Workplace Report February 2013


Zero-hours contracts on the increase across all sectors

Casualised work arrangements, such as “zero-hours” contracts, are spreading. The recession seems to be a lot to do with it, but there is also a suspicion that they are being used by employers trying to avoid the agency workers regulations, which now entitle agency staff — after 12 weeks — to the same basic terms and conditions as permanent employees.

The latest Labour Force Survey figures indicate there were 1.65 million temporary workers in the quarter to September 2012 – a 6.9% rise on a year earlier. The biggest rise in this group was in the number who described their employment as “casual” which, at 346,000, was 16.3% higher than a year earlier.

"Zero-hours" contracts

One form of very casualised working which has started to hit the headlines is “zero-hours” or “as-and-when” working. There is no clear definition of this kind of work. It is a loose name for an arrangement where the worker is generally expected to be available to work for a particular employer but is not guaranteed any work, and is paid only for work actually done.

Zero-hours contracts are not —so far —prevalent across the whole economy, but use has been spreading over the recessionary period. The 2011 Workplace Employment Relations Study, which looked at 2,680 workplaces, found that the proportion with some employees on such contracts doubled from 4% to 8% between 2004 and 2011. The prevalence is greater in workplaces with 100 or more employees, where the proportion with some workers on zero-hours contracts rose from 11% to 23%.

The arrangement has clear advantages for the employer, who not only avoids paying for any “down time” but may also, if not challenged by unions, avoid providing the equivalent contracted holiday pay, pensions or other benefits enjoyed by other employees and agency staff.

There are occasions when a “no-strings-attached” arrangement might suit the worker, such as sometimes occurs with bank nursing or supply teaching. But it is increasingly being used to replace proper secure employment with its associated guaranteed level of paid work and other benefits.

Even worse, it can be applied in such a way that a worker, in order to have any chance of getting paid work, is obliged to be available for work at the whim of the employer and so cannot commit themselves to any other employment.

Zero-hours arrangements have become quite widespread in the last few years in a number of low-paying sectors, such as supermarkets, catering and social care. But they are also becoming prevalent in some better paid, professional occupations, notably among college lecturers, and even among airline pilots. In 2012, the Labour Research Department helped the BALPA pilots’ union in its campaign around the growing use of zero-hours contracts to employ commercial pilots.

More recently, there have been reports that zero-hours contracts are spreading to clinical areas of the health service, such as cardiology and psychiatry.

In September 2012, public services union UNISON expressed concern about an increase in such casualised working arrangements, which it says results from changes to the way in which health services are commissioned and provided. The union’s senior national officer for health, Sara Gorton, said: “We are getting worrying feedback that the use of zero-hours contracts, including for highly trained health workers, is increasing in the NHS.”

As shadow health secretary Andy Burnham pointed out, while zero-hours contracts have previously “suited staff willing to trade a bit of uncertainty for extra pay … it’s very different to extend these contracts into core delivery services. What is going on here is the unpicking of the fabric of the employment system of the NHS in England”.

Workplace Report survey

Workplace Report contacted reps on its Payline database to see if unionised workplaces were being affected by casualisation to any great degree. As reported in the January 2013 issue, while almost two-thirds of reps (65%) reported their employers made “significant” use of agency, casual or fixed-term workers, most of this does not come under the category “very casual”.

Nevertheless, further investigation suggests that there are pockets of the unionised economy where zero-hours contracts and other very casualised arrangements are creeping in. The most common area is further education, but there are also examples in central government, local government (including fire and rescue services), the utilities, manufacturing and the voluntary sector.

A rep from Balfour Beatty Workplace, which is contractor to the Department for Work and Pensions, described how some workers are taken on: “Staff are interviewed, then brought in ‘as and when’ on varying hours each week. Sometimes they are not needed at all for several weeks.” He added this was “not a way of earning the loyalty of employees”.

Further education

Zero-hours contracts have been a long-running sore for the university and college lecturers’ union, UCU, which has a permanent campaign against casualisation in higher and further education. It achieved some success in 2004 with a national framework agreement for higher education which guaranteed equal treatment for hourly paid lecturers with full-time lecturers.

However, the Workplace Report investigation suggests zero-hours contracts seem still to be common in further education, and in some cases constitute a significant proportion of teaching staff.

For example, a UCU rep from Hackney Community College reported that about 35% of teaching staff there are employed on zero-hour contracts. They are called “hourly paid lecturers” (HPLs), as distinct from those on permanent contracts who are called “main grade lecturers” (MGLs). The rep said: “Most of the HPLs carry out exactly the same duties as the MGLs, but are paid much less and have worse conditions, less job security.”

A rep from another college said over 60% of lecturers were now on permanent zero-hours contracts who have “very limited access to training” (although they can attend unpaid).

Fire service

Another sector in which several union reps report the introduction of zero-hours-type arrangements is fire and rescue services. In Devon and Somerset, the Fire Brigades Union (FBU) discovered that the service had been trying to recruit firefighters on a casual basis to provide water rescue services for harbour wall construction work.

The terms of work offered to recruits stated that: “As work is on a casual basis … you are not entitled to occupational sick pay while carrying out this work.” The terms also made clear that these workers would not be covered by the “grey book” (agreed terms and conditions for firefighters) and that pay would not be pensionable.

At Norfolk Fire and Rescue Service, the FBU rep said some 20 “training positions” and a dive team were currently on zero-hours contracts and the service was looking to expand this to other posts. In Essex County Fire and Rescue, these contracts “are being used for additional hours to avoid enhanced overtime” and in Surrey the service is also trying to bring in zero-hours “secondary” contracts to cover under-staffing — the result of a five-year recruitment freeze.

Short-hours contracts

While zero-hours contracts are the most common form of casualisation in unionised workplaces there is a sprinkling of workplaces with other very non-standard contracts.

One type which seems to be on the increase is to give very short-hours contracts while keeping open the possibility that more work will be offered. Sometimes the extra hours will be “off-contract”, in other words, do not attract the contracted benefits. These are spreading through the retail sector, and are particularly worrying in the light of the changes to the Working Tax Credit, which is only available to people working at least 24 hours a week.

These arrangements have sometimes been introduced as a lesser evil due to union opposition to zero-hours contracts. This was the case at social housing provider Riverside, where the union has managed to resist zero-hours contracts. It has recently been approached by the employer for staff to be recruited on reduced-hour contracts, but with an expectation of doing overtime when required.

At Michelin Tyres, the union rejected zero-hours contracts, but was unable to block variable-hours contracts. Between 20% and 30% of production staff have core hours set at 22.5-hour in their contracts, but in practice normally work full time (37.5 hours). However, if the work available shrinks, they revert to part-time hours. The rep said the company “would like to employ far more employees on this type of contract and are discussing it in the rest of Europe”.

Artificial self-employment

Another variation of casualisation is imposed or artificial self-employment. This has long been a bone of contention for construction unions, whose industry is riddled with employers forcing workers to be “self-employed” so as to avoid giving them holiday pay, sick pay, pensions and so on, as well saving on employers’ national insurance contributions.

Construction firms have become more sophisticated in this effort, and now often use middle men — known as “payroll” companies. These help the construction firms to switch their staff from the status of employee to self-employed. They charge the employer a fee for this, but the employer gains by avoiding having a legal relationship with the worker.

Umbrella firms

In a variant of this, a company (or a payroll company) may set up an “umbrella” company which employs the workers instead of the main company. These umbrella companies are able to take advantage of a currently legitimate tax dodge. They design employment contracts in a way that utilises tax relief the employees are entitled to on travel and subsistence payments. In theory this means they can make the arrangement attractive to workers as the company can offer more pay without spending more. However, the benefit is not necessarily passed on to the employee.

A UCU rep from one university told Workplace Report that the employer, which was already using contract staff to avoid direct employment and for the tax advantages, has now made proposals for using an umbrella company. The rep felt this was to “avoid” both the national framework agreement for higher education (which gives equality to hourly-paid lecturers) and the harmonisation of terms and conditions for the lowest paid.

Another company employing staff through an umbrella company is airline caterers LSG Sky Chefs (now part of Alpha LSG Sky Chefs) according to the Unite rep. However, these arrangements have not been 100% successful for the company and are now being discontinued.

Reversing the trend to casualised working

Until recently, around 70% of the Manchester-based workers at airline catering company LSG Sky Chefs (now part of Alpha LSG Sky Chefs) were employed via a range of casualised arrangements. These included as-and-when contracts, umbrella companies and agencies.

For the last eight or so years, the company has gone through a complex series of attempts at hiving off different sections of core work to outside providers to avoid the commitments of an in-house workforce. These culminated in the creation of a “labour provider” company (G.A.S.), which was 40%-owned by LSG. The arrangement also allowed the company to avoid the effects of the agency worker regulations on the pay bill.

G.A.S. was being used by the company nationwide for its “general assistance” workers. This previously core workforce now consisted to a great extent of staff on zero-hour contracts and “336-hour contracts”, which only guarantee 336 hours of work a year. (This number of hours is significant as it is viewed by HM Revenue and Customs as the minimum employers must guarantee to take advantage of the tax allowance available for employees of umbrella companies.)

However, unbeknown to the company, just as it was transferring staff out of its employment and into G.A.S., workers at the Manchester site were steadily joining the Unite union and preparing a bid for union recognition. This they achieved in November 2011. This was too late to stop the move to G.A.S., but at least recognition was carried over with the workers.

The union subsequently put pressure on LSG Sky Chefs to transfer the Manchester workers back in-house. This was ultimately successful, and the process was completed last month.

Another move made by the company just before the arrival of the agency worker regulations was to set up an “umbrella” scheme for its HGV drivers - previously agency staff. The drivers were urged to switch to the umbrella scheme. Some did, although many refused to.

Last year, the company merged with Alpha Flight Group to form Alpha LSG Sky Chefs which, according to the Unite rep, thankfully signals a more secure and ordered future for staff. Having caused chaos for the companies as they were merging, the umbrella system was scrapped and the company has begun the process of bringing staff back in-house. The HGV drivers are also largely being brought in-house.

In some cases zero-hours contracts and other very casualised arrangements are, like more “traditional” casual working or “bank” working, used by employers to cover for sickness or sudden upsurges in demand. However, many union reps sense other motives.

A union rep from a major entertainment venue said: “There are employees employed on contracts of around 20 or 24 hours who are routinely working 35 hours or more. Some areas have as-and-when casuals. I believe both go beyond what would be required to accommodate the peaks and troughs the company experiences.”

A rep at Orkney Islands Council said there is currently a high use of casual staff in care work, which is increasing as contract staff are not being replaced. The union thinks this is because the council is planning to outsource all staffing in the care service.

Other reps think the use of zero-hours and other casualised contracts is an attempt to avoid paying enhanced overtime rates to existing staff or to minimise the use of agency staff (who have rights after 12 weeks to the same basic pay as permanent employees). The Workplace Report investigation certainly threw up a number of examples, including in the House of Commons catering department, where staff previously taken on through agencies are being employed on zero-hours contracts.

Union action

In some cases, unions have managed to prevent the casualisation of core work at their workplace. Unions at the National Assembly for Wales, for example, opposed a management proposal for zero hours working, which seems to have worked for the time being. And at Akcros Chemicals in Eccles the management has agreed to Unite’s demand that such casualisation will not take place on that site at all.

It is rare to have such categorical successes as these, but there are a good number of examples of where the union has managed to mitigate the worst excesses of casualisation.

These include a number of universities, where UCU nationally has had a campaign against casualisation for some time. Bradford University, for example, not only has implemented parity for part-time hourly paid staff with full-time contracted staff, as per the national framework agreement for higher education, but its policy also states clearly: “There is no scope for the use of ‘zero-hours’ contracts under the terms of this agreement.”

At University College London (UCL), all those on “as-and-when” teaching-only contracts were moved onto contracts of employment in 2007-08 after a union campaign. And, unlike other employers in the sector, UCL did not impose a “minimum number of teaching hours” qualifying condition on this. The UCU there is now also campaigning “in support of research staff on fixed-term contracts or allegedly-permanent ‘finite-funding’ arrangements”.

Another university reached agreement with the UCU on converting hourly paid staff onto contracts, with a simple transfer after four years. Management also agreed to review the use of hourly paid academic staff contracts.

At Manchester University, the union has tried to get all zero-hour contracts replaced with at least a defined-minimum-hours contract. The UCU rep says: “This has been largely successful, but there is resistance from some parts of the university.”

Even in further education, where casualisation among teaching staff has been rife, the unions have in some cases managed to limit the damage.

Leeds City College, for example, has agreed in principle to use outside agency workers less and offer a “college contract” to such teachers/lecturers. And at another northern college, all new jobs or extensions of contracts are sent to unions before actioning. The UCU rep said: “We have put pressure on improper use of contracts with some limited success in that they are probably less likely to be used now.”

At Hackney Community College, the UCU has won the right for some of the staff to be made permanent. Previously, when there were cuts to be made, staff on zero-hours contracts were prioritised for dismissal. But instead of being made redundant their hours were varied down to zero. Sometimes these were members of staff who had been working many years on stable, substantive hours.

The union successfully argued that this was in effect an unfair dismissal and a breach of contract (as the hourly paid contract specifies notice and redundancy terms). Since then, the employer no longer singles them out for redundancy/dismissal, but pools all the teachers together.

Outside education, at the Welsh Ambulance NHS Trust, Unite got management to agree to use “as-and-when” paramedics/EMS technicians (mostly people who have retired or left the service but have put their names down to work in this way) only as a last resort after employing staff and offering overtime to the current workforce. And the FBU at Essex County Fire and Rescue has managed to get “secondary” zero-hours contracts limited to specific, usually community projects, rather than for core work.

At Michelin, Unite has gained some improvements for the staff on variable contracts. If they are working the full-time hours (which is normal) and they go off sick or on holiday, their pay is based on full-time hours rather than the guaranteed 22.5 hours in their contract.

UNISON has had success at a county police service which employs station desk officers and custody staff on zero-hours contracts to cover sickness and so on.

The union has prevented these being applied in some cases and, where the member of staff has been used on a regular basis and perhaps in regular hours, they have been given a permanent fixed-hours contract.

At Riverside, Unite has at least managed to block zero-hours contracts (see above), while at Bassetlaw District Council the UNISON rep said the union had negotiated to ensure all casual work is “on a standard basis”. And at transport logistics firm DHL, Unite negotiated an agreement whereby agency workers progress to full rates of pay and are not laid off on a casualised basis.

Using zero-hours positively

When introduced for the right reasons and with union involvement, zero-hours contracts can be an acceptable arrangement.

The Nottingham Community Housing Association (NCHA) introduced zero-hours contracts for relief care and support workers as an alternative to relying on agency staff. In this case the change in arrangements was not to avoid the agency workers regulations but to ensure the staff went through proper background checks and that they had the correct skills. (These employees are in fact required to undertake training provided by NCHA.)

From the workers’ point of view the arrangement is better than that as agency staff: their pay was improved because there was no third party taking a cut. In addition, they are consulted about work changes and are encouraged and enabled to be members of a trade union. They are included in any pay awards and their representatives negotiate with the company.

They do not receive the full range of benefits available to permanent employees, but do have access to statutory parental leave and pay and sick pay and are entitled to join the company pension scheme. They are paid – at national minimum wage rate – for all hours spent on training, and receive enhanced rates for “waking nights”, “sleeping-in duties” and for Christmas and New Year’s Day.

While elsewhere many care workers on zero-hours contracts are paid only for time actually attending a client, at NCHA they receive “payment for time between visits”, calculated at 10% of total gross monthly pay.

Following the switch to zero-hours contracts for relief care staff, NCHA also set up an admin relief team on zero-hours contracts – but this time it was to save money. However, it turned out to be more costly so the staff are now being re-engaged onto permanent contracts of employment.