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

6  Engaging with the State

80. Zero hours contracts can result in an individual having irregular hours of work. The consequent fluctuation in earnings can create uncertainty for workers, both in terms of their future earnings and benefit entitlement.[136] Zero hours workers often have difficulty claiming in-work and out-of work benefits. Citizens Advice Scotland explained how "they may have to submit information about changes of circumstances on a weekly basis, and manage Jobseeker's Allowance and Working Tax Credit claims interchangeably".[137] Unite's survey found that one in four people on zero hours contracts had difficulty claiming benefits-this figure was higher for women, with one in three affected.[138]

Working Tax Credit

81. Working Tax Credit for a single person can only be claimed if an individual is in paid work of at least 16 or 30 hours depending on their circumstances.[139] To be eligible for Jobseeker's Allowance an individual must work less than 16 hours per week. Having fluctuating hours and income can make it difficult to calculate Working Tax Credit entitlement and can also mean claimants shifting frequently between Jobseeker's Allowance and Working Tax Credit-that these benefits are administered by different departments (DWP and HMRC respectively) adds to the administrative complexity faced by zero hours workers.

82. Working Tax Credit is paid retrospectively; this can lead to individuals receiving benefit at its highest when they earn the most and at its lowest when they earn very little.[140] In weeks of no income, zero hours workers can find it is several weeks before they receive a benefit payment (if they are permitted to claim). Citizens Advice Scotland also point out that,

    if one works between 16 and 20 hours, and those hours fluctuate, it is likely that one's income will be very low-potentially lower than those in receipt of out of work benefits.[141]

Zero hours contracts particularly affect young people - one in three zero hours workers is under 25. Working Tax Credit is only payable to individuals over 25 years, meaning a large number of zero hours workers, who will likely be on low incomes, are unable to top-up their income with tax credits.[142]

Jobseeker's Allowance

83. A Freedom of Information request by TheGuardian in April 2013 revealed that, for the six months leading up to April, 27% of Jobcentre Plus advertised vacancies had no guaranteed income.[143] Citizens Advice Scotland report that job seekers "may be pressurised into taking zero hours contracts, despite the working hours, pay, and instability of the contract being inappropriate for their situation."[144] They also state that some clients have been told by Jobcentre Plus staff that, if a zero hours contract does not provide any work, they are unable to claim Jobseeker's Allowance because "having a contract of employment implies they are not available for work or actively seeking it, despite the lack of any income".[145] If an individual wishes to leave their zero hours contract, for example if that contract is not providing any work, they can be at risk of being sanctioned when trying to claim Jobseeker's Allowance.[146]
Box 15: Retail worker

A West of Scotland CAB reports of a client who came in with several mobile phone debts. However, early in the conversation it transpired he had no income. The client has a zero hours contract working in a department store. However, he has had no work and thus no income for some time. He had been to Job Centre Plus to ask about Jobseeker's Allowance for the weeks he did not get any work. They informed him that he was not eligible for Jobseeker's Allowance - as he had a contract for work and it would not be possible to give him Jobseeker's Allowance for the times he was not earning. The client was advised that there was a possibility that if he withdrew voluntarily from his contract and then applied for Jobseeker's Allowance he could be sanctioned for 13 weeks.

Source: Anonymous (Citizens Advice Scotland written evidence)

84. In response to challenge by Citizens Advice, the Department for Work and Pensions confirmed that job seekers will not be required to accept work which does not offer a secure contract with a defined minimum number of hours per week and that individuals would not besanctioned for leaving a zero hours contract.[147] The confirmation is welcome, but evidence from Citizens Advice suggests that not all Jobcentre Plus staff are aware of the Government policy in this area.[148] It is also not always clear to the job seeker what the contractual obligations of a position might be until they accept the offer of work, as Rob Gowans, Policy Officer at Citizens Advice Scotland explained:

    We have seen a couple of cases where people have not found out until they are working that they are on a zero hours contract. There is one client that was told at interview that he was guaranteed 30 hours a week but when his contract came for him to sign it was a zero hours contract, which did not come until three weeks after he had started.[149]

85. The Government must do more to ensure that Jobcentre Plus staff are aware of, and follow, the rules regarding zero hours contracts. The employment terms of a vacancy must be made clear to a Job Seeker and, if the vacancy is an offer of insecure employment, the individual must be allowed to reject it without facing sanction. Individuals must also be allowed to leave zero hours contracts which do not provide sufficient work without facing sanction for doing so. Jobcentre Plus staff should be putting people into permanent employment not pushing them into exploitative working conditions.


86. We have already discussed the difficulties zero hours workers may face in trying to budget for the present and plan for the future. Housing can be a particular problem; zero hours workers may find it difficult to rent in the private sector because landlords may regard them as at risk of rent default if they have no guaranteed income.[150] Rapidly signing on and off Jobseeker's Allowance can also affect claims for Housing Benefit and Council Tax Reductions as it takes time for changes of circumstances to be passed between the DWP and local authorities.

87. Justine Seran explained that in order to receive a reduction in council tax she had to inform Edinburgh Council of every change of earnings, "this means that every month I will have to go back to Edinburgh Council and give my new payslip for the month because it is going to be different every month."[151] Citizens Advice Scotland told us:

    Delays in Housing Benefit payments, coupled with the Local Housing Allowance and under-occupancy changes, mean that tenants are at risk of accumulating rent arrears, or having to choose between paying rent, buying food and heating their homes.[152]

Universal Credit

88. Universal Credit will see six separate benefits rolled into a single payment. The Government claims that its introduction will help people with a fluctuating income such as workers on zero hours contracts:

    Regarding benefits, the introduction of Universal Credit will help to address uncertainty. It is an integrated in-and out-of work benefit, so people who move into work will continue to be entitled, until they earn enough to come off benefits completely. Universal Credit will be based on real-time information about how much people earn, so there is a much lower risk of any over- or under- payment.[153]

Under Universal Credit workers will not have to claim different benefits as their hours fluctuate and they will not have to re-sign on. However, the Government's view of the benefit of Universal Credit to zero hours workers is contested. BECTU[154] suggest the difficulties in calculating benefits "will become much worse with the roll out of Universal Credit, with its four-week reference period, and conditionality that obliges claimants on low hours to seek, and accept, more work."[155] The move from fortnightly to monthly payment in arrears could impact disproportionately on low-paid zero hours workers who already have difficulty budgeting. The TUC also point out that:

    With the introduction of universal credit, zero hours workers on low incomes may be placed under increased pressure to look for additional work, even though they have no control over the number of working hours they are allocated by employers.[156]

89. We are concerned that Universal Credit might not be as beneficial to zero hours workers as the Government suggests. In response to this Report, the Government must set out the advantages and disadvantages of Universal Credit to workers with a fluctuating income.

Administering benefits

90. Jobcentre Plus are responsible for administering Jobseeker's Allowance, HMRC for Working Tax Credits and local authorities for housing benefit and council tax reductions. The amount of benefit that an individual may be eligible for depends on their level of income over a specified period-this is particularly complicated for zero hours workers whose hours of work may change from one week to another. Zero hours workers can find themselves regularly having to report changes in their income to a number of different government bodies and their benefit payments can be delayed as a result.[157]The Government must make sure that staff who are responsible for administering benefits are aware of the specific problems faced by zero hours workers. Staff in Jobcentre Plus, HMRC and local authorities must be able to respond quickly to reported changes in earnings so that individuals can receive their benefit payments at the time when they need them most.

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

137   Citizens Advice Scotland (ZHC003) Back

138   Unite the Union (ZHC005) Back

139   For an explanation of eligibility criteria see Back

140   Citizens Advice Press Release, Citizens Advice warns on zero hours, 9 July 2013 Back

141   Citizens Advice Scotland (ZHC003) Back

142   Citizens Advice Scotland (ZHC003) Back

143   Q98 Back

144   Citizens Advice Scotland (ZHC003) Back

145   Citizens Advice Scotland (ZHC003) Back

146   Citizens Advice Scotland (ZHC003). Back

147   Citizens Advice Scotland (ZHC003); DWP response to FoI request, 10 July 2013 Back

148   Citizens Advice Scotland (ZHC003) Back

149   Q269 Back

150   Citizens Advice Press Release, Citizens Advice warns on zero hours, 9 July 2013; Q380 Back

151   Q416 Back

152   Citizens Advice Scotland (ZHC003) Back

153   Department for Business, Innovation and Skills, Consultation: zero hours employment contracts, December 2013, p17 Back

154   The Broadcasting Entertainment Cinematograph and Theatre Union (BECTU) Back

155   BECTU, Response to government zero hours consultation, 14 March 2014 Back

156   TUC, Ending the abuse of zero hours contracts: TUC response to BIS consultation, March 2014 Back

157   Citizens Advice Scotland (ZHC003) Back

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Prepared 14 April 2014