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In responding to the recent consultation by the Government on the use of ‘zero hours’ contracts, LITRG have drawn attention to the ways in which such contracts interact with the employees’ tax, NIC position, related tax credits and welfare entitlements. The group maintains that the problems low-paid workers face are more often than not to do with poor support from the system, rather than the actual contracts themselves.

 

Against the backdrop of the Government’s labour market strategy, LITRG can see this is a much more complex issue than just banning ‘zero hours’ contracts outright. The nature of the enquiries the group has received from the public suggests that the problems faced by low-paid workers are often more to do with insufficient support and information than the actual contracts themselves. The LITRG response recommends changes to those parts of the system within its remit (tax, tax credits and benefits) that can put workers on ‘zero hours’ contracts at a particular disadvantage.

 

An example from recent email correspondence LITRG received featured a care worker paid the national minimum wage (NMW) and on a ‘zero hours’ contract whose work-related motoring costs were not reimbursed by her employer. She had been told in her induction interview that they could be ‘claimed’ under HMRC’s ‘mileage system’ even though her earnings were insufficient for her to pay tax in the first place, with the result that the expenses she incurred in doing her job were not reimbursed either by her employer or through the tax system. In addition, the NMW rules meant that any unavoidable travel expenses she incurred personally could not be taken into account in the NMW calculation whereas they would have been if the employer had reimbursed them. Accordingly, she was very likely to be making far less than the £6.31 per hour minimum wage, eroding her precarious position even further.

 

If ‘zero hours’ contracts are here to stay – and it seems that they may be – this query clearly illustrates the need for basic information about what low-income workers on such contracts should expect, as well as the mismatch of the rules that may be affecting them. Great care needs to be taken over such details in order not to put workers at a disadvantage. The LITRG response makes recommendations on these and other matters in the form of practical measures that can be taken relatively quickly to help ease the position of a low-income ‘zero hours’ worker. The group also recommends a comprehensive review taking into account the tax and benefit interactions, with a view to better protecting low-paid workers in the long term.

 

LITRG response in full