Low Pay Commission consultation 2018

Published on 31 May 2018

The LPC are consulting on the recommendation made in ‘Good work: the Taylor review of modern working practices’ that they should consider the potential impact of a higher minimum wage for hours that are not ‘guaranteed’. We raise concerns about the impact that arrangements involving nominal hours or zero-hours contracts have on vulnerable workers who are desperate for a secure and stable job.

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Matthew Taylor says the proposal aims to achieve two alternative benefits: 

‘First, the wage premium for variable time would encourage employers to think a bit harder about whether they need so much work to be through ZNHCs. The consequence should be that more people who are customarily asked to work longer than the time specified in their contract will get more guaranteed hours with consequent benefits for their economic opportunities and security. The second benefit is that those low paid people who continue to be on ZNHCs will get a bit more income to compensate them for the risk and insecurity.’ 

Although, on the face of it, this ‘Taylor premium’ seems like a worthwhile idea that could perhaps help them, after a proper period of analysis and evaluation, we do have some doubts that the proposal will achieve its stated objectives, and, in our response, we set out why.

Firstly, we draw attention to the ways in which such a premium could interact with the workers’ tax, National Insurance (NIC) position, related tax credits and welfare entitlements. Few workers will feel the full benefit of the premium – indeed in many cases, it will benefit the Exchequer more than the workers. There are potential tax and NIC consequences of the Taylor premium for those slightly higher up the income ladder too (albeit still on non-guaranteed hours contracts) because an increase in their minimum wage rate may affect their ability to salary sacrifice for things like childcare vouchers.

We are concerned that certain employers facing higher labour costs might simply decide to turn to other options to protect their profitability, such as the cutting of hours, with potential knock on consequences on working tax credit (WTC) claims and any other provisions that are based on number of hours worked. We think it is too simplistic to say that employers could just move workers to set hours contracts if they do not want to pay the premium – many need the flexibility of non-guaranteed hours to manage the peaks and troughs of their business.  

We have particular questions over what will happen in the care sector, as it is not clear to us where the money will come from to fund the premium. In the agency worker sector, our overriding feeling is that we will see an increased use of vicious models based on self-employment, which will leave the low-income worker in a potentially worse situation than they are currently.

We finish our response by looking at some alternative ways to help bolster a zero-hours worker’s position.

The consultation document can be found on GOV.UK.

Our submission can be found here: Low Pay Commission consultation 2018 – LITRG response

(31-05-2018)

Contact: Meredith McCammond (please use our Contact Us form) or follow us on Twitter: @LITRGNews