My Lords, this is a probing amendment to analyse the relationship between the flexible labour market and the benefit system that is supposed to support it and which often fails to do so. Some 6 million people in this country have part-time or flexi-hour jobs, and well over 1 million—probably nearer 2 million—are on ZHCs. Most are on or around minimum wage. Unite estimates that half of all workers under 30—that is 3.75 million—are on ZHCs and other short-hour contracts.
As I have said in relation to a previous amendment, of those who are on a ZHC, 75% find that their hours vary every week; only one in five have the same hours and thus the same pay each week. Many do not know on Friday what hours and what pay they will get on Monday.
We have already discussed the abuses that workers may face: unpredictable hours, low pay—nearly 60% of those on ZHCs earn less than £500 per month, with no proper contract, no reliable income, shifts cancelled at an hour’s notice and no ability, which the Bill addresses, to work another job alongside it. There is one other downside that has been largely overlooked and which applies not only to ZHCs but to any part-time job: the interaction more fully with the benefits system. The CIPD, whose figures I have with me, found that 37% of people on ZHCs—that is, 400,000 people—as well as hundreds of thousands of others in short-hour jobs work fewer than 16 hours a week, most at or around minimum wage, in any one job. Tesco was recently recruiting some 800 staff. Ninety-six per cent of the vacancies were for part-time positions, deliberately designed to save the company paying employer national insurance and thus saving Tesco some £100 million a year, even though that left many of its employees without national insurance rights.
Snapshots of Jobcentre Plus show that the majority of jobs usually advertised are part-time, which can mean that those filling them do not come within the national insurance system. As I am sure the Committee knows, for you to come within the NI system you have to earn at least £5,700 in any one job, although you and the employer do not pay NI rates until you are earning at the primary tax threshold of £7,500. Cruelly, and completely irrationally, if under the new freedoms you run three £5,000-a-year jobs alongside each other—for example, cleaning, work in the lunchtime sandwich shop, local newsagent or launderette, or bar work—although your £15,000 income from your three £5,000 jobs is amalgamated for tax purposes it is not amalgamated for national insurance purposes and you are outside the system. I estimate that some 200,000 people are caught this way. We can argue the statistics but I have had the privilege of being a member of a working party on this subject, chaired by the IFS and set up by the Minister’s right honourable friend in the other place, Steve Webb.
The Bill rightly allows people to run two ZHC jobs alongside each other but that will substantially increase the number of people caught. Although their amalgamated income would take them over the NI threshold, because they have to earn more than £5,700 in any one job, they are still penalised. Such jobs are not temporary contracts for entry-level jobs. As my noble friend Lord Young said earlier, half of those doing them stay for more than two years and one-quarter stay for more than five years in such ZHCs.
Who are they? People can be credited into the national insurance system if they are unemployed and on JSA or ESA, if they have children under 12, if they are caring for older people for more than 20 hours a week or if their household income is so low that they will qualify for universal credit.
Who then is excluded from coming within NI? They may be young people living at home. Rather than live off benefit, which would bring them into NI, they are bravely patching together an income that does not. If you are unemployed you get NI, but if you piece a living wage together through two or three jobs then you do not.
They will, in particular, be middle-aged women with children over 12, whose partner’s income floats them off universal credit but who have one, or three, part-time jobs, all below the lower earnings limit, which they have fitted around their family life and caring responsibilities for years. Does it matter? Why am I banging on about this? Without NI, you lose statutory rights to sickness, holiday and maternity pay. Above all, you fail to build your 35 years towards a full state pension. This mattered less until the spring because, in the past, married women could derive a state pension from their husbands—the 60% dependency pension. In future they will not be able to get a pension through him, or through their own work, even if they are working 30 hours a week in three ten-hour jobs. They will go into retirement with much lower pensions. If you lose seven years of NI contributions, and many women in their 40s and 50s may be working without NI contributions for seven years or so, your state pension on retirement drops, on current figures, by £30 a week for the rest of your life.
I have tried, and I am still hopeful that another Government may be able, to amalgamate a couple of mini-jobs for NI purposes, just as they do for tax, to bring a worker into NI. I recognise that in the past the difficulties in doing this were with divvying up the employer’s contribution among two or three mini-job employers and collecting the appropriate information about hours of work. I acknowledge that those two roadblocks were real but we are allowing the self-employed to acquire the full new state pension without an employer’s contribution, so that problem has disappeared and, as the Minister has said, we are collecting real-time information for UC so we can track it all. We could therefore treat people with ZHCs as though they are self-employed or, if they are working less than 16 hours in any of their jobs but at least that in total, they could be regarded as meeting JSA work conditionality and be credited in. We could let older workers, especially women, revisit their national insurance record at the point of retirement to make good any shortfalls, whenever
they had occurred, and not confine their ability to do that to the last six years of working life when family pressures—and, therefore, their exposure to a bundle of mini-jobs that did not bring them into NI—may well have occurred much earlier than this.
The coalition Government have, wrongly, refused all such possibilities. With this amendment, I am trying another path to again get people on ZHCs into the national insurance system. Revisit the lower earnings limit, the point at which you come into national insurance. It is currently £5,700 but you do not pay it until £7,500. You could abolish the LEL altogether. After all, if you are on JSA, ESA or UC you come into the national insurance system as of right, without paying a penny and, at that point, without working. It is therefore arguable that there is no point in the LEL any more. However, if that is too radical, I make a more modest suggestion that anyone earning £3,000 a year in any one job—that is £60 a week, or around 10 hours per week at minimum wage—should be credited into NI. A few weeks back, I tabled a Written Question asking what the net cost of this would be, given that so many people are credited into NI without any wage from work. I did not expect it to be high. The noble Lord, Lord Deighton, helpfully replied that the information was not available, which I find hard to believe. I am glad to see the noble Lord, Lord Newby, here; perhaps by now the Minister has had the datasets sorted. That is the reason for this probing amendment.
More positively, we know that the best predictor of anyone in a full-time job is that they held a mini-job the year before, and that a zero-hours contract job of around 10 hours may be a stepping stone back into the labour market for older women. It may, over time, add to our tax and NI receipts.
However, the real case for the amendment is a moral one. We are—some of us—happy to have a flexible labour market in which all the risk passes to the worker, who is then exposed to an exploitative labour market and a rigid and inflexible social security system. Even with this Bill, and even being able to work a couple of ZHCs together—which will be difficult, given that you cannot predict the hours in either of them—you still have to get above the LEL in any one of them to come within NI, so the risks of losing years of your state pension accrual remain.
The flexible labour market will send hundreds of people into retirement with an incomplete state pension, simply because issues such as these are off the Government’s radar. I beg to move.
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