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Low Pay Commission

Research into one-sided flexibility

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Every year, the LPC commissions and publishes a range of independent research projects to build our evidence base and understanding of the labour market and low pay. Today, we’re publishing two of the research reports we commissioned last year, to inform our work on one-sided flexibility. (We published our report and recommendations on one-sided flexibility in December.)

Minimum and zero-hours contracts and low paid staff

The first of these reports, produced by Incomes Data Research (IDR), looked at how zero-hours and minimum-hours contracts were actually used in a variety of organisations. IDR gathered evidence from a sample of 40 employers on the use of these contracts for low-paid staff. They looked at the extent to which these individuals worked beyond their contracted hours and how volatile their hours of work were from week to week.

Across IDR’s sample, there was a wide range of practices and working arrangements. Employers reported using these contracts to manage demand and cope with temporary and seasonal increases. Organisations were more likely to use zero-hours than minimum-hours contracts, but where the latter were used, they tended to cover more staff, with the most common amount of contracted hours being four or six. On the whole, staff were not given a choice over the type of contract they took. IDR found that individuals on these contracts typically worked around 12 hours per week, although they also found staff working virtually full-time on both types of contract.

The principle that individuals’ contracts should reflect their actual working hours was at the heart of the LPC’s recommendations to Government. We proposed a right for individuals to switch to a contract which reflected the reality of their working arrangements, going further than the right to request which BEIS are currently bringing forward.

International approaches

The second report, produced by Resolution Foundation, looked at the international context; the different forms the problem of insecure work takes, and the range of policy responses countries have used to address it. In arriving at the proposals which the LPC presented to Government, we thought carefully about these international comparisons and how they related to the UK situation.

It’s not easy to make direct comparisons between different countries’ responses to insecure work: the institutional and economic contexts can differ substantially, which means the nature of the problem varies too. But it is nevertheless clear that the UK is not alone in considering ways to rebalance the labour market.

Resolution Foundation’s report identifies three main types of policy response to the problem of insecure work. The first (and, internationally, the most common) is to introduce legal protections against insecure work, often using employment law to restrict arrangements where workers’ hours aren’t guaranteed. In France, for instance, the use of zero-hours contracts is almost completely banned, and contracts must specify a number of hours, with part-time contracts providing a minimum of 24 hours of work per week. Spain, Poland and Denmark are other examples of countries which have legislated to prevent employers offering zero-hours contracts.

After considering evidence from abroad and the UK, we found that the problems we identified with one-sided flexibility were not specific to zero-hours contracts and can happen across of range of working arrangements. The LPC’s proposals therefore did not include banning zero-hours contracts; instead we recommended that workers should have a right to reasonable notice of their work schedule, compensation for shift cancellation or curtailment and improved information for workers on the terms of their contract.

A second type of response that Resolution Foundation examines is to raise the cost of insecure work for employers. The example of the ‘casual loading’ premium in Australia fits into this category, as do examples of mandatory overtime premiums in other countries. Matthew Taylor’s proposal for a higher minimum wage for non-guaranteed hours, which we evaluated but did not recommend, would also belong here.

The third approach examined is the use of tax and benefit systems, to influence the prevalence of insecure work and to mitigate the impact on workers’ incomes. Resolution Foundation did not find clear examples of such systems being deliberately altered in response to non-standard work; rather, such changes were part of long-term regulatory shifts.

An important point which Resolution Foundation note is that it is not easy to predict employers’ (or individuals’) responses to measures. Enforcement, monitoring and communication are all key factors. When the LPC made its recommendations, we noted that key features of our measures would need to be decided via consultation – the details of notice of work schedules or compensation for shift cancellations, for example. To achieve lasting change, it is essential that both employers and workers understand and feel they have a stake in reforms to address one-sided flexibility.

Read the published research reports and the LPC’s report on one-sided flexibility.

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