Zero Hours Contracts: response to P.100/2013 as amended.

STATES OF JERSEY

ZERO HOURS CONTRACTS: RESPONSE TO P.100/2013 AS AMENDED

Presented to the States on 6th May 2015 by the Minister for Social Security

STATES GREFFE

2015   Price code: C  R.52

REPORT TO STATES – ZERO-HOURS CONTRACTS

1. Executive summary
2. Introduction
3. What is a zero-hours contract?
4. Appropriate and inappropriate use of zero-hours contracts
5. What statutory rights apply to zero-hours contracts?
6. UK Position
7. Zero-Hours Analysis – Manpower & Contributions returns
8. Zero-Hours Analysis – Jersey Annual Social Survey 2014

_________________________________________________________

1 Executive summary

1. This report is in response to parts (a) and (b) of P.100/2013 as amended.
2. The States is not asked to make any decisions on the basis of this report.
3. The Social Security Department does not intend to bring forward for approval any draft legislation relating to zero-hours contracts at this time.
4. A new zero-hours contracts guide' has been prepared in conjunction with the Jersey Advisory and Conciliation Service (JACS) to provide clarity about the appropriate use of zero-hours contracts and the rights of individuals who are employed under such contracts.

2 Introduction

1. In September 2013, the States adopted the Proposition Zero-hours contracts: Regulation', as amended[1]. The effect of the Proposition is –

"to request the Minister for Social Security to –

1. investigate the extent to which zero-hours contracts are used across the various sectors of the economy;
2. examine the impact of these contracts on employers and employees;
3. subject to the findings and conclusions of the investigations conducted in accordance with paragraphs (a) and (b), and subject to the outcome of consultation with stakeholders, to bring forward for approval such draft legislation as is deemed necessary to restrict any proven misuse of zero-hours contracts."

2. The report that accompanied the Minister's amendment to the Proposition commented that "The States of Jersey Statistics Unit intends to investigate issues relating to zero-hours contracts through its suite of business and household surveys. Such work will involve surveying businesses to estimate the overall scale and sectoral distribution of the use of zero-hours contracts in Jersey, and will also aim to measure the proportion of workers engaged on such contracts who were actually employed within a given time period as well

as the average numbers of hours worked. It is anticipated that a complementary perspective will be gained by also surveying households. Such an approach will aim to examine subjective and practical issues for individuals who are engaged on zero-hours contracts."

3. The report explained that the data was expected to be available by the end of 2014 and that the results would form the basis for further consideration as to what, if any, action might be necessary to restrict any proven misuse of zero- hours contracts. Data from businesses (from the manpower survey) and data about zero-hours contract workers (from the Jersey Annual Social Survey) is available and the Minister is pleased to present the findings in sections 6 and

7.

3 What is a zero-hours contract?

1. Zero-hours contracts can be described as arrangements where a person agrees to be available for work, but no particular number of hours or times of work are guaranteed by the employer and the employee is paid only for work carried out. There is usually no obligation on the part of the employer to offer work andno obligation on the employee to accept.
2. Zero-hours contract' is not a legal term and a wide range of different types of working arrangements fall under the term. The types of typical working relationship are many and varied and may include office-holders, fixed-term contractors, part-timers, bank staff, employment agency staff, interns and casual labour.
3. Problems sometimes arise where an employer inappropriately uses a zero- hours contract for work that is regular, perhaps because the employer believes it protects them from claims under the Employment (Jersey) Law 2003, or the working arrangements may have changed over time to become more regular. However, where an employer-employee relationship has been created, which is likely where there is a mutual expectation that work will be offered by the employer and accepted by the employee, all of the employment rights will potentially apply. While it is for the Employment Tribunal to determine the facts in any complaint, it is clear that employers must be careful that they use zero-hours contracts appropriately.

4 Appropriate and inappropriate use of zero-hours contracts

1. The commitment of the States to review the extent of the use of zero-hours contracts in Jersey is based on the premise that employers in Jersey are misusing these contracts to their own advantage – "with no holiday or sick pay often, and any waiting time spent at home rather than at work, firms need only pay for the time workers actually spend on the job"[1]. There is the suggestion that regulation' would address the poor practice amongst some employers and lack of awareness of employment rights amongst employees.

2. There are many situations in which a zero-hours contract may be appropriate;

• an employer needs a bank of casual workers who are available to be called upon to meet workload peaks (e.g. seasonal work) or to cover for permanent staff who are sick or on holiday (e.g. health services, teaching)
• an employer needs a flexible workforce that can respond to fluctuating demand quickly and cost-effectively (e.g. catering)
• an employment agency supplies temporary staff to other organisations but there is no guarantee that work will be available
• People with professional skills are willing to be available on an ad hoc basis, depending on their own schedule (e.g. retired people)
• Individuals require more scope than other employees to dictate their own schedule and balance their work commitments around their personal lives (e.g. students, people with caring responsibilities).

3. It is important to ensure that employers are aware of the alternatives to zero- hours contracts, such as variable hours contracts, flexible hours contracts and minimum hours contracts, for example, where the amount of work available is regular but the hours vary from week to week, and where the employer wants to exercise a degree of control in the hours that employees must be available for work.
4. The Minister, in conjunction with JACS, has ensured that information is available to Jersey employers to help them use appropriate contracts and reverse anypoor practice. Clarity about the appropriate use of zero-hours contracts and the rights of those employed under such contracts is provided in a new JACS guide which sets out[1] –

• an explanation of the term zero-hours contract' and the principles around how such contracts work
• a flowchart to assist a business in deciding whether a zero-hours contract is the right type of contract for the work they have available
• a template for written terms and conditions that would apply when zero- hours contract work is appropriate.

5 What statutory rights apply to zero-hours contracts?

1. A person who meets the definition of employee' is entitled to protection under the Employment Law including rest days and paid annual leave, the minimum wage, pay slips, redundancy payand all of the family friendly rights that will come into force on 1 September 2015.
2. In the UK, the extent of a person's employment rights depends on whether they are defined asan employee' or a worker'. Workers have fewer employment rights than employees; they have some basic statutory protection which recognises that they are in a subordinate position to the person for whom they work, but are not entitled to the full range of employment rights.

For example, in the UK, both employees and workers are entitled to receive the minimum wage, paid annual leave and weekly rest breaks, however, employees are entitled to written terms of employment, pay slips and protection against unfair dismissal, but workers are not.

3. Zero-hours contract staff in the UK are often treated as workers, rather than employees and so engaging staff on zero-hours contracts maybe attractive to employers in the UK, for example, to reduce staff costs. This distinction does not exist in Jersey because the Employment Law definition of employee' encompasses both the UK definitions of worker and employee and all of the employment rights potentially apply. Some employers in Jersey may notbe clear on the implications of this difference relating to employment status, however a JACS guide explains the difference between employees and independent contractors under the Employment Law and clarifies when an individual is likely to be regarded asan employee[1].
4. Jersey's definition of employee' is as wide as the UK definition of worker; a person is employed by another person "if the first person works for the second person under a contract of service or apprenticeship with the second person"or"if the first person enters into any other contract with the second person under which – (a) the first person undertakes to do, or to perform personally, work or services for the second person; and (b) the status of the second person is not that of a client or customer of any profession or trade or business undertaking that is carried on by the first person."[2]

6 UK position

1. At the time of the States commitment to investigate the extent of the use of zero-hours contracts in Jersey, the UK Government was undertaking an information-gathering exercise about zero-hours contracts, including consultation with stakeholders.
2. In September 2013, the UK Government announced that it would consult on zero-hours contracts to tackle any abuses in the system, particularly around exclusivity clauses, which means the employer does not guarantee work but requires that the zero-hours employee does not work elsewhere. That consultation identified exclusivity clauses as being of concern and the Government decided to consult further about banning exclusivity clauses in contracts that provide no guaranteed working hours.
3. By comparison, according to the Jersey Annual Social Survey (see page 11) only 2 percent of zero-hours contract staff in Jersey said that not being allowed to work for another employer whilst on zero-hours contract'' was a significant problem for them.
4. The Small Business, Enterprise and Employment Bill (which received Royal Assent on26 March 2015) amends the Employment Rights Act 1996 to

render exclusivity clauses unenforceable and includes regulation-making powers to introduce a mechanism to penalise employers for including such clauses and to tackle avoidance of the ban.

5. The Bill defines a zero-hours contract as a "contract under which –

1. the undertaking to do or perform work or services is an undertaking to do so conditionally on the employer making work or services available to the worker, and
2. there  is  no  certainty that  any  such work or  services  will  be  made available to the worker."

6. As well as banning exclusivity clauses, the UK Government announced two other plans as result of the extensive consultation with stakeholders; developing an industry lead code of practice on the fair use of zero-hours contracts and reviewing existing guidance to improve the information available to employers and employees.
7. The UK's Office for National Statistics (ONS) has estimated from a survey of businesses that the number of people who worked under a zero-hours contract in August 2014 was 1.8 million[1] - which represents around 6% of people in employment. ONS data from the Labour Force Survey (which collects information from workers rather than employers) suggests that 697,000 people were on zero-hours contracts as their main employment in the fourth quarter of 2014 – which represents 2.3% of people in employment.
8. The ONS business survey also shows that zero-hours contracts were most commonly used among employers in the accommodation and food services sector (53% of employers in this sector), in education (27% of employers in this sector) and health and social work (19% of employers in this sector).
9. Data on zero-hours contracts in the UK varies depending on the exact parameters of the question being asked.

7 Zero-Hours Analysis – Manpower & Contributions returns

1. In order to investigate the extent to which zero-hours contracts are used across the various sectors of the Jersey economy, data from the manpower and contribution returns has been analysed.
2. These figures are based on the first published report on manpower and contributions returns. The figures were not seasonally adjusted.
3. This report has required extensive time and resources to produce.

4. As of June 2014, there were 5,861 zero-hours jobs in total based on the manpower return compared to the recently published labour market numbers (5,990[1] in December 2014) and the manpower return.[2]

2. The number of people with zero-hours jobs (5,522)

1. Of the 5,861 zero-hours jobs, 5,522 people had at least one zero-hours contract. This represents 10% of the economically active population (55,039) asper the Census 2011.
2. Of the 5,522 people with at least one zero-hours contract, 313 people had two or more zero hours jobs (6%) and 5,209 (94%) had either no other job or another job that was not a zero-hours contract.

Number of Zero-Hours Contract  People  %

Total  5,522

Table 1: people with at least one zero-hours contract  

3. The following table breaks down the 5,522 people with at least one zero-hours contract by age and gender:

Age (years)  Male  Female  Total  %

15-19  267  290  557  10%

25% 20-24  442  379  821  14%

25-29  369  315  684  12%

71% 4%

60-64  102  142  244  4% 65+  114  114  228  4% Total  2,774  2,748  5,522

% 50%  50%

Table 2: people with zero-hours contract by age and gender

4. 29% of people with a zero-hours contract are under 25 years of age or over 65 years of age.
5. The following table breaks down the 5,522 people with at least one zero-hours contract by nationality:

Nationality of People with Zero-Hours Contracts

3%

2% Jersey / British Isles

6%

Portugal / Maderia 13% Poland

Ireland (Republic)

EU country

17% 59% Elsewhere in the world

Figure 1: nationality of people with at least one zero-hours contract

6. Of the 5,522 people with at least one zero-hours contract, 59% are Jersey / British Isles individuals.
7. The following is an excerpt from the 2011 Census regarding working age adults by place of birth:

Working Age Population by place of birth

4% Jersey / British Isles 2%

5%

Portugal / Maderia

5%

Poland

11% Ireland (Republic)

EU Country

73% Elsewhere in the world

Figure 2: place of birth of working age people, Census 2011

8. In comparison to the Census 2011, EU workers with zero-hours contracts are over-represented in the analysis and those with British nationality are under- represented in the analysis.

3. The number of people with a zero-hours jobs as their main job (3,998)

1. Of the 5,522 people with at least one zero-hours contract, 3,998 people had a zero-hours contract as their main job. This represents 7.3% of the economically active population (55,039) as per Census 2011.
2. The latest estimate of the number of people who are employed on zero-hours contracts in their main employment, from the Labour Force Survey (LFS) in the United Kingdom, which is a survey of individuals in households, is 697,000 for October to December 2014, representing 2.3% of people in employment.[1]
3. The following table breaks down the 3,998 people with a zero-hours contract job as their main job by age and gender:

Age (years)  Male  Female  Total  %

15-19  237  241  478  12%

28% 20-24  372  282  654  16%

25-29  282  211  493  12%

66% 5%

60-64  83  110  193  5% 65+  108  106  214  5% Total  2,109  1,889  3,998

% 53%  47%

Table 3: people with zero-hours contract as main job by age and gender

4. There are slightly more people with a zero-hours contract who are under 25 years of age or over 65 years of age than in the population generally asper the Census 2011 (32%).
5. More than half (53%) of people with a zero-hours contract as their main job are male.
6. In comparison there are more men with a zero-hours contract as their main job than in the population generally asper the Census 2011 (50%).

7. The following table breaks down the 3,998 people with a zero-hours contract as their main job by nationality:

Nationality of Zero-Hours Contracts

2% 5% 2% Jersey / British Isles

Portugal / Maderia

16% Poland

Ireland (Republic)

EU country

13%

62% Elsewhere in the world Figure 3: Nationality of people with zero-hours contract as main job

8. Of the 3,998 people with a zero-hours contract as their main job, 62% are Jersey / British Isles individuals.
9. The 3,998 people with a zero-hours contract as their main job work in the following industries:

Total

Total number of  % of zero hours

number

Industry  people with zero- contracts as

of zero-

hours as main job  main job

hour jobs

Agriculture and fishing  562  585 96% Computer and related activities  22  31 73% Construction and quarrying  485  603 80% Education, health and other services  594  1000 59% Electricity gas and water supply  15  17 87% Financial and legal activities  56  76 74% Hotels, restaurants & bars  522  913 57% Manufacturing  76  106 72% Public  336  525 64% Real estate and other business

activities  856  63%

1365

Transport, storage and

communication  188 73%

137

Wholesale and retail trades  337  452 75% Total / average  3,998  5,861  68%

Table 4: industry worked in by those with a zero-hours contract as their main job

10. There are four industries in which over 500 people have zero-hours contracts as their main job.
11. The average proportion of people on zero hours contracts as their main job is 68%. This statistic varies considerably between sectors, e.g., those working on a zero-hours contract in agriculture and fishing almost always have the zero-hour contract as their main job, whereas for over 40% of employees in hotels, restaurants and bars, the zero-hours contract is not their main job.
12. The analysis was able to fully match 3,107 (78%) of the 3,998 people with a zero-hours contract as their main job to data held by the Social Security Department.[1] The following shows the four industries where over 500 people have zero-hours contracts as their main job (table 4) against matched data.

Matched

Annual  Matched  Annual  Annual

and less

Average  and on  Average  Average Industry  Matched  than 5

Earnings  Income  Earnings  Earnings

years

£'000  Support  £'000  £'000

residency

Agriculture and

549  £19,000  ~  £13,000  263  £18,000 fishing

Education, health

and other  414  £13,000  50  £11,000  52  £13,000 services

Hotels,

restaurants &  375  £12,000  31  £9,000  190  £13,000 bars

Real estate and

other business  669  £19,000  62  £12,000  106  £16,000 activities

Total  /  Average

3,107  £17,000  263  £12,000  731  £16,000 (all industries)

Table 5: people with a zero-hours contract as their main job by income support and contribution data. (~ represents less than 10 people).

13. The estimated annualised average earnings for sectors varies considerably, e.g., average earnings for workers with zero-hours contracts as their main job in real estate and other business activities is estimated to be well above the average earnings for workers with zero-hours contracts as their main job in the hotels, restaurants and bars sector.

8  Zero-Hours Analysis – Jersey Annual Social Survey (JASS) 2014

1. To examine the impact of these contracts on employers and employees, a set of questions was included in the 2014 JASS.
2. Around three-quarters (76%) of workers on zero-hours contracts reported being either very' or fairly' satisfied with the type of contract, identifying the flexibility asone of the main benefits. Lack of employment benefits and difficulties arranging a mortgage or loan were a significant problem for around one in six of those on zero-hours contracts.
3. Those currently working for an employer were asked whether they were on a zero-hours' contract of employment. This was defined as an employment contract under which the employee is not guaranteed work and is paid only for work carried out'.
4. In terms of occupation, almost half (45%) of those on zero-hours contracts worked in routine or manual type roles (routine occupations include jobs such as cleaner, labourer, waiter), another quarter (24%) worked in professional occupations (which generally require a professional qualification, such as accountant, teacher or nurse) and a fifth (19%) worked in technical or craft occupations (which includes mechanics, electricians and plumbers).

2. Satisfaction with zero-hours contracts

1. Those working on zero-hours contracts were asked how satisfied they were being on such a contract.
2. Figure 4 shows that three-quarters (76%) reported being either very' or fairly' satisfied with being on this type of contract. One in ten (11%) reported being not at all' satisfied.

Very satistifed

Fairly satisfied 35% 41% 13% 11%

Not very satisfied Not at all satisfied

Figure 4: "How satisfied are you with being on a zero-hours contract?"

3. Advantages of zero-hours contracts

1. People working on zero-hours contracts were asked about potential advantages of being on this type of contract.
2. Three-quarters of people on zero-hours contracts identified that the flexibility in hours was relevant for them. A quarter of those on such contracts reported that they just wanted occasional hours', and one in eight (13%) liked the flexibility to be able to turn down work at short notice (see Table 6).
3. In contrast, one in five (21%) zero-hours contract staff reported not gaining any advantages from being on a zero-hours contract.

Percent  of  those  on zero-hours' contracts

I like the flexibility in hours as it suits my circumstances  74 I just want occasional hours  28 I like to be able to turn down work at short notice  13 None of the above – I don't gain any advantage from

21 being on a zero-hours contract

Table  6:  "Which,  if  any,  of  the  following  advantages  do  you  gain  from  being  on  a  zero-hours contract?" (Respondents were able to tick more than one option)

4. Disadvantages of zero-hours contracts

1. People working on zero-hours contracts were asked about potential problems arising from these contracts. A number of potential issues with being on a zero-hours contract were listed, and respondents were asked to identify which, if any, were slight or significant problems for them. Table 7 provides the full results. Around half of zero-hours contract staff said that arranging childcare', obtaining a mortgage or loan', not being allowed to work for another employer' and receiving a lower rate of pay than non-zero hours colleagues doing the same job' were not applicable for them.

Not a  A slight  A significant Not

problem  problem  problem for applicable

for me  for me  me

Arranging childcare  53  27  15  4 Planning time off for holidays  9  78  8  5 Obtaining a mortgage or loan  51  30  2  17 Not being allowed to work for

another employer whilst on  51  30  17  2 zero-hours contract  

Less employment benefits  

18  36  32  14 (such as pension, sick pay)  

Lower rate of pay than  colleagues not on zero-hour  51  39  7  4 contracts who do same job

Table 7: "Are any of these a problem for you, as a direct result of being on a zero-hours contract?" Percent of respondents on zero hours' contracts

2. The most common issue identified as being a problem was having less employment benefits such as pension, sick pay', as nearly half (46%) reported this as being either a slight or significant problem for them. Planning time off for holidays' and having a lower rate of pay than colleagues noton zero- hours contracts but who do the same job' were identified as a problem by just over one in ten of respondents on zero-hours contracts (13% and 11% respectively). The other listed issues, namely arranging childcare' and not being allowed to work for another employer', were considered a slight or significant problem for around one in five people on zero-hours contracts (19%).