Tag Archives: Low Pay

The growing problem of zero hours contracts in the UK

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Chris Forde
Chris Forde is Professor of Employment Studies at CERIC.

@CERIC_LUBS

In May, Vince Cable announced a review of zero hours contracts, amidst concerns that such contracts may be ‘abusing workers at the margins of the labour market’. Under zero hours contracts, workers agree to be available as and when required, but they have no guaranteed hours or times of work.  In healthcare, hospitality, and education, such ‘on-call’ workers are increasingly commonplace, cleaning hotel rooms, waiting in restaurants, or providing care to people at home. A number of reports have highlighted the precarious nature of many zero hours contracts, characterised by low pay, few employment rights, and little opportunity for progression.

Getting a handle on the numbers engaged in zero hours contracts has proved difficult. A Resolution Foundation report, using Labour Force Survey data, puts the number of workers on zero hours contracts at 200,000, although the authors recognise that this is likely to be an underestimate.  This would certainly seem to be backed up by figures cited last week by Norman Lamb, the Care and Support Minister who stated in Parliament that in social care alone, 300,000 workers – one fifth of the workforce – were employed on zero hours contracts. Why have they have become so commonplace in some sectors, and what are the experiences of those workers at the sharp end of these contracts?

In our recent research at the Centre for Employment Relations Innovation and Change (CERIC) at the University of Leeds, Ioulia Bessa, Sian Moore, Mark Stuart and I have been able to look at the realities of zero hours contracting in the domiciliary care sector. Our study for the Low Pay Commission examined contracts, hours of work and pay for workers who provide care for clients in their own homes. We have looked at pay levels in this sector in a previous blog, but what about the prevalence of zero hours?  One of the most striking findings from our analysis of a national dataset on work and employment in social care was that zero hours contracts have become the norm for domiciliary care workers over the last few years. Between 2009 and 2012, 56% of domiciliary care workers were employed on zero hours contracts. As figure 1 below shows, in the private sector, it is rare to see a care worker on a standard employment contract: in 2012, a staggering 4 in 5 domiciliary care workers was on a zero-hours contract. Our analysis suggests that there were approximately 100,000 domiciliary care workers in total on zero hours contracts in 2012.¹

Figure 1: Proportions of Domiciliary Care Workers on zero-hours contracts, 2009-2012, National Minimum Data Set for Social Care.

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Source: Bessa, Forde, Moore and Stuart (2013) Report for Low Pay Commission

Our case studies showed that it was changes in the commissioning process and well-documented falls in ‘block contracts’ (where providers are given guaranteed numbers of hours of care under local authority contracts) that had driven the rise in zero hours contracting. As a manager from one large national home care provider put it:

‘It would be difficult to not sustain a zero hours contract because  you don’t have any guaranteed or block hour contracts from the local authority, because they’re all commissioned and framework (agreements), there’s no guarantee of business, it’s difficult to guarantee a workforce business or work’ .

Advocates of zero hours contracts point to the flexibility of such arrangements, and the benefits to both employer and worker of adaptable work schedules. To be sure, we found some evidence of workers who valued flexibility over how many hours they worked (in particular those with second jobs, students or those with other commitments). However, the problem is that zero hours contracts remove any element of continuity for workers in the hours they worked from one week to the next. One respondent who had worked as a care worker described how his ‘heart sank every Sunday night’ when he received a work schedule for the coming week from his employer, typically setting out less hours for the worker than they were expecting. Whilst these hours were often topped up by the employer with additional hours during the week, it made planning very difficult. Our case studies also highlighted how working variable hours each week also had implications for the receipt of Statutory Sick Pay, and benefits such as Working Family tax Credits.

Some have called for these contracts to be outlawed, whilst others suggest tighter regulation, and better enforcement of those rights that zero hours contract workers do have. As one commentator has noted, those on zero hour contracts do have a modest advantage over those on casual contracts, in that an employer does have an obligation to provide work to employees on fixed-term contracts over casual workers, if work is available.  The problem is that under zero hours contracts, the risks associated with work not being available are predominantly borne by the worker, .

If we are arguing that commissioning practices in social care are one of the causes of the rise in zero hours in the sector, are there better solutions? Our case studies highlighted how the practice of contracting for hours of care from suppliers (with no specified pay rates or employment conditions that suppliers must adhere to) was a barrier to improving contract arrangements of the care workforce. ‘Fair fee models’, where authorities could give a specified rate for hourly pay and for overheads (with the capacity for increases), or ‘open book’ approaches, where the local authority would pay what a service costs and then allow a certain percentage profit might lead to a reduction in the reliance by employers on zero hours arrangements to maintain margins. However, the dominance of the current commissioning model in social care would seem to suggest that such radical changes are unlikely to happen any time soon.

¹ Our analysis of zero hours in the NMDS-SC dataset in 2012 was primarily concerned with wages and hours worked, and we focused on the 42,908 zero hours contract workers who provided information on their contracted hours and additional hours. We excluded from the analysis of those workers who indicated that their contracted hours were zero, but who provided no information on actual hours worked in a given week. These involved the exclusion of 60% of cases from the dataset. Including these workers in the count of zero hours contracts would give the higher count of 100,000 reported above.

Government rhetoric is likely to turn off business and undermine a flagship policy

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Dr Jo Ingold

Everyone knows someone who has experienced, or is currently experiencing, job insecurity, unemployment or underemployment. In the past, it was largely those at the lower end of the labour market with low, or no, skills or qualifications who were most likely to find themselves without work. But in the current recession, anyone can be unemployed – whatever their skill or qualification level, whatever job or industry they’re in.

The Government repeatedly claims that they want to help people into work. They argue that their combination of tax and benefits reforms and the expansion of welfare to work programmes are the best ways to do this. They also make little secret of the faith they place in enterprise and the private sector to get the economy moving and to tackle unemployment. As Iain Duncan Smith said in a speech in Madrid in July, 2011: “Government cannot do it all. As we work hard to break welfare dependency and get young people ready for the labour market, we need businesses to give them a chance”.

There can be no doubt that employers are fundamental to the success (or failure) of welfare to work initiatives, such as the Work Programme, introduced in 2011. The Work Programme is the cornerstone of the Coalition Government’s employment policy. Central to its design is a network of mainly private providers, contracted to deliver tailored assistance to get the long-term unemployed back into work.

As the CBI has highlighted, the Work Programme can offer a range of benefits to employers looking to hire, including tailored packages which reduce recruitment costs and on-going support. Recently, here at CERIC, I’ve been researching (1) whether and why employers do or do not recruit from the Work Programme, and (2) how providers can persuade employers to give more job opportunities to the long-term unemployed. In the past year I’ve surveyed employers and interviewed providers and other key stakeholders. This research has highlighted two important barriers to persuading employers to recruit unemployed people. These are employers’ negative perceptions about unemployed people, and their portrayal in the media.

The first barrier is relatively well-known: for example, in a survey by the Institute of Leadership and Management a quarter of employers said that they were less likely to recruit people who were long-term unemployed.

Also well-known are the views put forward by some of the media about people claiming benefit. However, the Government itself is also increasingly talking about shirkers, scroungers, welfare dependency and benefits as a ‘lifestyle choice’. Government ministers present erroneous statistics about unemployment, worklessness and benefit receipt. They also focus on specific, individual and unrepresentative cases. This not only presents an extremely misleading picture. It is potentially sabotaging the delivery of a key government policy, hindering both those searching for work and those at the coalface who are actively involved in assisting them. Kayleigh Garthwaite  highlighted this recently in relation to long-term sick and disabled people.

Those who took part in my research, as well as employer organisations such as the CBI have suggested that the Government should do more to promote the benefits of the Work Programme to employers. Painting those who are unemployed, lone parents or disabled as shirkers is unlikely to address employers’ concerns about hiring people who have been out of work for a long time. On the contrary, it is far more likely to lead to the cementing of any existing perceptions that employers may have: that people on benefit lack motivation, self-discipline or that they are never going to be the most promising candidates for jobs. At a time when finding any work is difficult enough – let alone sufficient, regular work that pays the bills – this seems perverse.

The Government says that they want to move people off benefit and into work. To this end, Ministers and MPs need to be ambassadors for unemployed people. A myriad of evidence over the years makes it clear that very few people actually want to live on benefit. Most people who are unemployed want to work. One thing that is unlikely to be effective in helping them into work is portraying unemployed people as somehow ‘deficient’, reinforcing stereotypes based on prejudice, rather than evidence. This is doing unemployed people – and businesses – a severe disservice. Through its rhetoric around benefit receipt and unemployment, the Government is not only kicking people when they’re down. They’re undermining their own policy and potentially wasting large amounts of public money in the process.

Dr Jo Ingold is a Post-doctoral Research Fellow at CERIC.

Paying the price for commissioning in social care? The minimum wage and domiciliary care work in the UK

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Chris Forde
Chris Forde is Professor of Employment Studies at CERIC.

@CERIC_LUBS

When The Low Pay Commission’s annual recommendations were released a fortnight ago, most attention focused on the 12p and 5p rises in the minimum wage for adults and 18-20 year olds. As in previous years, these recommendations have attracted headlines about the level of the minimum wage, and the effects of the NMW on employment. Yet, whilst there is broad consensus over the importance of setting a floor for wage levels, the focus on a minimum wage may detract attention away from the more fundamental problem of low paid jobs in the UK economy. Why are there so many low paid jobs in sectors such as hospitality, retail, social care and personal and protective services? There is a need for a clearer understanding of how a diverse range of factors, including employer strategies, government commissioning regimes, and sectoral norms combine to institutionalise low pay in particular sectors.

In this respect, it is worth focusing in on one of the LPCs supplementary recommendations in their 2013 report. The Commission has recommended that contracts issued by public bodies which commission the provision of social care should contain a clause requiring at least the NMW to be paid.  One in 12 jobs in social care were paid at or below the minimum wage by 2011 and there has been much interest from the LPC in whether the commissioning of social care by local authorities is a contributory factor.

Within social care pay in domiciliary care has attracted most attention, and it was this sector was the focus of my report with colleagues Ioulia Bessa, Sian Moore and Mark Stuart from the Centre for Employment Relations Innovation and Change (CERIC), for the LPC this year. Almost 700,000 workers are now employed in the UK providing care for people in their homes, with the number of jobs expanding rapidly as the population ages. As commissioning of public service delivery of domiciliary social care has increased, so the number of directly employed care workers has fallen sharply. A decade ago, most domiciliary care workers were employed by local authorities, whereas now they are much more likely to be employed through one of the 6000 registered home care providers in the UK. The vast majority of publicly funded home care is provided by these private and voluntary organisations through contracts commissioned by local authorities. A recent survey found that there was increasing pressure on providers in terms of what they can cost in contracts. Local authorities may effectively pay only for workers’ ‘contact time’ with a client, rather than including any provision for ‘travel time’ between visits, which can be considerable.

Our research was able to shed light on the realities of work and pay for those in front-line domiciliary care roles. First, we analysed a unique national dataset on employment in the domiciliary care sector, the National Minimum Dataset for Social Care, gathered by Skills for Care. This dataset contains information on pay levels for domiciliary care workers, although, critically, it does not allow us to identify directly whether travel-time is included in hourly pay. Nonetheless, even without adjusting for unpaid travel time, we found that between 2008 and 2012, 1 per cent of domiciliary care workers were paid below the minimum wage, a figure which rose to 2.5 per cent in 2012.   Our case studies of five local authorities all revealed that none currently specified payment of the NMW in its contracts or actively monitored compliance, although two had undertaken research on provider pay rates as part of budget scrutiny exercises and quality assurance. One local authority representative argued that it was not their responsibility to monitor compliance amongst its providers, noting: ‘That is their business, that’s not something that we would get involved in.  It is up to them how they deliver’.

We do make it clear in our report that these percentages should be seen as a lower-bound estimate of those paid under the minimum wage, as they do not take into account the significant amount of travel time that domiciliary care workers undertake within their working day. In our case studies, commissioning documentation sometimes explicitly stated that tenderers would not receive any separate payment from local authorities for workers’ travel costs and that they should cost travel time into their tender prices.  Yet providers typically set charge rates that did not incorporate travel time between visits. With tender contracts awarded on the basis of clear price and quality criteria, Commissioners were acutely aware of the potential impact of including travel time. As one noted:  ‘….we know the impact of not paying travelling time.  However, if it were to be included, it’s probably going to make the service unaffordable for us.  It’s a dilemma.  It doesn’t sit comfortably.… In terms of finance, I can’t give you a figure because we haven’t done that piece of work.  But yes, it would be significant, it would make a significant difference to the cost of the service at a time when we’re having to make huge cuts’.

The other factor that is crucial to understanding hourly pay for the domiciliary care worker is visit length. Most homecare visits being commissioned by local authorities are for periods of 30 minutes or less. For workers this may result in their work being arranged so that they have too many visits too close together or ‘call cramming’, resulting in their having to rush their work or leave a client early to get to their next visit on time.  Clearly, there are implications for compliance with the minimum wage, if extensive travel time is sandwiched between a series of short 15 minute visits, which are only paid for contact time. Some local authorities had begun to move away from commissioning 15 minute visits, and some paid enhanced rates for shorter visits. At one local authority in a semi-rural location, there had been a consultation of the cost implications of paying for travel time. This had revealed that additional allowances, including travel time, might add as much as £2 per hour to costs for providers, and the local authority was considering changes to its commissioning practices as a result.  It also highlights how much unpaid time is borne by the domiciliary care worker as a standard, typically non-negotiable part of their job, and suggests that the numbers paid under the minimum wage will be much higher when travel time is taken into account.

To begin to tackle these issues, Local authority contracts with care providers should explicitly state that external providers pay care workers an hourly rate for all working time, including the time required to travel between visits. There should also be transparency in procurement processes and contractors should be required to state what hourly rates comprise in terms of working time and specifically whether travel time is included, and whether there are enhanced rates for short visit lengths. Only then will it begin to address the realities of travel time, visit lengths and unpaid labour that currently characterise work in domiciliary care.