Introduce a bill to set a higher minimum wage for zero hours contracts
We call on the government to introduce a bill into parliament to set a minimum overtime rate of 1.25 times an employees standard hourly rate. This standard hourly rate must itself be no less than the national minimum wage in force at the time.
This would effectively set a higher minimum pay rate for zero hours and minimal hours contracts – that rate being 1.25 times the national minimum wage.
As well as those on zero hours contracts this would also benefit other staff who are flexible and routinely work overtime.
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We would suggest the following –
- Every employee must (already) have an hourly rate of pay specified in their contract that applies to their contracted/standard hours. This rate may be no lower than the National Minimum or National Living Wage if it such a wage applies to the worker
- Every employee should have standard working or contracted hours specified in the contracts.
- For hours worked above the workers contracted hours the minimum pay rate must be at least 1.25 times the hourly rate specified for contracted hours (it being no lower than the national minimum wage).
Salaried Positions
The above rate not is not to apply to salaried positions where overtime is not paid.
Piecework/Tips and other non-hourly salaries
Where salaries have to be made up to the national minimum wage
- Salaries up to the guaranteed hours of the employee will need to be made up to the national minimum wage
- Where additional hours are worked these will need to be made up to 1.25 times the national minimum wage
Interpretation
The aim of this policy is to target employers who systemically provide employees with contracts for considerably fewer hours than they would normally be expected to work. The most extreme case of this is employers who widely use zero hours contracts.
In the example of a zero hours contract the minimum pay rate would be £9 per hour based on the current National Living Wage of £7.20.
In the case of an employer where the typical contracted pay rate was £12 an hour overtime would be paid at a minimum rate of £15 an hour.
There are expected to be multiple beneficial effects of this bill
- There is a substantial incentive for employers paying close to the National Living Wage to offer employees contracts for the hours they work ensuring a degree of job security
- Workers on flexible contracts will be guaranteed an incentive in terms of pay for that flexibility.
- This will establish the principle that working overtime deserves extra pay to reward flexibility
- This will encourage an employer to create more full or part time positions sooner rather than use casual labour or excessive overtime
- There will be a reduction in state benefit requirements and administration costs by reducing income volatility
- It will allow employees to plan for the future with a degree of certainty – increasing economic activity.
Will this penalise good companies
No if anything this will reward companies who offer employees security in work. It creates a fairer playing field – acknowledging that good employers shoulder risks on behalf of their employees.
It still allows for a flexible workforce with the overtime incentive being within reasonable limits.
Will this cause job losses/increase unemployment
This is unlikely. It may force employers to plan more carefully to give employees a more stable income. It will also help force out some of the worst practice such as bullying. Most employers should not see a material increase in cost. It should also help ensure a happier and more productive workforce.