How zero-hours contracts hide real unemployment

If you're on contract without work, the ONS can count you as employed.

The CBI and Institute of Directors have both waded into the debate over zero-hour contracts, arguing that tenuous labour is a necessary tool in the fight against unemployment. The Financial Times' Elizabeth Rigby, Duncan Robinson and Andrea Felsted report:

John Cridland, director-general of the business lobby, said those complaining about such contracts needed a “reality check”…

“These contracts play a vital role as a way of keeping people in employment,” said the head of the employers’ body. “If we hadn’t had this flexible working when the economy contracted, unemployment would have topped 3m – and it didn’t it went to 2.5m.”

Cridland may or may not be correct (the actual numbers do not appear to be based on any research, but even numbers pulled out of thin air may be correct through chance), but somewhat misses the point.

People on zero-hours contracts may count as employed even while, for all functional purposes, they have no job. When the ONS is counting employment, anyone who has a currently active zero-hours contract counts as "employed", even if they haven't taken a single shift in the week of the survey. And given the anecdotal evidence that employers frequently stop giving employees work as a way of effectively firing them, many of those employees actually are unemployed, then just haven't been told yet (official statistics on the practice don't exist for obvious reasons). Dawn Foster details the sort of stories which are common:

One colleague was slightly late two weeks in a row, and when asked why replied she’d had trouble finding a parking space. She didn’t come in the following week. Looking at the month’s rota I saw her name but with no shifts allocated. Two months later I saw her near my house. “Have you got a new job?" I asked. She explained she hadn’t, and that while she’d not been sacked, she hadn’t been offered any shifts and there’d been no explanation.

The ONS explains how they measure zero-hour workers who may be in that trap:

People who are on zero hours contracts count as employed. If they worked at least an hour in the survey reference period they would be counted in the employment numbers as usual. If a survey respondent did not in fact work in the reference period, the first question asked is whether they are 'temporarily away from a job' (they could be sick or on leave, etc..). Those on a zero-hours contract should reply to say they have a job to return to. In this instance they would be in employment but listed as having worked no hours

In other words, there are people who are not currently receiving work from an employer, and who will never again receive work from that employer, but who still count as "employed" in national statistics because their employer sees no need to officially fire them. This has additional implications for their lives. Some zero-hour contracts include rules banning the employee from taking work for other employers at the same time, while those who end up "voluntarily" leaving work are unable to claim many out-of-work benefits.

The effect of this on employment statistics is hard to measure, particularly since it is widely believed that employment statistics already fail to capture the full effect of zero-hours employment. The latest figures from the ONS show just over 200,000 people on the contracts, but the FT reports that "research released this week by the Chartered Institute of Personnel and Development claimed there were about 1m zero-hours workers in the UK". Regardless of the total, however, one thing is clear: for some people, the difference between a zero-hour contract and unemployment is negligible.

McDonalds is one of the firms at the centre of the zero-hour contract row. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Stability is essential to solve the pension problem

The new chancellor must ensure we have a period of stability for pension policymaking in order for everyone to acclimatise to a new era of personal responsibility in retirement, says 

There was a time when retirement seemed to take care of itself. It was normal to work, retire and then receive the state pension plus a company final salary pension, often a fairly generous figure, which also paid out to a spouse or partner on death.

That normality simply doesn’t exist for most people in 2016. There is much less certainty on what retirement looks like. The genesis of these experiences also starts much earlier. As final salary schemes fall out of favour, the UK is reaching a tipping point where savings in ‘defined contribution’ pension schemes become the most prevalent form of traditional retirement saving.

Saving for a ‘pension’ can mean a multitude of different things and the way your savings are organised can make a big difference to whether or not you are able to do what you planned in your later life – and also how your money is treated once you die.

George Osborne established a place for himself in the canon of personal savings policy through the introduction of ‘freedom and choice’ in pensions in 2015. This changed the rules dramatically, and gave pension income a level of public interest it had never seen before. Effectively the policymakers changed the rules, left the ring and took the ropes with them as we entered a new era of personal responsibility in retirement.

But what difference has that made? Have people changed their plans as a result, and what does 'normal' for retirement income look like now?

Old Mutual Wealth has just released. with YouGov, its third detailed survey of how people in the UK are planning their income needs in retirement. What is becoming clear is that 'normal' looks nothing like it did before. People have adjusted and are operating according to a new normal.

In the new normal, people are reliant on multiple sources of income in retirement, including actively using their home, as more people anticipate downsizing to provide some income. 24 per cent of future retirees have said they would consider releasing value from their home in one way or another.

In the new normal, working beyond your state pension age is no longer seen as drudgery. With increasing longevity, the appeal of keeping busy with work has grown. Almost one-third of future retirees are expecting work to provide some of their income in retirement, with just under half suggesting one of the reasons for doing so would be to maintain social interaction.

The new normal means less binary decision-making. Each choice an individual makes along the way becomes critical, and the answers themselves are less obvious. How do you best invest your savings? Where is the best place for a rainy day fund? How do you want to take income in the future and what happens to your assets when you die?

 An abundance of choices to provide answers to the above questions is good, but too much choice can paralyse decision-making. The new normal requires a plan earlier in life.

All the while, policymakers have continued to give people plenty of things to think about. In the past 12 months alone, the previous chancellor deliberated over whether – and how – to cut pension tax relief for higher earners. The ‘pensions-ISA’ system was mooted as the culmination of a project to hand savers complete control over their retirement savings, while also providing a welcome boost to Treasury coffers in the short term.

During her time as pensions minister, Baroness Altmann voiced her support for the current system of taxing pension income, rather than contributions, indicating a split between the DWP and HM Treasury on the matter. Baroness Altmann’s replacement at the DWP is Richard Harrington. It remains to be seen how much influence he will have and on what side of the camp he sits regarding taxing pensions.

Meanwhile, Philip Hammond has entered the Treasury while our new Prime Minister calls for greater unity. Following a tumultuous time for pensions, a change in tone towards greater unity and cross-department collaboration would be very welcome.

In order for everyone to acclimatise properly to the new normal, the new chancellor should commit to a return to a longer-term, strategic approach to pensions policymaking, enabling all parties, from regulators and providers to customers, to make decisions with confidence that the landscape will not continue to shift as fundamentally as it has in recent times.

Steven Levin is CEO of investment platforms at Old Mutual Wealth.

To view all of Old Mutual Wealth’s retirement reports, visit: products-and-investments/ pensions/pensions2015/