Head of UK Policy Review Floats Higher Minimum Wage for Zero-Hours Employees

Head of UK Policy Review Floats Higher Minimum Wage for Zero-Hours Employees

Zero-hour contracts, which do not obligate companies to give employees any work in a given pay period, have been a hot-button issue in the UK since an investigation of Sports Direct last year found that they regularly led to workers at the UK’s largest sportswear retailer earning less than the minimum wage. These contracts have become increasingly popular among UK employers in recent years, with a report last September finding that over 900,000 British workers were employed on zero hours.

Now, the head of a government-sponsored review of current employment practices says one solution to the income security challenge posed by zero-hour contracts is to adopt a higher minimum wage for this category of employees.

“The problem in the labour market is not security of work, it’s security of income,” Matthew Taylor, a former advisor to Tony Blair who was appointed by Prime Minister Theresa May last October to lead the Independent Review of Employment Practices in the Modern Economy, told the Financial Times last week. Taylor, whose panel of experts is scheduled to issue its final report this summer, proposed that by requiring employers to pay a premium on non-guaranteed hours would create an incentive for them to give their workers more predictable hours, leading to less variable incomes and greater economic security.

Taylor stressed that the idea is still “up for debate” and may not necessarily feature in the review’s final recommendations. He also acknowledged that there could be drawbacks to creating another minimum wage category: The UK’s National Living Wage, which rose this month from £7.20 to £7.50 per hour for employees aged 25 and over, already provides a lower minimum for under-25s to encourage businesses to employ more young people.

Whatever approach the review ultimately settles on, Taylor’s dim view of zero-hour arrangements suggest that the report will likely address them as a problem to be solved. Non-guaranteed hours, he told the FT, allow companies to be “lazy about transferring risk” to their employees, and while these contracts are theoretically supposed to provide flexibility to both parties, he has heard evidence that this flexibility is sometimes “one-sided.”

Taylor’s wide-ranging review also touches on issues like the skills gap, the gig economy, and long-term issues around tax and benefit policies. Regarding the gig economy, Taylor said his panel was unanimous in the opinion that “the law should do more of the work and the courts should do less of the work,” advocating legislation that explicitly spells out the difference between genuinely self-employed people and gig economy workers. Taylor is not the first to suggest that the gig economy necessitates updating labor laws to account for a new category of worker who is neither an employee nor an independent contractor.