Some people on zero hours contracts will not see the full benefit of any premium added to the National Minimum Wage, says the Low Incomes Tax Reform Group (LITRG).
According to LITRG, this is because of knock on deductions in their entitlement to welfare benefits. There are also concerns about how employers would react to such a premium, with the LITRG setting out its own recommendations on how the government could better support these vulnerable workers.
The doubts and concerns were raised as part of LITRG’s response to a consultation by the Low Pay Commission looking at the Taylor Review’s proposal to introduce a premium rate of pay for hours which are not guaranteed – the ‘Taylor premium’. Review author Matthew Taylor believes that this premium will lead to such workers getting more guaranteed hours and, where it does not, that it will mean they get a bit more income to compensate them for the risk and insecurity.
LITRG Chair Anne Fairpo, commented, “While this seems on the face of it a good idea for low income workers, we actually have some doubts as to whether the ‘Taylor premium’ will help tackle the issue of ‘one sided flexibility’ and workers experiencing uncertain and unpredictable work schedules.
“In particular we are concerned at the ways in which a ‘Taylor premium’ could interact with the workers’ tax, National Insurance position, related tax credits and welfare entitlements. Some workers will not feel anything like the full benefit of the premium. In addition, there are potentially serious financial consequences for those who might currently qualify for ‘passported’ benefits such as free school meals.’’
In its proposal, LITRG believes that in some cases the ‘Taylor premium’ will benefit the Exchequer more than the workers and that this measure does not seem to do much for those who are already paid at slightly more than the minimum wage.
For example, if the premium is 15% – then someone on the £7.83 rate will have their hourly rate lifted to £9. However, if they are already on £9, it seems their pay will stay at £9.
Anne, added, “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. It also does not follow that they will simply absorb the cost of the ’Taylor premium’ themselves.
“We are concerned that certain employers facing higher labour costs might 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 claims and any other provisions that are based on number of hours worked.
“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 exploitative models based on self-employment, which will leave the low-income worker in a potentially worse situation than they are currently.”
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