Question for Short Debate
To ask Her Majesty’s Government, in the light of the increased use of zero-hours employment contracts nationally and regionally, what assessment they have made of the effects of such contracts on an individual’s chances of gaining full-time salaried employment, and on specific sectors, both public and private, of the UK economy.
My Lords, I welcome the opportunity to raise the subject of zero-hours contracts this evening. I welcome, too, the fact that a short debate such as this has attracted an excellent list of speakers and I thank noble Lords, and my noble friends in particular, for putting their names down to speak. I look forward very much to their contributions on this subject.
I applied for this debate before the European referendum result was known. As a lifelong supporter of the European Union, I was utterly dismayed at the outcome. In terms of this debate, I know from my experience of the EU and the EEC before it, what a good record the EU has on employment rights. I am concerned that leaving the European Union will undermine rights at work for British people. We must do whatever we can to prevent that happening.
Whether inside or outside the European Union, we have a responsibility to see that being in employment and being willing to work rewards people and does not plunge them into insecurity and stress. Unfortunately, in many cases the increased use of zero-hours contracts in employment contributes greatly to insecurity and stress among some of the poorest-paid employees in a number of sectors of our economy.
The trigger for my tabling this Question for Short Debate was not, however, the statistics about the growth in zero-hours contracts, worrying though that is. Indeed, the statistics are somewhat unsatisfactory for a number of reasons. The trigger was the experience of a young friend of mine in the north-east of England who, for a number of years now, has struggled to find any employment other than that on zero-hours contracts. Nothing else has been offered to him. My friend even finds the name “zero-hours contracts” ironic since the employers with whom he has worked have never given him a proper contract and in no case has he ever been given, despite occasional encouraging words, any guarantee that a permanent contract might follow, even when a satisfactory probation period has been served. The stress he experienced from never knowing whether he was going to be working or not was enormous. Being subject to such variable and uncertain employment conditions meant that he could never plan ahead and, of course, he was never anywhere near getting on the housing ladder. Furthermore, because his benefits would be cut when he found employment but work was not always offered, he found that he then had to reapply for benefit—a process that takes time—and that the only way he could then survive was by taking out loans, which in turn, unsurprisingly, led to considerable indebtedness.
The exploitative behaviour by some employers using these contracts is simply unacceptable and has to be stopped. Similar concerns were expressed in a House of Commons debate last year by one of the Minister’s honourable friends, Richard Bacon, the Member for South Norfolk. One of the people he met described how his son travelled to Norwich each day to work in a retail outlet. When he got there at 9 am he was told to go and sit in a store-room at the back. Later, if it got busy, he would be called out on to the shop floor, for which he would be paid. He would then be ordered back to the store-room to wait for his possible next period of work. I understand that that behaviour is illegal and I hope that it has been stopped but, none the less, this example was cited. The union USDAW has done a great deal of work in compiling deeply worrying examples of people who have been exploited in such ways.
I concede—I am probably anticipating the Minister’s comments on this—that for certain people zero-hours contracts can work; for example, students who perhaps want to work for only a few hours each week and, if that work is not offered, have financial support to survive. Similarly, one or other parent in a supportive family framework might find such contracts work for them. They can give them the flexibility that they want as well as giving employers flexibility. However, for people wanting permanent work and who cannot rely on financial support from partners or families when no work is available, the situation is often dire.
I mentioned that the statistics on zero-hours contracts need to be improved and deepened. I shall expand briefly. In a written reply to me, the noble Baroness, Lady Neville-Rolfe, said that the Government had not made their own assessment of the proportion of people on zero-hours contracts who are seeking full-time guaranteed paid employment. She none the less quoted figures which suggested that 60% or so of those on such contracts were content and not looking for permanent employment. Aside that leaving up to 40% who are not content, the figures themselves come from limited surveys of employees under the Labour Force Survey or, again, limited research commissioned by the Office for National Statistics. There is little direct information from employers on how much use they are making of zero-hours contracts and in what circumstances they are used. It is vital for us to be able to get such information. I urge the Government to do their own studies and research so that a fuller picture is obtained across the country. I notice, from the excellent brief provided for us by the House of Lords Library, that the Work Foundation agrees with this in favouring,
“a more systematic approach which would get the best possible picture of the incidence and drivers of zero hours contracts from all currently available information sources”.
The Government should also look at this issue in the different regions of the country. There is currently no accurate regional breakdown. Naturally, as a north-easterner, I am concerned that there seems to be a lot of use of zero-hours contracts in our region. Even before these contracts began to be used on this scale, our region was one in which low pay was all too prevalent. The Government should also look at particular sectors of the economy. Again the noble Baroness, Lady Neville-Rolfe, in answer to an Oral Question—and, I think, to a supplementary from the noble Lord, Lord Stoneham of Droxford, who is to speak later—said that she did not have a breakdown between public and private sectors regarding the use of these contracts. Does the Minister now have this information, and if not, are there plans to obtain it?
I would also like the Government to look at particular sectors. First, in the security industry, I know of examples where zero-hours contracts are given to people who very much want permanent employment, which never materialises. Secondly, and very importantly, there is the domiciliary care industry. The issue with the care industry is twofold: there is the exploitation of care workers on zero-hours contracts but also the effects of this on the client—the person being cared for—because of the lack of continuity of care. They are not able to get to know the carer and are subject to the stress, in a vulnerable situation, of coping with many different carers within a short period.
In the earlier debate in the House of Commons, the Minister was urged to set up a working group to look at these issues. Was this set up, and if not, what other initiative was taken? What protection is being given to whistleblowers who expose exploitation, and as also mentioned in the earlier debate, will there be a central and trustworthy contact point for whistleblowers, so that the information can be collected?
In this House, the noble Baroness, Lady Neville-Rolfe, said that the Government would bring in a route of redress against employers who ignore the ban on exclusivity. I fully concede that the Government took that important step, which I welcome, but has that route of redress now been established? I would also like the Government to consider urgently a requirement for employers to disclose how much use they make of zero-hours contracts and how long individuals who are seeking permanent employment end up on such contracts. As the contracts become more widespread and long-lasting, this is an entirely legitimate concern.
In looking forward to other contributions to this debate, I urge on the Government the importance both of investigating how much exploitation is taking place and of then taking action to stop it and prevent it recurring in the future.
My Lords, I thank my noble friend Lady Quin for bringing this issue of zero-hours contracts once again to the attention of the House. The increasing use of these contracts is rather symptomatic of some wider trends whereby employers tend to shift risk away from themselves and on to the shoulders of their workers. Other symptoms include the rise and rise of agency work and of self-employment, some of it bogus. In different fields, the flight from final salary pension schemes and the increased reliance on publicly and individually funded training schemes point in the same direction in terms of this transfer of risk. I am not speaking of all employers of course, but the better ones are being undermined by the worse ones in this area. More and more of our citizens are working under contracts which are too often, in the words of Thomas Hobbes, “nasty, brutish and short”.
The even deeper truth is that labour is coming off second best in the battle with globalised capital. Our share—the workers’ share—of national income has retreated, except of course for those at the very top of many of our big companies. There are profound consequences in all this. Topically, one of them was the revolt last Thursday against the status quo, including the EU, in some of the old industrial areas of this country. We saw and were reminded that whole towns have lost their raison d’être, as staple industries disappear to be replaced by jobs at lower rates on wobbly contracts. Migrants proved to be a convenient scapegoat for the dissatisfaction that has been bred because of these factors in these areas.
Globalisation is not working for as many people as it should. Big business, especially since 2008, has been rather bad political news, with stories about widespread tax evasion, excessive directors’ pay, insecure contracts and broken pension promises. These have taken a heavy toll on the reputation of business and of our current model. We can point to statistics about how global markets stimulate growth and prosperity, but these are abstract to those on insecure, low-paid contracts and do not dissuade them from pouring into the polling booths with the nationalists and nostalgics of last Thursday, who turned out in force to register their dissatisfaction with the status quo.
I fear that those who voted that way have self-harmed, but many will tell you, “What the hell, I have nothing to lose”. In 2008, politics bailed out business; now it must confront the excesses of our system. In addition to the national living wage and the apprenticeship levy, we need a nationwide effort to promote recruitment and training so that local labour gets a chance at the jobs that are available. We need the minimum rules on zero-hours contracts and casual working to which my noble friend Lady Quin pointed. But more than that, we need a better power balance in the workplace.
In the 1920s, Stanley Baldwin—an unlikely crusader—worried about the excesses of employer power and, as an answer to it, resolved to encourage nationwide collective bargaining. His action led to a national system of negotiations which commanded international admiration and which, along with progressive taxation and the welfare state, made our society fairer and more equal. A similar crusade is needed now, to tackle inequality and put the issue at the heart of our nation’s future. Collective bargaining, information for workers, consultation with them and even representation in the boardrooms are all part of that. These can be key factors in bringing fairness and equality back to the centre of British life.
My Lords, I, too, thank my noble friend Lady Quin for getting this short debate. Three years ago, the issue of zero-hours contracts scandalised many people who had no idea that such excesses were expected of very vulnerable people in no position to look after themselves better. After that, because the coalition Government came out and said they were conducting some survey and were going to move against them, people thought the issue had been solved. It has not, but has grown since then by at least a third: well over a million workers are now covered by them.
We could conduct this debate through the superficial observation that some people like zero-hours contracts—they do at certain times in their life, in certain circumstances—but the mass of people, predominantly women, have zero-hours contracts because they have no other option. On the Order Paper today, three of the four Questions for the Government all deal, in one way or another, with topics related to deprivation. A whole raft of our population today is isolated and alienated from the mainstream of society, and it is no wonder that many of them voted last week in the way that they did.
This is an area which has to be dealt with. It boxes people in: if they are working for an employer who will not guarantee hours, they cannot arrange childcare—they cannot afford it—arrange to go and get training for a job or arrange to look for another job. It boxes them in and closes down any potential opportunity that they might have. As I say, that affects substantially women. Will the Minister address this issue and try to give us some indication of what the Government are doing to inspect and keep a check on the amount of zero-hours contracts and where they are operating? Are the changes that the coalition Government made being honoured and carried through?
The way our state benefits are structured means that often a worker has to decide whether they are going to take a zero-hours contract or remain on benefits. That is unfair, to them and to their family, and does not allow them as an individual to improve their status: they have no hope and no anticipation of life improving in the future.
Some employers say, “Well, actually, if you survey our zero-hours employees”—well, they are not employees, are they?—“that is, the zero-hours people that we use, when we want to, when we need to, you will find a lot of them are satisfied”. In the words of the famous Mandy Rice-Davies statement, “Well they would, wouldn’t they?”. If I did not have a job and was dependent on an employer to give me whatever mean hours they could, do you think I would go out and complain? It might mean that, actually, the little bit of work that I get would soon go.
This is an important issue. It is very regrettable that, this evening, the only government spokesperson is in fact the Minister. There is no one else speaking on this issue other than the right reverend Prelate and Members on the Labour Benches. I hope that will be noted. I would welcome the Minister giving us what assurance he can as regards to steps that the Government will take on what, actually, is still a scandal in this country.
My Lords, I, too, thank the noble Baroness, Lady Quin, for introducing this important event. It does feel lonely over here, and I hope you will not think that I am the Opposition.
I have become interested in this issue in part because of my work on modern slavery. I name that, alongside this issue, because we are in a perfect storm that is making slavery and zero-hours contracts increasing phenomena in our society. We have heard about this perfect storm: this tightness in margins and the shifting of risk; the desire for flexibility; the fact that people are so mobile they do not develop a strong relationship with any employer anyway; and the fact that, as the noble Lord, Lord Monks, and the noble Baroness, Lady Dean, said, economic inequality is increasing so much that people are desperate for work. Then migration, and especially illegal migration, adds another degree of desperation. There is a market to be exploited, both through slavery and through the unscrupulous use of zero-hours contracts, although we know these do suit some people.
We are talking about extremely vulnerable people, and I want to ask two questions about how we reach out to those under the kind of pressures articulated by the noble Baroness, Lady Dean—people who do not have enough security to get a mortgage or pay rent, and whose whole lifestyle is therefore vulnerable. One area that I would like to invite the Minister to comment on is the relationship between the employer and those on zero-hour contracts in terms of the quality of care in the workplace. Many of my colleagues on the Benches opposite are great experts on the role of trade unions; in my own experience, from where I work in Derby, trade unions play an enormously creative part in helping people at work relate to the employment context and to the power of the employer, for good relationships. I think there is a question of how this traditional heritage can be made significant to help the most vulnerable people—to the person who was sent out to the back of the factory. What kind of care is there for that person, and what is the role of the unions as well as the employers?
Secondly, I would briefly ask the Minister to comment on the role of training institutions in trying to shift people on. I have done some research where I work: Derby College, our local college, had a scheme from 2012 to 2015 to help people who are unemployed to learn skills. It was based on European social funding, and was in partnership with employers such as our local hospital, East Midlands Airport and supermarkets. That scheme enabled a significant number of people to move on from zero-hours contract life into secure employment, by giving them skills and confidence and building relationships with employers. Out of 4,200 unemployed people who started under that scheme, 80% got accredited qualifications and 30% did progress into secure employment. That scheme finished in 2015, and they are still seeking further funding for a similar effort.
So, my two questions to the Minister are, first, about the quality of pastoral care in the workplace and the role and heritage of unions, working with employers, for these most vulnerable people and, secondly, about adequate funding for training institutions such as Derby College. Such institutions have a track record of relating to vulnerable people who are trapped, and trying to give them accredited skills, while also building relationships with employers, in order to put these people over the mark, away from zero-hours contracts and into proper employment.
My Lords, my thanks to my noble friend Lady Quin for introducing this topic, and very adequately describing the misery that it can, and does, cause. She spoke of the north-east, but it is a nationwide problem. The other week, we saw before the Select Committee in the other place a major entrepreneur in our area, who was trying to defend completely indefensible practices. The fact that he has also been responsible for the sad decline of a once-great football club adds to the pain, I think, that they must feel in that region.
In a sense, zero-hours contracts are a contradiction in terms. A contract of employment means that the employee provides the labour, and the employer provides the work, and there is a sum exchanged for that. If the employer has no responsibility for providing work, then there is no contract, there is no mutuality.
I want to put it in a rather wider context, like my noble friend Lord Monks, and relate it to some of the events of the past week. This is but one symptom of what is going on in the rough end of the labour market. It applies particularly in areas such as retail, catering and construction, and, of course, agriculture and food. The old form of labour is changing—of permanent contracts; of understanding between employer and employee, with some rights negotiated by trade unions, or if not, at least reflecting the level and structure of permanent employment. There are many areas of our economy where that no longer applies. Yes, for some individuals, flexibility is a good thing. But one person’s flexibility is another person’s exploitation, and in this area exploitation prevails. There is a continuum here: from what appear to be relatively respectable employers, offering sub-standard terms and conditions; through to zero-hours contracts; through to false self-employment; through to dubious agency provision; through to dodgy gangmasters; through to trafficking and the terrible conditions that we have seen in a number of cases up and down our country in recent years. That continuum, in the bottom quartile of the labour market, actually undermines everybody. People may not realise it, but everybody’s terms and conditions are undermined because of what has happened at the bottom end of the market.
My noble friend Lady Quin rightly expressed concern that exit from the EU may reduce workers’ rights. But it is also true that workers’ rights have already been seriously reduced by the degree of undermining of traditional values and understandings within the Labour Party. Low pay and insecurity have been exaggerated and accelerated by these changed forms of employment. At one end—and I raise this as a delicate and difficult problem—this is also related to migration. Not the migration of highly skilled workers, but migrants who are occupied in unskilled jobs, often in gangmaster-type territory or the near equivalent. Those who remember, maybe themselves and certainly their parents, being employed in very different conditions, will have a tendency to blame this on the immigrants and on the way in which employers favour them, because they are prepared to work in those conditions, coming from countries where these traditional standards have not applied.
I have met Members of this House in the last two or three weeks who said—certainly three weeks ago—that they had never met anyone who would vote leave. Even since the referendum, people tell me they cannot understand it. For the section of the employment class that we are now talking about, it is pretty obvious why they voted to leave. Their standards have disappeared, nobody takes much notice of them, and unfortunately, they frequently blame the immigrants, and last week they blamed the EU.
This is a cancer on our society and it is undermining all of us. Some of us, our families and the people we normally socialise with enjoy good working conditions and do not understand or know that this is going on: the only aspect of this we know about is that we employ relatively cheap labour as our builders, nannies and cleaners. Out there, in many parts of the country, pride in work, enjoyment of work and reward from work are disappearing because those standards, those practices, the degree of representation by trade unions and legal standards have been seriously undermined. What we should be blaming is the lack of enforcement of standards across the board, not simply one form of contract, although it is itself deplorable.
My Lords, like other speakers, I am grateful to my noble friend Lady Quin for the opportunity to debate this matter, albeit with such a short time available to us. My experience of short-term contracts came around a year ago, when I was talking to a young man in the West Midlands who left school at 18, lived with his girlfriend in a flat and worked in the fast-food industry. I have never been a fan of the fast-food industry—neither its products nor its working practices—particularly after my daughter had some bad experiences working in that industry, but at least she was at university, so it was temporary; this young man was looking for permanent work. He never knew from one week to the next how many hours he was going to get. He never knew from one week to the next which shift he was on. He was told on a Sunday evening what his working hours would be for the following week. He was more than six foot tall, and they obviously felt he would be useful in the event of any trouble, so they regularly rostered him for afternoon and evening work. He was prepared to put up with that, despite the inconvenience.
This was at a McDonald’s in Halesowen in the West Midlands, a franchise operation. The young man related to me how he would get to work at five o’clock in the afternoon, the time laid down, and be told by the franchisee, “It is pretty quiet. Go and sit in the kitchen for an hour”. Of course, he sat in the kitchen for an hour without any pay. He then started work at six o’clock—if it was a quiet evening, it would be seven—and went home at nine o’clock, paid just for the three hours he worked. On a Saturday evening, when it was busy, he was expected to help to close the place at 11 o’clock and then—all credit to the fast-food industry for this: it is very keen on hygiene—spend an hour cleaning up the place ready for the following day, again without pay.
All of us in the House were 18 at some stage. Would we really want to be treated in the way that many of our young people are these days because of those contracts? Eighteen year-olds are not children. They can join the Army, they can fly aeroplanes, they can drive motor cars and they can get married, yet they are expected to work in the industry, if that is the right word for it, in this young man’s case, for £5 an hour.
When I was 18, I was a railway signalman. It was 1960, so I was paid a fraction under £10 a week. With overtime, I could possibly take home £14 or £15. In real terms, looking at the wages I was paid in 1960 compared to £5 an hour now, I earned three times as much as that young man.
Is it any wonder that our young people are disillusioned with life and politics and vote, if they vote at all, in the way outlined by my noble friends who have already spoken? The fact is that short-term contracts are a scandal and it is time that the Government did something to outlaw them.
My Lords, I thank my noble friend for securing this debate and endorse everything that she and others said. I shall just add a few thoughts.
Zero-hours contracts are in many ways a sign of our times. Changes in technology, business and society change the way we work. Advances in the strength and speed of broadband, the development in cloud computing technology, the ever-greater involvement of women in the workplace and a greater culture of flexibility and independence are transforming the workplace even from two decades ago.
One fact starkly encapsulates this change. The ONS estimates that 4.6 million individuals are now self-employed, rising by roughly 80,000 every three months. The public sector now numbers only slightly more than 5.3 million, and that number is in decline. It seems likely that the self-employed sector will overtake the public in the near future. I do not think that our workplace culture, from our management to our benefits system and our law, is anywhere near ready to deal with these seismic changes.
The legal and contractual way we manage the way we work needs to change. That includes the structures that govern the use and prevent the abuse of zero-hours contracts. As this debate has shown, such contracts are increasingly the reality of life for many people. The ONS says that they form 2.5% of our workforce, a deceptively small percentage masking the 800,000 individuals who earn their income this way. These figures are increasing rapidly: by more than 100,000 on the previous year.
As others have said, for some there are clear advantages of working this way. As my noble friend Lady Quin pointed out, students value the lack of set hours every week and the possibility of some control over when and how much they work. The growing band of the self-employed may equally rely on such flexible working to supplement their income as they seek to get a business or service off the ground.
However, acceptance of their basic utility cannot be a blanket endorsement for their free use. Most of us have come to this debate with examples of abuse in our minds, some of them shocking. It is worth repeating the malpractices in the Sports Direct business addressed in another place. A young woman had her hours cut for visiting her GP for a serious health complaint. The same punishment was meted out to multiple other staff for visiting grievously ill or dying relatives. There is a culture of fear that penalises illness.
Amazon has been accused of draconian practices in its warehouses, including GPS tracking its staff, timing their toilet breaks and imposing disciplinary action for any lost time, regardless of personal circumstances.
We would be wrong to think that these contracts are kept within the manual and service sectors. As I speak, a debate and action among many lecturers and teaching staff across Britain’s universities is taking place, with strike action called in many of them over exactly this issue. Other highly skilled professionals, such as radiographers and phlebotomists, are affected. If such staff—many with thousands of pounds of debt to pay for their high level of education—are unable to find secure and fair work once qualified, they may leave their profession, with damaging repercussions for their sector and, by extension, the country.
A job contract should be a relationship of dignity, the promise that one’s time and effort will be truly valued and fairly sold. As this debate has shown, too many zero-hours contracts threaten that dignity, destabilising the balance of power between employer and employee and allowing the whims of the business to force uncertainty of income and occupation.
The Government have taken some good steps, but I urge the Minister to tell us this evening that more is being done. Such contracts have a place, but I join my noble friend in urging that we regulate to minimise abuse and maximise value so that they provide the best opportunity for employer, employee and the country at large.
My Lords, I start by registering my interest as chair of Housing & Care 21, which is an employer of domiciliary care staff.
I join the congratulations to the noble Baroness, Lady Quin, on arranging this very timely debate after the referendum vote last week—which, if we did not know it already, really shows how divided our society is. I am sorry that I must disappoint the noble Baroness, Lady Dean, who included me among the Labour Benches in her speech. I certainly sign up to the progressive alliance, but this week, I think she will forgive me for not making a further choice.
As the noble Lord, Lord Whitty, said, zero-hour contracts have become a symbol and sign of past certainties and securities breaking down under the pressures of globalisation and technology. We need to recognise the concerns they give rise to in our workplaces. I would not argue that all casual work—or all zero-hour contracts—is wrong. In some occupations—say, hospitality—where patterns of customer demand come in peaks, it is inevitable and indeed welcomed, especially by students getting through their education and retired people trying to keep active and top up their pensions.
However, zero-hour contracts have become much more pervasive and have sometimes become a deliberate tool exploited by employers to lower costs, regardless of human consequences. There is evidence that in non-union workplaces employees can be intimidated by an intolerable culture to accept completely unacceptable conditions due to their vulnerability and insecurity. Those should be challenged in such circumstances.
Sadly, in a world without the presence of trade unions in so many sectors, there is little restraint on bad employers, except where legislation prevents it or media publicity exposes it. I therefore believe that the Government should go much further with legislation and there are three points I would urge them to look at. The Low Pay Commission should monitor not just minimum pay rates but all contributory aspects of the problem of low incomes from work, which include the increasing use of zero-hours contracts. The noble Baroness, Lady Quin, was quite right in saying that the statistics on this are completely unacceptably unavailable, particularly the breakdown between the private and public sectors. Secondly, the right of all employees to have a statement of employment particulars should be extended to all workers as well. Thirdly, as the labour market continues to strengthen, the Government should consider the right of employees to a right to a fixed-hours contract after 12 months of employment, provided their weekly pattern of hours is relatively consistent. When will the Government, if they remain committed to their one-nation pretensions, act on looking at introducing these reasonable proposals?
I will end with two points. The Government have a direct interest in and responsibility for zero-hours contracts. We do not know quite the extent of that but they certainly have, as the noble Baroness, Lady Quin, said, a commitment in the domiciliary care sector. These zero-hours contracts are pervasive in this sector and the Government need to initiate an inquiry on the threat to care quality from these contracts, which are cut to the bone, are time and task-orientated rather than the result of outcomes-based commissioning, and where high staff turnover compromises a quality service.
My final point is that a move outside the EU and the single marketplace will expose our economy even more to the global economy, and require further cost reduction to compete against the tariffs and other trade restrictions that will be in place outside, and without any of the protection provided within the EU. It will simply worsen the lot of the less skilled exposed to the zero-hours economy, so many of whom undoubtedly voted for Brexit out of sheer alienation with their lot.
My Lords, I congratulate my noble friend Lady Quin on securing this debate. Hers was the first of a series of very powerful speeches, many of which drew on real-life experience. As a result of this short debate, we have generated a series of rather trenchant questions about government policy in this area, which I hope the Minister will be able to respond to in full.
The labour market context, according to a recent report from Citizens Advice, is that 4.5 million people in England and Wales are in some form of insecure work, just over 2.3 million people work in variable shift patterns and 1.1 million work on temporary contracts. I think we are now beginning to get a fix on what the numbers are in the area of zero-hours contracts, because the recent ONS report picks up 801,000 people working on zero-hours contracts, up from a figure which it derived from surveys in 2014 of 697,000. So it is a significant and rising proportion of our workforce.
In a recent report commissioned by the Labour Party from Norman Pickavance, the majority of employers were reported as not using zero-hours contracts, in most cases because they did not believe that they provided the right approach to flexibility or workforce management, something which I think we need to take hold of. It is of course the case that, as has already been said, when used appropriately, zero-hours contracts can aid short-term flexibility for some employers and employees, and provide increased choice for individual workers. However, zero-hours contracts are often used as crude cost-reduction tools and the lack of rules and safeguards governing their appropriate use leaves huge scope for abuse.
It is interesting to look at the distribution across the sectors of the economy. Zero-hours contracts are very significantly used in accommodation and food services, possibly because of supply chain pressures, and also in health and social work activities, where perhaps low pay is the driving issue. It is also important to recognise, as I think has been mentioned by others in this debate, that women are proportionately much more represented, with 53% of working women on zero-hours contracts, compared with 47% on non-zero-hours contracts. Of course, as has again been said, it affects younger people. Some 38% of people on zero-hours contracts are aged 16 to 24, compared with 12% in the rest of the employment sectors.
As my noble friend Lord Monks said, there is evidence that organisations use zero-hours contracts as a way of managing their entire workforce in place of good performance management systems, and that must be wrong. As my noble friend Lady Dean said—echoed, I think, by my noble friend Lady Warwick—zero-hours contracts create significant financial insecurity for employees, uncertainty around entitlement to benefits and the new, automatic enrolment system for workplace contributions, and generate higher workplace stress. They also lead to higher pressures for personal debt, as we have heard.
Zero-hours are disproportionately associated with low-value business models and low investment in training. That hampers social mobility, as people in those arrangements often struggle to find opportunities to progress to better paid and more secure work. The right reverend Prelate was right to warn us about the dangers that might arise from modern slavery considerations. Whatever tag we use, these contracts are not compatible with the goal to build a high-skills, high-wage economy, which I am sure we all wish to see.
My noble friend Lord Whitty called all these variations on zero-hours contracts a cancer on our society. They certainly need to be properly regulated, and I would be interested to know whether the Minister agrees with the suggestion made by my noble friend Lord Monks that it is time for a crusade to tackle inequality in the employment sector, starting perhaps with the exploitative use of zero-hours contracts.
My Lords, I join other noble Lords in thanking the noble Baroness, Lady Quin, for raising this important subject. Noble Lords need only look at the breadth of experience on the Benches opposite on this subject to know that a lesson on employment has been received and inwardly digested by myself. I should make a declaration. The noble Lord, Lord Monks, referred to wobbly contracts; I started off at one stage of my life on a wobbly contract out of need, and I ended up jointly running a successful SME which employed 25 people.
The right reverend Prelate mentioned the pastoral care available to people in these situations. I assure him that SMEs, to get the most out of their employees, need to give proper pastoral care.
It is unfortunate that zero-hours contracts have recently been demonised due to the wholly inappropriate practices of a minority of employers. Let me be clear—the Government condemn exploitative behaviour by irresponsible employers. Zero-hours contracts, when used appropriately, as the majority of employers do, fit positively within the UK’s strong and flexible labour market, and the opportunities that they provide. That was acknowledged by many noble Lords. The UK’s labour market is one of the most flexible in the world, and it is this flexibility that allows individuals and business to vary working arrangements to weather changing demand that has helped the UK to exit the recession with high levels of employment.
I want to be clear that it is not just business that benefits from this flexibility. Zero-hours contracts are one example among a whole range of flexible employment contracts which make it easier for workers who cannot or do not want to commit to standard, full-time employment. The most recent ONS Labour Force Survey showed that around 63% of those on zero-hours contracts in their main job were not looking for more hours. That does not mean that the 37% should be forgotten. We should not simply assume that the remaining 37% of those surveyed wanted a full-time regular job instead of a zero-hours contract. They may be considering taking a second zero-hours contract job, or simply a few more hours in their current job. In any case, we know that, on average, individuals on a zero-hours contract work 26 hours a week. To further demonstrate that not everyone on a zero-hours contract wants a full-time job, we have only to look at the recent example of a fast food retail chain. It responded to criticism about its use of zero-hours contracts and offered all staff the option of a fixed-hours contract. The result was that 80% of workers elected to stay on zero-hours contracts. In any case, if there are those on a zero-hours contract who wish to seek full-time work, there has been nothing to prevent them from doing so since this Government implemented the ban on exclusivity clauses in 2015. My own experiences in this business showed that people do go on to get full-time contracts. The ban on exclusivity means that nobody on a zero-hours contract can be prevented from seeking work elsewhere, whether it is a full-time job or another flexible arrangement that they may wish to pursue.
We should also bear in mind the acknowledged point that someone is more likely to be successful in their pursuit of a job if they are already in some form of employment or activity. In fact, for many people, the skills obtained by working on a zero-hours contract can improve their employability in later life. For instance, many students and young people benefit from this type of casual work as it shows future employers that they have work experience and commitment, and have developed valuable soft skills to secure a job. A CBI survey confirms this view and reports that nearly two-thirds of respondents believe that flexible employment contracts, including zero-hours contracts, are an important stepping stone into work for groups most vulnerable to periods of unemployment, including young people and the long-term unemployed.
The noble Baroness, Lady Quin, referred to a breakdown of zero-hours contracts by region. According to the ONS, around 2.5% of those in employment in the United Kingdom were on zero-hours contracts. That figure rises to 3.8% in the north-west, 3.6% in the south-west and 3.4% in Wales. In part, the higher rate of use of zero-hours contracts in these regions can be attributed to the hospitality sector. In London, Scotland and the east of England, only 2.2% of those in employment were on zero-hours contracts in their main job.
A number of noble Lords referred to zero-hours contracts by sector. The latest ONS data show that the main sectors that use zero-hours contracts cut across both the public and private sectors. Of all workers on zero-hours contracts in their main job in 2015, around 24% worked in the accommodation and food industry and around 22% worked in health and social work. This means that around 12% of those employed in accommodation and food and around 4% of those in health and social work were on zero-hours contracts. These are both sectors where there can be fluctuating demand for services—whether this be seasonal or patient care. A number of noble Lords also asked about the division between the private and public sectors. I do not believe that I have a breakdown of those figures, but if they are available I will write to noble Lords.
The noble Baroness, Lady Quin, and the noble Lord, Lord Monks, raised the issue of exploitation and in particular the Government’s response to it. It is vital for the UK economy and the wider UK labour market to tackle this labour exploitation. Other businesses struggle to compete against rogue employers, distorting competition and reducing levels of employment over the long term. The Immigration Act 2016 creates a new Director of Labour Market Enforcement, who will be responsible for overseeing and setting priorities for the Employment Agency Standards Inspectorate, national minimum wage enforcement and the Gangmasters Licensing Authority, bringing better co-ordination.
The right reverend Prelate and the noble Lord, Lord Whitty, mentioned rogue employers and their duty of care to their workers. It is vital for the UK economy and the wider labour market to tackle this labour exploitation—I already went into detail on that in my previous point.
Most noble Lords, including the noble Baroness, Lady Warwick of Undercliffe, asked about government action, and the noble Lord, Lord Whitty, in particular, referred to rogue gangmasters. To enable enforcement to be effective, we are creating a new intelligence hub, to enable enforcement to be targeted at certain areas or sectors and to ensure our enforcement strategy is evidence-based, and a new regime of labour market enforcement undertakings and orders, backed up by a criminal offence and custodial sentence, to allow us to tackle repeat labour market offenders and rogue businesses. We are also, as I mentioned earlier, reforming the Gangmasters Licensing Authority into the Gangmasters and Labour Abuse Authority, which will have the ability to tackle labour exploitation.
A number of noble Lords mentioned the ONS Labour Force Survey, which estimates that 801,000 people report a zero-hours contract as their primary job. A separate ONS labour survey estimates that there were 1.7 million individual zero-hours contracts in November 2015. What this shows is what was said by a number of noble Lords—we need to look further into these figures being produced, as there seems to be a gap and look at whether people are individually taking a number of zero-hours contract jobs. I concur with much of what was said on that issue.
People working on zero-hours contracts account, as I said, for about 2.5% of the workforce. The noble Lord, Lord Snape, raised the issue of people being on call at their place of work and going unpaid. Employers should comply with the national minimum wage and the national living wage; employers who do not will face the consequences of a higher penalty and will be named and shamed as part of the Government’s naming and shaming scheme. The Government are committed to increasing compliance with the national minimum wage legislation and effective enforcement of it.
The noble Baroness, Lady Warwick of Undercliffe, mentioned the increase in the number of zero-hours contracts. While the most recent ONS data show an increase in the number of people on zero-hours contracts compared with previous surveys, this does not necessarily mean that there has been a significant increase in their usage. However, if there are any more details on that issue, I will write to the noble Baroness.
All noble Lords raised the issue that working under a zero-hours contract is insecure, precarious, low-value, low-paid and part-time. The most recent figures show that full-time work makes up around 75% of the net growth in employment since 2010. The noble Lord, Lord Stoneham, and the noble Baroness, Lady Dean, said that those on zero-hours contracts did not have a right to ask for more hours. The Government have taken on board the concerns raised around this issue during debates on zero-hours contracts and have addressed it with guidance published on the GOV.UK website. Employers need to understand when it is appropriate to use a zero-hours contract and what other employment contracts are more suited to regular work.
I am getting close to the end of my speech but there are probably some issues that I have not yet—
The noble Baroness is right. I know that there are some questions that I have not referred to. I will write to her on any issues that have not been covered in my speech and ensure that copies are sent to all other Peers who have taken part.
I want to reassure noble Lords that this Government have recognised that there has been an inappropriate use of zero-hours contracts and that is why the Government took action on exploitative zero-hours contracts. Both government and independent research found that exclusivity clauses were the key issue and were wholly unfair. That is why the Government banned the use of exclusivity clauses in zero-hours contracts in 2015 and further strengthened that ban in January this year by creating a route of redress for individuals via an employment tribunal. We have not been complacent since and continue to monitor zero-hours contracts but have so far not seen any evidence of avoidance of this ban. However, I can assure noble Lords that back in the department we will take careful note of what has been said.
When used appropriately, as by the majority of employers, zero-hours contracts play a valuable role in the labour market for those who cannot do or do not want a standard full-time job. When used appropriately, these flexible forms of employment make it easier for individuals such as mothers returning to work, and enable higher participation rates among groups that might otherwise be excluded from the labour market. Finally, we should remember that many people choose to work in this way. These contracts provide choice and the ability to combine work and other commitments.