Official Report: Minutes of Evidence

The Chairperson (Dr Archibald): I welcome to the meeting Orla Drummond and Michael Scholes, who are research officers in the Assembly's Research and Information Service (RaISe). I will hand over to you to give your briefing, and we will then bring in Committee members for any questions.

Mr Michael Scholes (Northern Ireland Assembly): Thank you very much. I will summarise the Bill paper's key points and then hand over to Orla, who will discuss the Bill's equality implications.

The paper aims to support the Committee and the wider Assembly in their scrutiny of the Employment (Zero Hours Workers and Banded Weekly Working Hours) Bill. Throughout the paper, as we usually do in RaISe, we have presented issues and questions in blue boxes for the Committee's use.

Section 1 of the paper, starting on page 7, provides a statistical profile of zero-hours workers in the UK and includes a statistical profile of zero-hours workers in Northern Ireland. Official statistics on zero-hours contracts are published quarterly by the Office for National Statistics (ONS) using data from the labour force survey. Historically, the prevalence of zero-hours contracts has been consistently lower in Northern Ireland than in other parts of the UK. The most recent figures show that only 1·2% of working individuals in Northern Ireland are employed on a zero-hours contract. The latest UK average figure for the same period is 3·2%. Overall, there has not been a significant rise in the recording of zero-hours contracts in the UK since 2014.

Section 2, starting on page 9, provides background information and gives an overview of the Bill as introduced. Back in 2014, the then Department for Employment and Learning conducted a consultation on zero-hours contracts. The consultation report did not call for an outright ban. In 2016, section 18 of the Employment Act (Northern Ireland) 2016 gave a power to bring forward regulations that can prevent abuses associated with the use of zero-hours contracts. In January 2020, the New Decade, New Approach (NDNA) agreement stated:

Finally, in November 2021, the Bill sponsor, Jemma Dolan, introduced the Bill in the Assembly. The Bill does not place a ban on zero-hours contracts. Instead, it seeks to limit their use by introducing a system of banded-hours contracts. I will give an overview of the main points in the Bill.

The Bill contains definitions for "zero hours worker" and "zero hours contract". It entitles workers to claim three hours' pay if they are called into work and not given any work. It outlaws exclusivity clauses, and I will discuss that later. The Bill gives the Labour Relations Agency (LRA) a conciliation role in disputes. It sets out the right of a worker to be placed in a band of weekly working hours that reflects the actual work hours completed over the previous three months. It gives the Department for the Economy the power to make regulations concerning the paperwork that employers must keep on the banded-hours system.

Section 3, starting on page 15, discusses the provisions in more detail. There are three elements to the section: definitions; the banded-hours system; and the ban on exclusivity clauses.

Clause 1 presents statutory definitions for "zero hours worker" and "zero hours contract". There are, however, many types of zero-hours arrangements, and reaching consensus on defining zero-hours contracts is difficult. The Committee may therefore want to reflect on whether the definition in the Bill is too broad or too narrow.

Clause 8 provides for a worker to be placed in one of eight bands of weekly working hours contracts. If workers' hours as set out in their zero-hours contract do not reflect the hours that they are working every week, they can request to be placed in a band that reflects the hours that they typically work. The Bill places an obligation on employers to monitor every three months the weekly hours worked by individuals and duly inform them, in writing, whether they are entitled to be placed in another band. The band is calculated by reference to the average weekly working hours over the previous three months. Critics of the banded-hours system suggest that it does not give employers or workers the flexibility that they need. Concerns have also been raised that the system is not fit for purpose in sectors such as tourism and hospitality, owing to the seasonal nature of some of that type of work.

The next key provision relates to exclusivity clauses. That is a practice whereby some individuals on a zero-hours contract are prevented from working for another employer, even when their primary employer does not have any work for them. Clause 3 states that the employer cannot demand that the worker not do any work outside the zero-hours contract. That effectively bans exclusivity clauses.

Clause 14, however, states that, if zero-hours workers are placed in a band, they are no longer defined as being a zero-hours worker. That may lead to a situation in which workers who were previously protected against exclusivity clauses by having a zero-hours contract are now not protected and therefore vulnerable to an exclusivity clause being placed on them by an unscrupulous employer. Representatives of the hospitality and retail sectors cast doubt on the prevalence of exclusivity clauses, however, and expressed an opinion that it was a non-issue in Northern Ireland.

Section 4, starting on page 24, presents a comparative perspective from other jurisdictions. In GB, the Small Business, Enterprise and Employment Act 2015 contains provisions banning exclusivity clauses in zero-hours contracts. In 2016, the UK Government published 'Good Work: The Taylor Review of Modern Working Practices', which was generally positive about the flexibility provided by zero-hours contracts. It did state, however, that that flexibility was largely one-sided, in favour of the employer.

In 2015, the then Department of Jobs, Enterprise and Innovation in the Republic commissioned the University of Limerick to research the prevalence of zero-hours contracts in Ireland. The report recommended that banded hours could provide more certainty for those on zero-hours contracts, particularly for those in the retail and hospitality sectors. The Employment (Miscellaneous Provisions) Act 2018 then introduced a system of banded hours in the Republic.

Section 5 of the paper looks at other issues for consideration. As I said at the start, Orla will cover the equality and human rights aspects shortly.

I have outlined the general pros and cons of zero-hours contracts, starting on page 35. The key merits include flexibility, the ability to retain experienced staff, and cost. The key demerits include the uncertainty of a regular income, a lack of fairness in employment rights and entitlements, and the potential for exclusivity clauses to be put in place by unscrupulous employers.

Finally, the paper gives an overview of the potential cost to the public purse. Clauses 7 and 16 of the Bill make provision for the Labour Relations Agency to monitor the compliance of employers and place a key role on the resolution of any disputes over zero-hours and banded-hours contracts. The LRA has indicated that a staff complement of one deputy principal, three staff officers and a small administration team may be needed to perform the new duties specified under clauses 7 and 16. Based on costings from the average salaries for 2021, the total cost of a new team dedicated solely to undertaking the new duties arising from the provisions created in the Bill equates to around £267,000 a year. It should be noted, however, that that figure is purely illustrative and is based on assumptions made without any detailed costings or impact assessments having been done.

I will now hand over to Orla for her consideration of the Bill's human rights and equality impacts.

Dr Orla Drummond (Northern Ireland Assembly): Thank you, Michael. Good morning, everyone. I will briefly cover section 5 of the Bill paper, which includes any human rights and equality considerations. That starts on page 30. Key areas for consideration of the Bill's potential human rights and equality impacts concern the negative impacts on employees and workers and their disproportionate bearing on women, younger workers and ethnic minorities.

There has been increased scrutiny of zero-hours contracts in recent years. Although they are often lauded for their flexibility, there are a number of documented detrimental impacts on workers. According to UNISON:

For example, UNISON states:

especially those arranging care for dependants.

It also states:

A summary of UNISON's concerns is detailed on pages 30 and 31 of the paper.

There are a number of areas for consideration concerning obligations under section 75 of the Northern Ireland Act 1998. The first is gender. According to the Northern Ireland Council for Voluntary Action (NICVA), women are around two thirds more likely than men to be a zero-hours worker. The TUC has highlighted how:

It also states that, owing to zero-hours contracts':

The Equality Commission emphasised that in its formal investigation into the treatment of pregnant workers and mothers in Northern Ireland workplaces. The report states:

It found:

On gender and race, a recent joint report from the TUC and the equality organisation Race on the Agenda (ROTA) highlights the fact that those from black and minority ethnic (BAME) backgrounds are almost twice as likely as white men and almost one and a half times more likely than white women to be on zero-hours contracts. The report, published in 2021, warned that, far from providing flexibility, zero-hours contracts were trapping women from BAME backgrounds into low pay and insecure work. That resulted in those workers struggling to manage their household finances as well as plan their lives.

The joint report describes zero-hours contracts as:

handing the employer total control over the workers' hours. It included polling data that showed that 40% of BAME workers on insecure contracts said that they faced the threat of losing their shifts if they turned down work, compared with 25% of white workers on insecure contracts.

Younger workers are also disproportionately impacted on by the negative outcomes of zero-hours contracts. Recent research states:

as that group is:

The research raised concerns:

The research continued:

In addition to gender, race and age, it is important to note that there have been concerns raised about zero-hours contract use for those with disabilities and for migrant workers that may also require further exploration.

Reducing zero-hours contract use and providing secure employment conditions for women, those from BAME backgrounds, younger workers and others could eradicate a number of the detrimental impacts on their working lives, thereby meeting section 75 requirements. That concludes the presentation. We are happy to take any questions.

The Chairperson (Dr Archibald): Thank you for that overview. It is really helpful to us. We have had a response from the Department on some of the points that you have highlighted for scrutiny. We received that just this week, so we can see whether there are any points on which we need to get additional responses from the Department.

We have discussed a lot of the points with the various groups that have come to talk to us about the Bill. For example, some of the loopholes in clause 14 and things like that are mentioned in the paper. We have raised those issues with the Bill sponsor, and she is willing to look at them.

We are now in the position in which this Bill is not going to conclude its passage before the end of the mandate, so there is an opportunity to consider those further points for scrutiny for any potential legislation that comes forward in the next mandate. I am sure that the Bill sponsor intends to look at introducing the legislation again.

It is an NDNA commitment, so the Department said that it needs to be considered in its forward work plan on employment law as well. Your briefing has been helpful in setting out all the points. I do not have any specific questions. I am not sure whether anybody is indicating that they want to ask anything.

The Committee Clerk: Mr Weir has indicated.

Mr Weir: Thank you for the presentation. I have a couple of queries, but you may have covered them already. Some jurisdictions have looked at the idea of banding, while some have looked at other measures. The legislation will not hit the statute books this Assembly term but may well be the foundation for what comes in a future term. I wish to ask about the mechanism used in the Bill of having a threshold or trigger point at which workers can move from a zero-hours contract to a banded-hours contract. For the period taken for the trigger point, has a similar approach been used to that in other jurisdictions or is it a variation?

Mr Scholes: The best example of that comes from the Republic of Ireland and the Employment (Miscellaneous Provisions) Act 2018. You are asking about the reference period, Mr Weir. In that legislation, 12 months is used, not three.

If I remember rightly, the three-month period was suggested by the Bill sponsor as a result of the responses to her consultation. Three months was suggested because it was seen as being more advantageous to workers than their having to wait for 12 months, which some people think may be more balanced through the employer having an input. The Republic of Ireland is the only jurisdiction that has a system of banded-hours contracts.

There are moves being made at the moment. A private Member's Bill from a Scottish National Party MP has been introduced, but it would just ban zero-hours contracts not introduce a system of banded hours. Certain aspects of it are quite interesting, including what would happen if a worker turns up and there is no work available. The provision in the Employment (Zero Hours Workers and Banded Weekly Working Hours) Bill is for the worker to receive three hours' pay if that happens. In the SNP MP's private Member's Bill, the hourly pay would be doubled, so if you were asked to come in for three hours but got no work, you would get paid for six. Moreover, travel expenses, childcare and other things would be taken into consideration.

In answer to your question, Mr Weir,12 months is the reference period in the Republic.

Mr Weir: OK. I am trying to make sure that we are not priding ourselves on doing something that may create a wider problem in different spheres.

I am going to ask a question that it may be difficult to provide an assessment of or statistics on. You and others have referred to the fact that the prevalence of zero-hours contracts in Northern Ireland is a lot less than it is in corresponding jurisdictions. We have a much smaller percentage here. That may be a reflection of the structural breakdown of the economy here, or it could be for a whole range of reasons.

There is also a concern about what I will call below-zero-hours contracts. I am not sure of the correct terminology, but it used to be called the black economy, although that may not be the correct terminology any more. In part of the economy, and I am not talking about serious criminal activity here, employers employ people casually, to the extent that they are paid cash in hand and do not appear on the books. That is a layer below that of zero-hours contracts. Has any assessment been done of the percentage of economic activity in Northern Ireland that falls into that category and of how that compares with other jurisdictions?

I would be slightly nervous that, in taking good action to try to close loopholes with zero-hours contracts, we provide an opportunity for employers to go in one of two directions. We could push employers down the virtuous route of having banded-hours contracts, but the more unscrupulous employers could take the view, "I'm not going to get caught up in the issue in the first place, so I'm just going to get in x, y and z, and give them cash in hand". Workers, through not appearing on the books, would then not have a contract at all.

As I asked, has any assessment been done of the prevalence of the problem here of people working off the books compared with the prevalence in other jurisdictions? The nature of that makes it difficult to quantify or assess.

Mr Scholes: You make an interesting point about the collection of official statistics. When talking about section 1 of the paper, I made the point that there is, and has been, a large underestimation of the number of zero-hours contracts in the UK labour market. The problem largely lies with the question that the labour force survey asks, which is about the types of hours under which a worker is employed. There is then a list of options to tick, one of which is "zero-hours contract". Another will be "called in for work", or words to that effect. I cannot quite remember the exact terminology. Respondents to the survey will tick as many boxes as they feel are relevant. Some people may not even be aware of what a zero-hours contract is or whether they are on one, and, as such, they may tick that "called in for work" box or other, similar boxes. There is therefore a problem with estimating effectively the prevalence of zero-hours contracts in the economy. The ONS is working on that. The black-market economy and that kind of casual pay go beyond the scope of the paper, but it is certainly something that we can look at. It would be a valuable contribution to a future paper.

Mr Weir: I appreciate that it was probably a little bit unfair to throw that question in your direction, but I was just wondering whether you happened to have any information about it. The benefit is that we will get a much more formalised structure, as well as better employment conditions and more certainty for people. The differential impact has been highlighted. As I said, however, I have a slight concern that we may create a situation in which unscrupulous employers are tempted to go down a route that makes the nature of work even more casual. That is more of a comment than a question.

The Chairperson (Dr Archibald): No other members have indicated that they wish to ask a question. Thank you for the presentation. It will be really helpful to us for our scrutiny of the Bill and the report that we will be doing. We will be coming back to it at some point. Thanks very much for your time.

Mr Scholes: Thank you.