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Workers on zero-hour contracts are ‘£1,000 worse off a year’ than employees

93p per hour pay penalty for zero-hour workers doing the exact same work as those on permanent contracts

A recent study by the Resolution Foundation highlights that workers on zero-hours contracts lose an estimated £1,000 a year compared with employees doing the same work.  The foundation said that all workers who find themselves without a permanent, full-time role lose out in terms of wages, but people hired on zero-hours contracts suffer the biggest financial punishment.  The analysis is the first to reveal a specific penalty associated with zero-hours contracts.

The pay penalty directly associated with zero-hours work amounted to 93p an hour. For a typical zero-hours worker doing 21 hours a week, this adds up to £1,000 a year. .

Although it is well known that zero-hours workers earned less than permanent employees – 38% an hour less on average – it had previously been assumed this was down to their concentration in low-paying sectors, and younger and less experienced staff.

“To get to the real pay penalty associated with zero-hours contracts, the foundation’s analysis compares the pay of zero-hours and non-zero-hours workers with similar characteristics and doing similar jobs,” it said.

“It does this by controlling for a wide range of factors including the worker’s gender, age, experience, qualification level, their occupation, the industry they work in and how long they’ve been in their current job. These factors explain around four-fifths of the overall pay gap between zero-hours workers and other employees.”

Zero-hours contracts are widely used by the care industry who are estimated to employ approximately 160,000 workers on this basis.  Retailers such as JD Sports and Sports Direct have recently been in the spotlight of the press regarding their zero-hours workers and unfair working conditions.

Figures show the number of UK workers on zero-hours contracts increasing in recent years, and official data for the last year reveals a jump of 20% to more than 900,000, indicating that insecure employment has become a permanent and growing feature of the jobs market.  In fact, a report by the UK’s largest trade union, Unite, estimated that the number of workers in insecure employment has topped 5 million.

Senior policy analyst at the Resolution Foundation, Laura Gardiner, said: “Concern about the use and abuse of zero-hours contracts goes far wider than a few notorious firms. There is mounting evidence that their use is associated with a holding down of wages.

“While some people value the flexibility offered by zero-hours contracts, they also carry a significant ‘precarious pay penalty’ that can cost workers around £1,000 a year. That’s a big price to pay for work that too often lacks the security workers desire.”

The TUC general secretary, Frances O’Grady, said: “Zero-hours workers suffer the double whammy of lower pay and fewer rights at work. That’s why the Taylor review must drag employment law into the 21st century. Far too many workers have no power to stand up to bad bosses.”

In recent months several employers have distanced themselves from the hype and unrest by offering workers full-time contracts, including the pub chain Wetherspoons who have said workers will be offered more secure employment.

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