The Business Secretary Vince Cable has announced that the Government will launch a consultation on tackling abuse of zero-hour contracts, and will ask the Low Pay Commission (LPC) to consider how the national minimum wage (NMW) may be raised faster over the medium term.
Zero-hours contracts (ZHC)
The announcement of a consultation follows a BIS review to gather information on the use of ZHCs and explore how the contracts are being used. The consultation will be focused on tackling any abuses found in the system and in making sure employees are getting ‘a fair deal’. The details of the consultation and its launch date will be confirmed later this year. BIS states that its review highlighted four key areas of concern:
• ‘exclusivity clauses’: contractual provisions that stop workers from working for another company even though they are not guaranteed a minimum number of hours and may need to supplement their income. BIS states that feedback from employers suggests an awareness that ‘there can be abuses that limit flexibility’
• lack of transparency: there is no clear legal definition of a ZHC, which can cover a number of working arrangements. BIS found that some people were unaware that they might not be offered work regularly
• uncertainty of earnings: the amount of money earnt on a ZHC is dependent on the number of hours worked. Thus people on a ZHC can find it hard to calculate earnings which can lead to concerns about how benefits might be affected, and
• the balance of power in the employment relationship: the review found that people perceived they would be penalised if they did not take hours offered, even if they were offered the hours at very short notice and it did not suit them to work. This could lead to a climate of fear that a person is less likely to be offered regular work in future if he or she fails to accept the hours on offer.
Vince Cable said that it is clear that ZHCs ‘are much more widely used than we had previously thought. It is also clear that there are abuses in the system, especially around the issue of exclusivity which some employers are demanding from workers on these contracts’.
National minimum wage
In June the Government asked the independent Low Pay Commission to make recommendations on the NMW rates it believes should apply from October 2014. Dr Cable has now also asked the LPC to consider how the NMW may be able to rise faster than current conditions allow over the medium term so that workers can ‘benefit from the emerging economic recovery’. In particular, he has asked the LPC to consider what labour market conditions will need to be in place in the medium term to allow further increases in wages without an adverse impact on jobs. The LPC will report back to the Government in spring 2014.