Zero hours contracts in Scotland: Interim Report - Scottish Affairs Committee Contents

2  Employment rights: confusion and abuse

15. Workers on zero hours contracts are not defined as 'employees' and as a result can lose out on employment rights such as:

·  Statutory redundancy pay;

·  Statutory notice periods;

·  Unfair dismissal rights;

·  TUPE rights;

·  Collective redundancy consultation;

·  Family friendly rights.[28]

Workers on zero hours contracts may also have reduced entitlement to rights such as maternity, sick and holiday pay.[29] Citizens Advice Scotland told us:

    often workers lose out on their entitlement to holiday pay, or the holiday pay gets added on to their hourly rate, which can leave workers underpaid. Conversely, a client might not be paid for an enforced break in their usual hours.[30]

Adding holiday pay on to the hourly rate disincentivises workers from taking leave, which is against the rationale behind the Working Time Regulations and is unlawful unless it is clear that the payment is on top of the basic rate and the calculation of the holiday pay is transparent.[31] The Government website makes clear that "an employer cannot include an amount for holiday pay in the hourly rate (known as 'rolled-up holiday pay')."

16. Statutory sick pay is available to 'qualifying employees', with the definition of 'employees' being wider than under normal employment law. The Employment Lawyers Association state that, given the conditions for receipt of statutory sick pay:

    it is likely that some zero hours workers will not qualify during periods of sickness: for example (i) where the pattern involves only short periods of work of perhaps 1 or 2 days; (ii) if an employer is aware of employee's sickness, they will not 'offer' a period of work, meaning that the individual will not be 'absent'.[32]

Jake Molloy from the RMT gave the example of a worker in the offshore industry who survived a helicopter crash but, because he is not currently available for work, has been left without access to sick pay or any other form of support and now worries about paying his mortgage: "He was recovered from the sea, taken to hospital and given the support and counselling of the various companies on site at the time, but once he got back home no contact; nothing at all, despite repeated efforts to speak to the company that engaged [him]."[33]
Box 1: Pregnant worker

Our client has worked on a zero hours contract, working 40 hours per week, for 14 months. She informed her employer that she was pregnant, and her hours have been reduced in stages until she now works only 11 hours per week. The employer has taken on two other staff but hours were not offered to our client. She believes this is so that the employer does not have to pay Statutory Maternity Pay as her pay will be below the lower earning limit.

Source: Anonymous (Citizens Advice warns on zero hours contracts, 9 July 2013)


17. Not only do zero hours workers have fewer rights than employees but there is also confusion about what exactly those rights are. The CIPD's report, Zero hours contracts: myth and reality,states "there is significant confusion among both employers and zero-hours contract staff over which employment rights people on zero-hours contracts are eligible for".[34] Some organisations do use zero hours contracts in a way in which they accept from the outset that the individual is an 'employee', employed on a continuous basis and therefore allowed to accrue employment rights.[35] However, classifying individuals on zero hours contracts as employees does not necessarily mean the individuals are automatically granted the attendant rights. Almost two-thirds (64%) of employers who responded to the CIPD survey said they classed their zero hours workers as 'employees' but only:

·  31% of employers reported their zero hours workers were eligible for statutory redundancy pay (all employees are eligible after two years' service);

·  40% of employers said their zero hours workers were eligible for statutory maternity, paternity and adoption leave and pay (these should be available to all employees);

·  Just over 50% of employers reported their zero hours workers had the right not to be unfairly dismissed after two years (this right should be available to all employees);

·  Just under 50% of employers reported their zero hours workers received statutory sick pay (this is payable to employees and workers except under certain circumstances).[36]

18. It is not just employers who are confused; evidence suggests that workers are also not clear about what rights they are entitled to.
Box 2: Care worker

At the beginning of my employment I was given a piece of paper to sign with not much information on it. I never knew about zero hours contracts. I thought this was a job that guaranteed me work.

Source:Anonymous (Informal meeting of the Committee with zero hours workers)

Of those on zero hours contracts who responded to Unite's survey, 43% said they were not offered employment and redundancy rights and 47% said they did not know, while 73% did not know whether or not they were entitled to sick pay.[37]In part, this may be due to individuals not knowing their employment status.[38]Mark Epstein, Chief Executive of research specialists Mass1, explained that "people almost do not know that they are on zero hours contracts, because the contract does not say at the top of it 'zero hours'. It looks like a normal contract".[39] In the university sector, Mary Senior from the University and College Union (UCU) told us that "some people may have a bit of paper with a contract; other people may not".[40] In their written evidence Unite give the example of a door steward who, for the first year of employment, was not aware he was eligible for holiday pay.
Box 3: Holiday pay

An East of Scotland Citizens Advice Bureau reports of a client who came in and reported that she had been employed for around two years and she had not had any paid holidays. She spoke to her manager about this and was told that as she was on a ''zero'' hours contract she was not entitled to any paid holidays. The bureau assisted the client in writing a grievance letter

Source: Anonymous (Citizens Advice Scotland written evidence)

Inability to challenge

19. Some organisations will construct zero hours contracts to expressly state that an individual is not an employee.[41] But, while employers may draft contracts to imply a particular state of employment, case law indicates that, if the day-to-day reality of the work suggests a relationship of employment - for example, a pattern of regular work which is regularly accepted - then an employment tribunal may deem the contract to be one of employment. The House of Commons Library notes:

    One effect of this is that many employers, who proceed on the basis that staff working under zero-hours contracts have limited employment rights, may discover the existence of additional rights only when these are asserted against them.[42]

However, zero hours workers are unlikely to challenge their employer over employment rights because doing so risks a reduction in work offered.

20. With no guarantee of work, zero hours workers can effectively be dismissed - by not being offered any more hours - without the employer having to follow any formal redundancy procedure.
Box 4: Meat-processing industry

Within the meat processing industry, we've got a huge casualisation of labour, with very vulnerable workers and migrant workers. They don't challenge employers, because if they put their head above the parapet they don't get the tap on the shoulder-they don't get the work.

Source: Scot Walker, Unite (Q205)

21. James Bevan, Campaigns and Communications Officer, Unite, spoke of a fear factor amongst zero hours workers:

    there is high youth unemployment ... [zero hours workers] realise that, even if they do put their hands up, there can be quite a subtle punishment in effect. I have spoken to people who have had it. You will either stop getting calls for work the next week, or you will be punished by getting shifts that are impossible to fill.[43]

The evidence from the trade union representatives is supported by cases seen by Citizens Advice Scotland. Rob Gowans, Policy Officer at Citizens Advice Scotland, described to us a case where a client refused to do additional work for no pay and then found their hours were cut from 27 to 6 per week.[44]
Box 5: Security worker

A North of Scotland Citizens Advice Bureau reports of a client who is a security worker with a zero hours contract. He and several other workers are perturbed that their wages are not paid on the due date, and that they are paid into the bank by cheque which then takes several days to clear.Also, there are always deductions for unspecified reasons so that the actual wages are at least £30 less than the payment for the hours worked.They do not receive itemised payslips and if they do ask for them they are many weeks behind. The client queried why his money was not in the bank. He was then taken off the job he was on and put on standby. The client is finding these inconsistencies both stressful and distressing.[45]

Source: Anonymous (Citizens Advice Scotland written evidence)

22. 'Punishment' for challenging an employer is not necessarily limited to a reduction in hours. Unite's survey found that 46% of respondents who had spoken out about their contract had experienced bullying or harassment as a result.[46] Justine Seran, a PhD student from the University of Edinburgh, told us that it wasn't just about the potential repercussions but also the lack of transparency that accompanied it:

    the whole issue is that, being on a zero­hours contract, we could be withdrawn work and never be told why. If they say, "We just don't have hours for you," we will never know whether it is just because we have been here or there can be deeper reasons, because they don't have to tell us because it is a zero­hours contract.[47]

23. In their response to the Government's consultation, the CIPD highlight the problem of confusion over employment status and recommend a change to the law. The CIPD "believes all workers should be legally entitled to a written copy of their terms and conditions not later than two months in employment (currently under the Employment Rights Act 1996 only employees are entitled to this)".[48] They suggest this change would help provide greater clarity to workers and employers on the issue of employment status and associated employment rights.

24. Denying workers rights that are legally due to them, whether it is through confusion, abuse or even a failure to determine an individual's employment status, is unacceptable. Employers must make clear from the outset an individual's employment status. In addition, all workers should be legally entitled to a written contract setting out the terms and conditions of their employment. In many circumstances it would be unrealistic for such a contract to be produced from the beginning of employment, particularly if the work was for a very brief period, but such a contract must be agreed within a specific timeframe. The CIPD suggest not later than two months; this proposal has our support.

25. While abuses of employment rights might be resolved via an employment tribunal, it is unrealistic to assume zero hours workers, who are vulnerable to sudden changes in their working hours and are often poorly paid, would mount such a challenge against their employer. The Government must come forward with a robust means of protecting workers in insecure employment that enables them to claim the rights to which they are entitled without suffering detriment. Such a system must be enforceable and employers who abuse it appropriately penalised.

Government proposals

26. The Government agrees that a lack of transparency around zero hours contracts is a problem. In its December 2013 consultation on zero hours, the Government stated: "individuals are not always clear on the terms, conditions and consequences of a zero hours contract, and employers do not always fulfil or understand their responsibilities."[49] The Government is considering several options aimed at improving zero hours contracts:

·  Improving the content and accessibility of information, advice and guidance on (a) employment contracts and rights, and (b) entitlement of zero hours workers to benefits;

·  Encouraging an employer-led Code of Practice on the fair use of zero hours contracts; and,

·  Government providing model clauses for zero hours contracts.

27. Witnesses to this inquiry were sceptical about the Government's proposals to increase transparency. Dave Watson, Scottish Organiser, UNISON Scotland, agreed that more effort on education and understanding would be a good thing but suggested that an employer-led code of practice would be"benext to useless in terms of defending and protecting people in this area."[50] Representatives from the University and College Union questioned how increased transparency would address the key problem of zero hours contracts-that workers on them are exploited.[51] Dr Rachel Shanks, from the University of Aberdeen, explained:

    you have a two­tier work force. You have the work force with their permanent contracts and all the benefits and protection, and then you have the people who don't know how much work they are going to get and are working many more hours than they are being paid for. I don't think having the best zero­hours contract you can possibly have helps that.[52]

Karen Whitefield, Campaigns Officer, Union of Shop, Distribution and Allied Workers (Usdaw), was slightly more positive:

    if, as a stepping stone towards getting to a position [of nozero hours contracts], there was a code of conduct around the use of zero hours contracts we would not be against that, but it is not ultimately where we would want to get to, so it would not be a preference.[53]

28. We welcome the Government's concern about a lack of transparency around zero hours contracts, but we fail to see how an unenforceable Code of Practice, aiming to curb abuse by unscrupulous employers, can be 'employer-led' and still be effective. Improving the information available to employers may help address problems of confusion over rights and entitlements but model clauses and a Code of Practice may also serve to embed in the workplace a status of employment that is often unfair and unjust. Such proposals should only be implemented as a stepping stone to, or following, legislative change aimed at reducing the use of zero hours contracts and protecting those who are on them.

National Minimum Wage

Care workers

29. Before the Government launched its December 2013 consultation into zero hours it conducted an informal information-gathering exercise. In response to the exercise the Government received representations from the care sector around the non-payment of travel time between appointments. Carers argued that non-payment of travel time was causing them to be paid less than the National Minimum Wage.[54] Under National Minimum Wage rules, "travelling in connection with work, including travelling from one assignment to another" counts as working time.[55] In addition:

    where travelling time is time for which the minimum wage should be paid, any associated expenditure incurred by a worker by that travelling is classified as being in connection with the employment. These expenses reduce a worker's pay for minimum wage purposes. A worker paid at minimum wage rates would therefore need to be reimbursed such expenses in order to be paid the minimum wage.[56]

30. HMRC enforces the National Minimum Wage on behalf of the Department for Business, Innovation and Skills. In November 2013, HMRC found that out of 183 employers of care workers that were investigated, 88 (48%) had failed to pay their workers the National Minimum Wage; over 2,400 care workers were affected and £340,000 owed. The main reasons were non-payment of travel time, and deductions for uniform costs.[57] Dave Watson told us that in the past care workers would have had a contract for a set number of hours and travel time would have been part of those working hours: "with zero hours contracts we are seeing the opposite".[58] He explained that, while the rules were fairly clear,

    a lot of these workers do not understand their rights, are not as well organised as they might be and a number of employers are taking advantage of zero hours contracts. For example, if you challenged your wage rate and challenged the issue [...] with your employer you probably would not get asked back to work.[59]

31. The Parliamentary Under-Secretary of State for Business, Innovation and Skills, Jenny Willott MP, confirmed during a Westminster Hall debate on zero hours that the Government was trying to improve compliance with the minimum wage, particularly in the care sector. Penalties for non-compliance had been significantly increased and the scheme for naming and shaming employers that break minimum wage rules had been revised.

32. Exploiting low-paid workers through non-payment of the minimum wage is a disgrace. We welcome HMRC's investigation into the care sector. Care workers are expected to look after the vulnerable in society and treat them with dignity yet HMRC have found that almost half of those employers investigated have shown no such duty of care to their workforce. The Government's efforts in enforcing this area of legislation have been severely lacking.

33. As part of its investigations into payment of the minimum wage, the Government should make sure that workers are being paid for time spent travelling between appointments and that the associated expenses are reimbursed. We are concerned that zero hours workers who report bad employers might be 'punished' through a reduction in the number of hours of work made available. In calling for individuals to come forward the Government must ensure that they are not disadvantaged in doing so.


34. During our inquiry we heard that teaching staff in Scotland's higher education institutions (HEIs) were also particularly vulnerable to earning below the minimum wage. Research by the University and College Union found that 49% of all teaching staff of Scottish HEIs-approximately 4,500 people - were on zero hours contracts.[60] While the terms and conditions varied across the HEIs, the overwhelming conclusion of the UCU representatives who gave evidence to us was that teaching staff on zero hours contracts worked far more hours than they were paid for; as a consequence their level of pay fell below the minimum wage. We were told that the hourly rate, often between £10 and £15, might be comparable to the wage of permanent colleagues but it was generally only payable for the hours of teaching. Dr Rachel Shanks explained that:

    for teaching, you might only get paid for the contact hour that you are in front of the students, but to be in front of the students you have put in many, many hours of preparation, especially if it is the first time you have taught it, so it ends up that you are way below the national minimum wage. You are talking maybe £1 or £2 an hour once you have put in all that preparation time.[61]

Justine Seran told us that the University of Edinburgh have a 'multiplier-by-two' so she was paid for one's hour preparation for every hour she taught, "you are paid £13 plus £13, but when you teach subjects such as literature, when you are being asked to teach one book a week … [the preparation] is much more than one hour per week".[62]

35. The interaction with students is not limited to lectures and tutorials and preparation for them. Teaching staff are also expected to reply to emails, check for student posts in the virtual learning environment, mark papers and provide feedback.[63] We heard that marking was a particular problem; teaching staff were expected to mark papers but were not always paid for it.[64] Where staff were paid, the level of pay was based on the quantity of work completed rather than the time required to do the work.[65] Justine Seran suggested that while her department did pay for marking, it was "being paid way below what we actually do," and that students were being let down by the arrangements:

    When you have two classes of 16 students, that is 32 essays. It is a pile like that, which you spend hours going through without being paid for.

    Obviously, that impacts student learning; that impacts on the ratings of the university. They have really bad ratings every year at the National Student Survey because we don't have time. We are not being paid to give proper feedback. We would love to give proper feedback, but we need to be paid for it, or else the extra time that we can't spend on the feedback we will be spending on doing our other jobs—the ones that are paid—because rent and bills still need to be paid.[66]

36. Junior staff,such as PhD students, are the most vulnerable to exploitation because they depend on being given teaching experience to further their careers. Dr Shanks explained that they are less likely to challenge their pay and conditions as a result:

    you may be thinking eventually that you will be asking for references or even a job in that department, and so you don't like to complain that you are not getting paid for all the work that you are doing, because it looks good on your CV, you are getting experience, and you are becoming a valued member of the staff. So you don't want to rock the boat.[67]

We were told that teaching contracts were not always advertised.[68] One of the benefits of zero hours contracts to employers is that they do not have to advertise positions and incur the costs of a proper recruitment process. The lack of transparency can lead to accusations of nepotism, a lack of equal opportunities and people not being aware that opportunities exist.[69] It also keeps people vulnerable and ensures that they are unlikely to 'rock the boat'.

37. The disconnect between the hours worked and the hours for which payment is made raises a further concern-that teaching posts may only be accessible to those who have family, other work or a bursary to subsidise them.[70] In Dr Shanks 's view:

    it is skewing the work force. It is a bit like unpaid internships, where it is only the people who can afford to keep on waiting for that permanent, more secure employment who can do all those little bits of work. That is my worry as well. Then, obviously, it can—very likely—compound any inherent discrimination.[71]

38. We are alarmed by the extent to which zero hours contracts are used by Scotland's higher education sector. In some cases universities are being kept going by a staff who earn less than the minimum wage. The system of employment appears to us one of unashamed exploitation. This is unfair to dedicated teaching staff and may also compromise the quality of teaching that students receive. Scottish higher education institutions must review the terms of employment of their teaching staff and make sure that levels of pay accurately reflect the number of hours that must be worked to fulfil contracted duties. In addition, we recommend that HMRC investigate the use of zero hours contracts in the higher education sector in Scotland in order to determine whether employers have broken minimum wage legislation.

39. We expect to scrutinise compliance with National Minimum Wage legislation in Scotland in more detail as part of our future work.

28   Union of Shop, Distributive and Allied Workers (Usdaw) (ZHC0014); family friendly rights include parental leave, time off for dependents and paternity and adoption leave. Back

29   Citizens Advice Scotland (ZHC003) Back

30   Citizens Advice Scotland (ZHC003) Back

31   HM Government, holiday entitlement, Back

32   Employment Lawyers Association (ZHC006) Back

33   Q74; National Union Of Rail, Maritime & Transport Workers (RMT) (ZHC004); Q273 Back

34   CIPD, Zero hours contracts: myth and reality, Research Report, November 2013 Back

35   Employment Lawyers Association (ZHC006); For example, McDonalds and JD Wetherspoon - two of the private sector's biggest zero hours employers - report that they treat their zero hours staff as employees. Back

36   CIPD, Zero hours contracts: myth and reality, Research Report, November 2013; See also Employment Lawyers Association (ZHC006) para 6.4.5 for an explanation of entitlement to sick pay. Back

37   Q52 Back

38   RMT (ZHC004) Back

39   Q66; Mass1 worked with Unite in their investigation of zero hours contracts. Back

40   Q382 Back

41   Employment Lawyers Association (ZHC006) Back

42   Zero hours contracts, Standard Note SN/BT/6553, House of Commons Library, 20 December 2013 Back

43   Q31 Back

44   Q278; Citizens Advice Scotland (ZHC003) Back

45   Citizens Advice Scotland (ZHC003) Back

46   Unite, Submission to the Pickavance consultation on the abuse of zero-hours contracts, January 2014 Back

47   Q466 Back

48   CIPD, Policy Response: Zero hours employment contracts, March 2014 Back

49   Department for Business, Innovation and Skills, Consultation: zero hours employment contracts, December 2013 Back

50   Q266 and Q298 Back

51   Qq423-4 Back

52   Q425 Back

53   Q125 Back

54   Department for Business, Innovation and Skills, Consultation: zero hours employment contracts, December 2013, p14 Back

55   HM Government, Minimum wages for different types of work, Back

56   Department for Business, Innovation and Skills, Consultation: zero hours employment contracts, December 2013 Back

57   HM Government News Story, Care sector abuse of minimum wage rules, 25 November 2013 Back

58   Q242 Back

59   Q243 Back

60   University and College Union (ZHC002) Back

61   Q339 Back

62   Q343 Back

63   Q342 Back

64   Qq343-4 Back

65   Q343 Back

66   Q343 Back

67   Q341 Back

68   Q341 Back

69   Q339 and Q352 Back

70   Q341 Back

71   Q341 Back

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Prepared 14 April 2014