However, it wasn't the false statistic that he had used that had annoyed me and made want to physically retch, even though I spotted it straight away having already done the research for this blog (yes I do research). It was the sanctimonious air he adopted while accusing the Tories of something that his own party had failed to address while in government for 13 years. However, as is often the case, I'm getting ahead of myself.
There can be very little argument: “zero hours contracts” are an exploitation of people who have very little choice about where they work and how much they get paid. They are invidious and any self-respecting political party would be doing far more than they are to end their scourge. But, despite what Ed Miliband and Chuka Umunna would have you believe, they didn’t come into being on 6th May 2010. They’ve been around for a very long time.
Of course we didn’t always know ZHC by that name. That name was coined by the Labour Party around 2012 when they decided to politicise a practice that already existed and that they already knew about and had done nothing to stop. What were they called before? Well, perhaps I had better explain.
For those of you that have been living on Mars, a ZHC means that the employee has no guaranteed number of working hours per week. However, they can’t go and work for anyone else. They have to remain available to work for their employer or risk dismissal. As you can imagine, getting credit, being able to plan one’s finances and having any sort of decent standard of living are all pretty much impossible if you have no idea how much money you will earn each week. In 2013 the following companies and organisations all used ZHCs or contracted work to companies that used them: The Co-Op (funeral parlours), The House of Lords, Boots, BUPA, The NHS, Cineworld and Centre Parcs. Around 8% of all businesses currently use zero hours contracts as a matter of course.
Some of these businesses and organisations have been shamed into changing their ways. Perhaps the current biggest users of these contracts is Sports Direct and JD Sports. In 2013 approximately 250,000 people were employed on these contracts. According to the Office of National Statsitcs (ONS) this figure is now over 697,000 (Chuka Umunna note: Not 1.5 million). According to the same source the people on these contracts average 25 hours of work a week. If the employers pays national minimum wage of £6.70 then the average income is £167.50 per week.
But as I said, this isn’t anything new. What we now call ZHCs existed as far back as 2006 and probably before that. They have also been used by temping agencies for many, many years, as Labour well knows. And I know that Labour knows because they were in power when the EU was consulting on new regulations aimed at changing some of the terms and conditions that these agencies inflicted on their employees. The worst of these was that if the agency couldn’t find you work then you didn’t get paid. In other words it was a ZHC by any other name.
For many years the relationship between agencies and their employees was somewhat vague. However, that was sorted out when it was made clear to agencies that the burden of employment fell on the agency. The place where the employee then carried out their work was an “assignment”. The employer (the agency) hired out their employees to other companies, charged an agreed hourly rate or fixed daily sum and then paid the employee a portion of the income, pocketing the rest to cover overheads and profits. Until 2011 agency employees weren’t even entitled to the national minimum wage, though most "reputable" agencies paid it in order to avoid criticism.
Enter the EU and on 1st October 2011 the Agency Workers Regulations (AWR) came into force in the UK, having been signed into British law by statutory instrument in August 2010. These regulations made the employer responsible for several new aspects of employment, including maternity pay. Another new requirement was payment for holidays. All agency employees became entitled to 28 days of paid holiday each year. Naturally the agencies didn’t want to reduce their profits by paying for any of this, so the cost was added to the fees charged for assignments, making agency employees more expensive.
The other thing that the regulations changed was the way that agency workers were paid. For a start they became legally entitled to the national minimum wage. After 12 weeks continuously working on the same assignment the employees could ask for one of two things.
The first option was that the employee could ask for "payment between assignments”. This meant that if their assignment ended the agency had to carry on paying the employee for the same amount of hours they had previously worked each week until a new assignment could be found for them. This mainly favoured seasonal workers.
The second option was that the employee could ask to go onto the same rates of pay as the permanent employees at the places where they were assigned for work. This was the entry level wage, of course, not the pay that an employee might get after a few years of service. But it would be a big step up in wages for most agency workers. This mainly favoured employees who spent a lot of their time working on a single assignment.
Some agency employees working for the MoD at Bicester, for example, have been there for years. They had previously worked for lower wages than the Civil Servants that they worked alongside, but doing the same work. They got no paid holiday and, importantly, weren't eligible to join the pension scheme. AWR ended all that except for the pension arrangements. AWR doesn't cover that - a significant omission in itself.
Clauses within the regulations prevented the “churning” of employees: withdrawing employees from assignments after 11 weeks and assigning someone new in order to avoid these payments.
Naturally this put up the fees the agency applied to assignments and made agency employees a lot more expensive. In some businesses, such as logistics and construction companies, as many as 60% of all workers might be on assignment from an agency. Many businesses decided that the cost was going to be too high and they would manage without agency employees. This meant that agencies were unable to find work for their staff and employees’ income levels fell. The law of unintended consequences strikes again!
The employees started to come off the agency registers so that they could draw unemployment benefits simply to keep some sort of income. The only reason that a spike in unemployment levels wasn’t noticed was because we were in the middle of a recession. Unemployment levels were soaring and the additional few hundred thousand unemployed people were hidden within the general increase in levels of unemployment.
Some companies continued to use agency staff, but many found a way round the legislation. The businesses that had previously used agency staff still had work they needed doing, whether they paid for agency staff or not and they needed to have a flexible way of resourcing their employment needs if they were to avoid increasing their overall payroll costs.
It didn’t take long for some bright spark of an HR Director, or perhaps a management consultant, to spot a loop hole in the law. The AWR only applies to agency employees. They don’t apply to directly employed staff. What the agencies had been doing for years the businesses could do for themselves – and perfectly legally. In fact it would actually be cheaper for many companies, because they no longer had to cover the agency overheads and profit margins. Now they would directly employ people in the same way as agencies had employed them. Some companies had already been doing it , with around 140,000 employees on ZHCs prior to 2010. They must have been opening up fresh pots of glee in which to rub their hands. They started the transition from agency staff to zero hours contracts well before the new laws came into force in 2011.
As I hinted earlier, EU legislation doesn’t just appear out of Brussels like a conjurer pulling a rabbit from a hat. There are extensive periods of consultation as the EU takes account of the views of the governments of member states. That had been taking place in the years up to 2010. The legislation was enacted in the UK by statutory instrument, which meant that MPs and the House of Lords got no chance to debate it so the flaws in the directive hadn’t been publicly exposed. However, it had all started off in the EU as early as 2002 as Draft Temporary Agency Workers Directive COD2002/0149. The Labour government in Britain had opposed this draft. If they opposed it then they must have known about it. QED.
This means that various holders of the post of Secretary of State for Work and Pensions will have known about AWR, including Andrew Smith (2002-2004), Alan Johnson (2004-2005), David Blunkett (2005), John Hutton (2005-2007), Peter Hain, a current member of the Labour front bench (2007-2008), James Purnell (2008-2009) and Yvette Cooper-Balls, the current Shadow Home Secretary (2009-2010). It would have been she who had started the process to get the AWR passed into British law, which the new Tory government then completed.
Leaving aside the law of unintended consequences, there is nothing wrong with the AWR in themselves. There is no reason why agency workers should be exploited any more than it is justified to exploit any other employee. My gripe is about how the government(s) of the day failed to identify the obvious loop holes and act to close them, thus abolishing zero hours contracts.
There are several things that may have occurred at that time. Perhaps the various Labour Secretaries of State didn’t think the issue through and work out what might happen when the regulations came into force. They may not have identified the loop hole that allows ZHCs to exist. That state of affairs isn’t unusual and we call it incompetence.
Perhaps they did understand what would happen but decided that they wouldn’t do anything about it. Again that state of affairs isn't unusual and we call that negligence.
Perhaps they did understand what would happen but decided not to do anything about it, knowing that it would be a useful stick with which to beat a Conservative government if/when Labour lost the 2010 election. We call that the cynical and heartless exploitation of underpaid workers for political gain.
In 2013 the Resolution Foundation published a paper which tracked the change in the number of people working on ZHCs between 2006 and 2012. From 2006 to 2010 the numbers varied between 125,000 and 160,000, but from 2011, when AWR became law, the numbers began to climb rapidly and we have seen from the ONS data how that trend has continued. The Resolution Foundation doesn’t make a direct link between ZHCs and AWR, but the reasons they give for their use are exactly the same as those that apply to the use of agency staff. There can be no mistaking cause and effect.
By contrast the The Daily Telegraph tracked changes in the number of daily work placements taken by agency employees between 2002 and 2014. From a peak of about 1.5 million per day in 2004/05 these nosedived to about half a million in 2009/10. No doubt the recession had a lot to do with the rapid fall. However, since then they have risen to less than 1.2 million. With the growing economy this should be much higher, but of course ZHCs have risen to fill the gap. Again the conclusions are inescapable.
A little bit of simple mathematics shows that perhaps only 150,000 to 200,000 ZHCs are actual new jobs. About 140,000 existed already and the rest were a transfer of agency employees onto the cheaper ZHCs.
So, to Ed, Yvette, et al, two questions:
- As ZHCs already existed in 2006, why did Labour not do anything about them when they were in government?
- Why did Labour not anticipate the increased use of ZHC as a consequence of AWR?
If Labour was being cynical, rather than incompetent or negligent, but by some chance clung to power after the 2010 election, they could say they had always intended to do something about ZHC and were just about to do it. That was if the public added two and two together and made the link between ZHCs and the AWR. As few of the general public are even aware of the AWR it is unlikely that the link will be made except by those who are employed by agencies or who are otherwise “in the know” and they are the least likely to speak out. The only reason I became aware of AWR was because of my dealings with employment agencies while working for the MoD at Bicester, where around 100 agency staff were working at the time the regulations came into force. By the way, the MoD still uses agency staff, adheres to the AWR and hasn't resorted to ZHCs.
I must be honest at this point and admit that the Labour government did make attempts to bring in their own agency workers regulations with the 2005 Warwick_Agreement. However, they failed to turn the agreement into an enacted law and it was allowed to wither on the vine. With three Secretary's of State that year perhaps it isn't surprising that this fell between the cracks. However, that means they had thought about the issues very seriously and it can therefore be reasonably assumed that they understood the problems of making agency employment uneconomical for businesses. The trades unions were the other signatories of the agreement, so they must also have been thinking about the issues. Why did the trades unions not hold Labour feet to the fire for this failure? You’ll have to ask them.
So what of the Tories? When they gained power they could have brought in legislation to end ZHCs. Instead they kicked the problem into the long grass by asking Business Secretary Vince Cable to conduct an inquiry and report back to Parliament. The report from that inquiry was published in 2014 but Vince Cable ruled out any new legislation. Why? Well, the report has been accused of favouring business more than the employees, so it couldn’t have formed the basis of any meaningful legislation anyway, even if there was political will to change the status quo. But there is another, more cynical reason.
Unemployment, according to government figures, has been falling steadily for the last two years. Any new legislation to end ZHCs might jeopardise or even reverse that trend. With an election coming up the Tories wouldn’t want to adversely affect their narrative of a strong economic recovery that is benefitting everyone. You only have to look at those ONS figures to understand what new legislation might have meant for the Tories. So no legislation from them in this Parliament. And in the next? We shall have to wait and see, but if you are on a ZHC I wouldn’t hold your breath waiting for change.
Cameron has apparently stated that ZHCs may not be exclusive contracts; ie an employee may hold more than one contract with different employers. Get real Dave. This is how I imagine that will work:
"Hello Sam, Charlie from Conglomerated Widgets here. We'd like you to come in for a shift tonight."
"Oh, hi Charlie. Sorry, but I'm already booked in to do a shift for Widgets Incorporated."
"Oh, too bad. See you around sometime." Click whirrrrrrr.
Note that Sam hasn't actually been sacked, but do you think Charlie will be ringing back anytime soon? No, me neither. That's the problem with ZHCs, if an employee isn't guaranteed a minimum number of hours of work then they don't have to be offered any work at all. It's a blue print for victimisation.
What of Ed Miliband’s offer to finally close the stable doors by ending ZHCs? I have no doubt that when he made that promise he meant it, but what will it achieve?
As usual any legislation would be a compromise bill as Labour seeks to appease both the trades unions, who favour the ending of ZHCs and those businesses who don’t. There would no doubt be loop holes and the law of unintended consequences would strike yet again. Some new bright spark of an HR Director or management consultant would surely identify the loop holes and the workers themselves would be no better off. The best brains aren’t in politics or the civil service, they’re in industry and commerce, where the best money is to be made. It’s why tax avoiders are always one step ahead of HMRC and the same applies with employment legislation.
Any legislation would no doubt set a minimum number of working hours that an employee could be contracted for, or a minimum wage requirement. That’s where the key to fresh exploitation would be found. The employer would use fewer employees but manage their shifts better to make sure that each employee got enough working hours each week, but not a single second more. Employees might be brought in for a just two or three hours at a time. The same would apply to any requirement for a minimum level of earnings. Modern technology is already used to keep track of employees’ hours in order to comply with Working Time Directives, this would just be an additional application of that technology.
It would be quite possible that the average earnings I referred to earlier might actually fall, rather than rise. You can be sure that these employees would also carry the burden for working the most unsocial hours, perhaps being assigned to short shifts during the night when there are no buses running. Some employees might be marginally better off, but those that weren’t retained under whatever new contracts came into being would, of course, be worse off. There might be a few winners, but probably far more losers.
How many of those 697,000 employees on ZHCs would remain in employment if any new law was to be introduced? New legislation would undoubtedly increase the level of unemployment. Is Ed Miliband going to risk that, having just inherited falling unemployment figures? I don’t think so and even if he did an opposition Tory party would leap on any increase as evidence of Labour incompetence. That’s politics; it’s a dirty game. So the subject would be quietly allowed to fade into history, apart from a few campaigners who would struggle to keep the flag flying.
So if fresh legislation is unlikely or would be ineffective, how will the lot of employees on ZHCs be improved? The short answer is that it won’t be. The solution, as usual, comes back down to individuals. The best thing anyone can do is make sure that they’re not in a position where ZHCs are their only employment option. It's the same old story. Tell your kids, tell your grand kids.
The only way out of poverty is skills, knowledge and experience coupled to a willingness to work. People on ZHCs are perfectly willing to work, but they don’t have the skills, knowledge and experience to get work on more favourable employment terms. Change that and you’ll will start to reduce the levels of employee exploitation seen in our country. People who have genuine choices are much harder to exploit. Labour knows this. The Tories know this. So why are neither doing enough to remove the root cause of exploitation? Answers on a post card to Ed Miliband and David Cameron.
Now for a short quiz, or perhaps I should call it a quizette. There may or may not be a prize but you can send in your answer to the e-mail address detailed on this website: What do Alexander Graham Bell and the Labour Party have in common? Part of the answer lies in one of my previous blogs, and viewers of repeats of QI on Dave may know the other part of the answer.
Also next week another book review - this time a work of poetry.