Today (16 September, 2013) the Business Secretary Vince Cable announced a package of measures to inject more fairness into the workforce and in wages for British workers.
Following an initial review over the summer, Dr Cable announced today that he will launch a consultation on zero-hours contracts (ZHC) in order to tackle any abuses Government finds, particularly those involving exclusivity.
Dr Cable has also asked the Low Pay Commission (LPC), the body that advises Government on the National Minimum Wage (NMW), to consider how the NMW may be able to rise faster than current conditions allow over the medium term. This will allow low paid workers to 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.
On zero-hours contracts Business Secretary Vince Cable said:
I have been examining closely the issue of zero-hour contracts over the last few months. We’ve been speaking to businesses, trade unions and other groups both about their downsides and their benefits.
It is clear that they 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.
Today I am announcing that we will proceed to issue a consultation, which will explore how to tackle any abuses, particularly around exclusivity. I am determined to make sure people are paid and treated fairly, in a way that also helps keep people employed in these delicate economic times.
On the National Minimum Wage, Business Secretary Vince Cable said:
The National Minimum Wage is a vital safety net in protecting the low paid. However, as signs of an economic recovery start to emerge, we need to do more to make sure that the benefits of growth are shared fairly across the board.
The Low Pay Commission every year carries out a huge amount of valuable, detailed work looking at labour conditions across the economy. Today, in addition to their ongoing annual remit, I am asking them to extend this expertise to help the government and business understand how we can deal with the issue of low wages in the economy. In particular I have asked them to look at what economic conditions would be needed to allow the National Minimum Wage to rise by more than current conditions allow.
- the announcement of a public consultation on ZHC follows a review by BIS officials to explore how these contracts are being used to better understand the issues
- the details of the consultation and an official launch date will be confirmed later this year
- our efforts will be focussed on tackling any abuses found in the system and in making sure employees are getting a fair deal
- this is about striking the right balance and not taking knee-jerk decisions which offer little in the way of real solutions
The review conducted over the summer highlighted 4 key areas of concern:
Exclusivity: This is where someone agrees to a contract that does not guarantee them a minimum number of hours and is stopped from working for another company. This is described as an ‘exclusivity clause’. In certain cases this can mean that people were stopped from looking for work elsewhere particularly when they needed more hours to bump up their earnings. Feedback from employers themselves suggests awareness that there can be abuses that limit flexibility.
Transparency: There is no clear or legal definition of a ZHC and it can cover a number of working arrangements. This can lead to confusion and a lack of understanding on contract details and what it means for the individual. In some cases people were not aware of the fact that there was a possibility that they might not be offered work on a regular basis.
Uncertainty of earnings: The amount of money a person on a ZHC can expect to earn is dependent on the number of hours worked. This means that people on a ZHC find it hard to calculate earnings and it can lead to concerns about how benefits might be affected.
Balance of power in the employment relationship: Our review found that people perceived they would be penalised if they did not take hours offered even if the hours were offered at very short notice and did not suit. This meant it could lead to a climate of fear that a person is less likely to be offered regular work in future if they failed to accept the hours on offer.
National Minimum Wage:
In June the Government asked the independent LPC to make recommendations on the NMW rates it believes should apply from October 2014
In addition to this, the Business Secretary has now asked the LPC to work with the Government to examine over a longer time horizon what business and economic conditions are needed to allow further increases in the NMW
Notes to editors
The LPC will report back to Government in spring 2014
In June, BIS began a review to gather information on the use of zero hours contracts, which has now concluded
The government’s economic policy objective is to achieve ‘strong, sustainable and balanced growth that is more evenly shared across the country and between industries’. It set 4 ambitions in the ‘Plan for Growth’, published at Budget 2011:
- to create the most competitive tax system in the G20
- to make the UK the best place in Europe to start, finance and grow a business
- to encourage investment and exports as a route to a more balanced economy
- to create a more educated workforce that is the most flexible in Europe
Work is underway across government to achieve these ambitions, including progress on more than 250 measures as part of the Growth Review. Developing an Industrial Strategy gives new impetus to this work by providing businesses, investors and the public with more clarity about the long-term direction in which the government wants the economy to travel.