block of people who are completely stuck. In reality, most people are moving through. They will do the zero-hour contracts for a certain period of time or work in a temporary capacity for a certain period and then move through to a permanent job if that’s what they are looking for. Some people want that flexibility on an ongoing basis, other people will use it as a stepping stone.

The other side of the debate is about the best ways of bringing flexibility into the workplace. As Kurt mentioned, there always will be a need for flexible staffing so how do you do that in the best possible way. Some people prefer to use agencies rather than just looking for work themselves. If you are working via an agency of course there is no issue of exclusivity because that agency is trying to find the individual work with many different employers not just with one.

So I think having that debate around the best way of bringing flexibility into the workplace is a good one and it is something we are keen to drive through our Good Recruitment Campaign.

Yes, we need to address exclusivity clauses but ultimately we can’t just have a discussion about contracts because the bigger debate for us is around skills, awareness, aspiration and how you progress in the jobs market. There’s a lot of people out there who are stuck in low-paid permanent jobs so it’s not just an issue around temporary or zero hours contracts versus permanent work; it is about how do we help everybody, even those in permanent jobs, to progress and move through the jobs market.

Sarah: We obviously see the thing very much from the perspective of the individual workers but also as a labour market issue. For us at the TUC, the whole area of precarious work and irregular working and extraordinary different varieties of contract you now get is huge. Zero-hour contracts is just one issue, other issues include what we call bogus self employment, people who are taken on and told that they are self employed but in fact they don’t get the advantages of that and end up in a position where they have no employment protection and very light touch health and safety protection.

I’d also at this juncture want to distinguish what we would consider to be quite legitimate freelance working. For example, in the entertainment industry it is common for people working as camera operators and so on to be freelance workers who arrange their own tax and national insurance, they are self employed, they get job offers themselves sometimes and others through agencies and that works pretty well. They are skilled workers who can always get work and whose work is highly valued. That is completely distinct from somebody who works for example as a carer in social services going round from home to home to provide basic cleaning and support facilities for individuals.

People who are involved in casualised contracts working in that sort of situation are in a very, very different position altogether. The power there is all with the employer, and it has a huge impact on the service end user. We would want to see a big review that focuses particularly on the type of work, the suitability of the relatively casual arrangements in particular types of work and otherwise.

I suppose in the labour market the real issue is the strength of bargaining power between the worker and the employer. Kurt talked quite rightly about the tourism industry and how, for many people, it’s always been inherently suitable to have that sort of flexibility. I completely get that for students and for some people who have other responsibilities in life. But for someone who is a breadwinner, whose entire work is dependent on an employer, to put them on a zero-hours contract so they have no idea when they are going to get any work, when they need to book childcare arrangements, if and when they can claim housing benefit, you know if the work dries up one week after another, that is, I think, completely unsustainable for a whole range of reasons.

I think it’s a highly complex area. I just want one postscript about exclusivity. Banning the exclusivity clauses is obviously a good thing but I have to say the powers that come into force are pretty difficult to use in practice. The real issue always is the vulnerability and the weakness of individual workers in low-skilled, low-waged jobs who are put under these contracts. The chances of them being able to enforce any action against an employer who is attempting to use an exclusivity ban will be pretty low. If you are desperate for the work then you don’t go off and complain about the fact they have told you that you can only work for them. I think that it really was just chipping away at the edges. Someone needs to take responsibility for having a look at this whole issue of employment status, labour market demand and the social impact and the consumer impacts as well.

Kurt: I’d agree with you Sarah. We need to draw a distinction: the problem has become with the term zero-hour contracts being applied to everything and with the idea that zero-hour contracts are bad. We rather should be looking at having a more sophisticated approach. There are types of zero-hour contracts such as the casual worker ones which are absolutely fine. But, as you say,  if this is the person’s kind of livelihood, that’s a completely different story and especially where employers are trying to evade legislation by, as you said, making them self employed rather than doing the right thing and realising that they are actual staff.

Tom: There is some consensus on this between employer bodies and the trade unions. One thing that we do agree on is the need to focus on the specific issues facing different sectors. I think the care sector is a good example where in reality a lot of it is tied up with increasingly tight budgets. Driving discussions on a sectorial basis is definitely one way to go

We’ve talked with the TUC before that there is a big role for employers but also for agencies to try and make sure that workers understand the type of contract they are on. I think you are right, with so many different contracts out there it can be slightly confusing. But that is certainly something that we ensure our members do as part of our code of practice. They should explain the contract to the workers so at least they can make informed choices.

Sarah: We have no quarrel with agency work per se at all. We have a good working relationship with Rrecuritment and Employment Confederation (REC) as Tom knows, and I think it is important to make sure people do understand what their contracts say.

I appreciate the efforts that good agencies and REC make to ensure that that happens. But I am afraid there is still quite a large what you might call the dirty end of the labour market, which really is very casualised and something has to be done about that.  Those employers don’t use agencies because they don’t want to pay the extra. Probably the route there lies through the enforcement mechanisms and having a look at how some of these existing agencies, HMRC and others can do more to intervene and enforce things like the National Minimum Wage, which is again another big problem. Once you add together the hours and the amount of work that zero-hour contract workers have done it doesn’t equate, they are being paid below what is actually the legal minimum.

There’s a whole range of issues like these that government ought to be looking at in order to protect good employers and reputable agencies; it is crying out for that. Where there are trade unions there’s often a very good package of sectoral level negotiations, which come out with some sort of solution that allows the employer flexibility but also ensures that there’s some kind of basic decent standards and a minimum amount of paid hours available, so that at least the workers have some sort of certainty about the minimum that they are going to get every week. So I think in some sectors there are already mechanisms for making things better but probably we are all agreed that there are these rather nasty patches in the labour market where there still is awful exploitation and I haven’t even started on the really illegal stuff like trafficking people in and illegal immigrants and all the rest of it.

Tom: From our perspective this is an area of absolute consensus with the TUC in terms of the need for effective enforcement. Good enforcement of existing regulations is important to protect workers but also to protect the interests of legitimate and compliant businesses, employers who are trying to do the right thing and risk being undercut in the marketplace by rogue providers who aren’t doing the right thing.

Kurt: Yes, in the tourism industry we’ve got a very wide range of good practice and bad practice, and things from pubs and restaurants where there is a long history of casual workers and there’s not really a national problem because everyone knows how it works. But on the other end, a lot of hotels now are outsourcing their cleaning, for example, and that’s a real problem myriad.

Can we say that there is a two-tier situation, one for workers with lower skills/incomes and one for professional highly remunerated such as lawyers, IT engineers, and each of these operates differently?

Tom: It is important to analyse the practices because we tend to conflate a lot of things. Sometimes you read the media and it is as if any sort of flexible working or different type of contract that’s not full time and permanent is some sort of aberration. In reality we know from our data that a lot of people choose to work in different ways, including at the high end of the jobs market.

I think when you are talking about flexible working arrangements it is important to bear in mind that certainly for most IT contractors, engineers, locum doctors, etc. it’s a genuine choice. Other individuals, not necessarily in a high-skilled positions, also chose to work in different ways because it fits with caring commitments. There are a lot of people working through agencies making that choice because it fits their lifestyle needs at a particular time. Other will chose to work on a temporary and flexible contract while they are looking for permanent work.

I think there are different categories within our jobs market. I wouldn’t say it is necessarily two tier but we do recognise there are different drivers when it comes to ways of working. Even if you aren’t doing it purely out of choice – for example as a stop gap while looking for permanent work – it is a positive outlet and an important stepping stone.

Kurt: I would say that there probably is a two tier but it is hard to define the terms. In the tourism sector you have the events industry and there’s a lot of people on zero-hour contracts who are very skilled people. But on the other hand you have a lot of people on zero-hour contracts who are university students, they are very bright cookies and they work the system to their  own ends as well even though they  are not getting paid particularly a lot  of money. But then you have people who are not being paid a lot of money and find it very difficult because they  don’t know the system, they probably can’t even read a contract. They are very vulnerable.

Sarah: They are, that is just exploitative and it probably is breaching various International Labour Organisation standards. A government that purports to have an interest in blue collar workers and protect people from worst excesses should be thinking of some sort of intervention to try and ensure that this doesn’t go on. Again, as I was saying earlier, you need some sort of joined up relationship between the Gangmasters Licencing Authority,  the agency inspectorate, HMRC, the Health and Safety Executive.

Normally when people are working in very poor conditions, it is not just one bit of exploitation, it’s a whole range of different issues. And I’d have thought that in cleaning, for example, they should be safety critical. Sooner or later, the tragic thing is that there’ll be some sort of appalling accident and then too late there’ll be a sort of panic reaction and probably inappropriate attempts to regulate the wrong bits.

I am very concerned that people like us here today should be talking before any of that happens about solutions that enable the delivery of this flexibility, at the same time as ensuring that everywhere there are decent standards are enforced. I think, as Tom was saying earlier, the key word here is enforcement. We have a national minimum wage but it is unfortunately the case that there are still a significant number of people who don’t get paid that amount. It is law breaking at its worst.

Tom: The only other point I would add is that we need to address the work practices, we need to drive effective enforcement but we also must not lose sight of other facts. A few years ago we sat with TUC and Citizens Advice Bureau colleagues on the Vulnerable Workers Enforcement Forum who did a piece of research on labour practices. At the time, the Citizens Advice Bureau colleagues gave us a bit of a reality check by saying that the vast majority of complaints they got about bad working practice were from people in permanent full-time jobs.

That’s why I think we must not lose sight of the debate about helping everybody, those on zero-hour contracts who want to move through, but also people in permanent low-paid jobs that aren’t really going anywhere. We need to debate how do we help them make the next step? Sometimes it is not the type of contacts you are on, it is that you get the awareness, the skills and the support to make the next step to start earning more whether you are in permanent jobs or flexible type jobs.

Sarah: I agree, the term zero-hour contract is actually another misleading way to lead the debate, where it has become a euphemism for rubbish job. If you’ve got a skill you are selling, and employers are crying out for you, you got power. Interestingly, looking at tourism in London for example, there’s suddenly a shortage of people who clean the rooms out, and you will find hotels suddenly being willing to add on all sorts of new benefits they haven’t been willing to give before, because they know that they have got to get enough people in to do the basic jobs.

So you know in a sense that is the market leading conditions. But nonetheless, it doesn’t excuse bad behaviour. When we talk about exploitation is always the workers who are the ones to get exploited but on the other hand, for employers, if they get this wrong they end up being the losers in the labour market because they haven’t got sufficient numbers of people working for them. It is much more subtle than it initially looked isn’t it?

Tom: That’s the point I was making at the start. In a meeting with members last week we realised that a lot of employers haven’t quite cottoned onto the fact that the jobs market has changed a lot in the last 18 months to two years, so people are voting with their feet. People will take alternative jobs elsewhere if they are not managed well and treated with respect. I think that is a really important message. This is not only key to employers getting and retaining the right staff, but also it is also about managing their brand.  You hear a lot of employers talking about their employer brand and it has always struck as a bit of a strange one. if you are investing money to be seen as a great place to work and yet you are treating your flexible or contingent labour in a way that doesn’t fit with that sort of brand image at all. Employers need consistency and part of that has to be treating temporary workers on zero-hour contracts with the same respect as you do the rest of your workforce.

Kurt: The problem comes between whether you are kind of front of house or back of house. If you are front of house, obviously the employer has got a real need to train employees and make sure they are of a certain standard and there’s a centre for them to do that. Back of house staff, if things go terribly wrong, it hit their profit lines. That is where the squeezing of costs really comes.