Fair Work Framework 2016
Why is security at work important?
Security and stability of employment allows individuals to better plan their day-to-day lives and their future. Security of income can contribute to greater individual and family stability and promote more effective financial planning, including investment in pensions. When people have a stable and sufficient income they rely less on the welfare system while in work and in retirement. Predictability of work commitments, especially working hours, are also important elements of fair work60.
Security plays an important role in behaviours and attitudes within workplaces and therefore can generate important benefits for employers. Where people feel secure, this can increase their willingness to adapt and change, their commitment, the chances of them 'going the extra mile' and can also increase employer-worker trust. Stability of work can support more workplace
learning, better skills development and fulfilment in work. Security and stability in work can also reduce worker turnover and minimise recruitment, selection costs and lost training costs.
Security at work can generate clear benefits for society. Where people have stable employment and sufficient income, public spending on the welfare system can be lower and more public revenues can be generated through taxation. Conversely, low pay and employment insecurity lead to in-work poverty, child poverty and poverty beyond working life, all of which diminish individuals and society. Insecure employment is associated with poorer health outcomes with implications for demands on health services.
Evidence on security at work
Looking at pay levels, gross median annual full-time pay in Scotland was £27,710 in 2015, with part time workers' gross median pay at £9,837. Gross median weekly pay was £527 (full-time) and £175 (part-time)61. Median pay varies considerably across Scotland's regions.
Turning to low pay, in 2014 around 3% of people in Scotland earned the minimum wage or less, and just over 19% of the workforce (around 427,000 people) earned less than the Living Wage, more commonly in the private sector (for 27% of workers) than the public sector (for 3% of workers)62.
Some groups are over-represented in low paid work: women, disabled workers and BME workers. To illustrate, 22.4% of women earn less than the Living Wage compared with 13.9% of men63.
Of the respondents who reported to the Scottish Parliament's Economy, Energy and Tourism Committee Inquiry into Work, Wages and Wellbeing64, 26% identified their job as a bad job and 39% of these cited low pay as the reason why their job was bad.
In the UK, earning less than the Living Wage is a particular problem for bar staff, waiters and waitresses, kitchen and catering assistants and sales and retail assistants65. Many self-employed workers suffer low pay, with average gross median income of £207 per week in 2012/13. Low pay links to poverty. In Scotland, 52% of adults living in poverty (250,000 people) were in working poverty in 2012/1366. The UK ranks 16th in the EU-27 countries for the proportion of people facing in-work poverty; 8% compared with the EU-27 average of 9%67.
Turning from pay levels to pay disparities, there are known, observable pay differences between different groups of people in Scotland - between men and women, white and BME workers and disabled and other workers. In 2014, gross median full-time hourly earnings for men and women were £13.61 and £12.39 respectively, with gross median part-time hourly earnings of £8.31 for men and £8.91 for women68. In Scotland, the gender pay gap is higher (17.5%) in the private than in the public sector (11%).
Pay disparities also vary by industry: the finance/insurance sector has high earnings and widely unequal hourly earnings. Pay in the manufacturing sector is concentrated in the mid-range of earnings. The service sector has lower median wages and more concentrated pay ranges69.
Britain has the highest pay inequality in Europe70 and pay inequality has been rising for more than three decades71. In Scotland, the bottom 40% of earners earn
22% of total income while the top 10% get 24% of total income. Reliable data on pay ratios is not widely available for Scotland, but in 2013, FTSE 100 CEOs were paid on average 130 times more than their average employee72. Non-pay benefits or benefits in kind exacerbate income disparities as these also rise with income.
Employment insecurity and precariousness can arise from fears of job loss and are often linked to types of contractual arrangements. Around 16% of UK employees perceive that they are likely or very likely to lose their job73. In 2015, temporary workers made up 6.4% of the total UK workforce. One-third of these workers are in temporary work because they cannot find permanent employment74. The impact of employment insecurity goes beyond its impact on income, impacting negatively on wellbeing.
Around 2.3% of people in employment in the UK and in Scotland are on zero-hours contracts (ZHCs)75; 65% of these work part-time. Young people and women are more likely than others to be on ZHCs76. Around 11% of businesses make some use of ZHCs, most commonly in larger than smaller businesses, in accommodation and food services and education, and for people in elementary occupations and caring and other service occupations77.
Around 8.6% of workers in Scotland report that they are underemployed (that is, they do not have enough hours of employment)78. In the UK, 22.1% of part-time workers and 19.6% of young workers report underemployment79. In Scotland, 16 to 24 year olds were the only age group to see an increase in underemployment in 201580. Underemployment is most heavily concentrated in elementary occupations and in sales and customer services occupations81.
What people told us
A range of security related concerns were raised by individuals and organisations who spoke or wrote to the Convention.
- Analysis of employment advice provided by Citizens Advice Scotland from 2014-15 as part of the Oxfam Decent Work project identified 50,625 new employment advice inquiries with 13,081 of these relating to pay and entitlements (up 19% on the preceding year); 514 relating to the National Minimum Wage; 1,636 relating to illegal pay deductions (up 25.6%); 3,471 relating to holidays and holiday pay (up 21%); 3,555 related to sick pay (up 26%); 94 related to sick leave (up 24%); 7,610 relating to dismissal (up 8.4%) and 3,078 relating to redundancy (down 9%).
- Oxfam's Decent Work research suggests that at the lower end of the labour market, a decent hourly rate and job security were ranked as the most important components of decent work, illustrating that the material basis of employment - what people earn and how secure their income is - is crucially important.
- Concerns were raised over what was considered an inappropriate application of the lower rates of National Minimum Wage pay rates for young people and apprentices.
- High salary disparities within organisations and across organisations in the same sector were viewed as unfair.
- Many workers reported a lack of transparency in pay policies.
Employment and income instability was widely viewed as inconsistent with fairness, not just by workers but by many employers who engaged with the Convention:
- The overwhelming view of zero hours contracts was that they were unfair.
- Forms of flexibility that led to insufficient hours of work and unpredictable income were widely considered to be unfair and burdensome to individuals.
- Many workers reported that work insecurity led to personal and life insecurity and made it more difficult to take longer term decisions such as taking out a mortgage.
- There was widespread condemnation of situations where people could be in work but still in poverty.
- Older women reported that insecure and low paid work had significant negative consequences on their incomes and wellbeing.
- Interactions between the welfare benefits system and insecure contracts were often seen to leave people doubly disadvantaged: insecure work was not a stable escape from unemployment, but taking up flexible or insecure work disrupted benefits entitlements and was extremely challenging for those without a financial safety net to rely on.
- Workers and many employers supported the Scottish Government's commitment to increase the uptake of the Living Wage in Scotland.
- Importantly, some stakeholders urged the Convention to focus not just on the Living Wage, but on fair wages and pay ratios.
A number of employers and employers' organisations highlighted the challenges to improving security including:
- Some firms and sectors who foresee challenges in adopting either the new National Living Wage or the Living Wage Foundation specified Living Wage because of its cost implications for the business and/or because those who commissioned their services would not cover its cost.
- The impact of adopting the Living Wage on established pay structures/relativities.
- Good examples were offered by small and large employers of how to achieve operational flexibility without resorting to zero hours contracts. These included flexible guaranteed hours contracts which met the needs of the employer for flexibility without burdening workers with uncertainty of income.
- Some businesses stressed the importance of a level playing field and that opting to pay the Living Wage might disadvantage them competitively in a way that a higher National Minimum Wage would not.
- The New Policy Institute reported to us their research with some accredited Living Wage employers in Scotland82. For many, the rationale for the Living Wage was 'enlightened self-interest' - the positive impact on workers and the benefits to the business of being distinctive in the eyes of potential recruits, customers and other businesses.
Many expected that paying the Living Wage would lead to greater loyalty and commitment from staff. For small firms, the Living Wage was a useful signpost of what is fair. For large employers,
the key challenge of Living Wage accreditation was how to manage this in their supply chain.
- Employers with low levels of control over their revenues, particularly those emanating from public sector funding, argued that they had little scope to enhance the pay and security component of fair work.
- In the third sector, employers noted the need to be more innovative in making fair work happen, notwithstanding budget constraints.
- For larger employers, influence over their supply chain was seen as a lever to improve fair work in their smaller suppliers.
How to deliver security at work
- Everyone involved in work has a responsibility to ensure and support widespread awareness and understanding of employment rights. Employers should give clear information on pay and contractual matters and signpost workers to advice and support, for example through trade unions, ACAS or other relevant organisations.
- Contractual stability should be a core employer objective. Forms of flexible working where the burden of risk falls disproportionately on workers (including most zero hours contracts) are not fair work. Contracts that allow employers flexibility can be designed where worker rights are also protected, which offer sufficient security and that do not undermine worker development and future progression.
- All workers should be paid at least the Living Wage as calculated by the Living Wage Foundation, and other stakeholders - government, public agencies, unions and consumers - should support them to do so.
- Agreement making between employers and workers (collective bargaining in unionised establishments) promotes stability and perceptions of security and should be supported. Agreements at sectoral level can ensure greater consistency in security and reward for workers across the sector can set a level playing field for employers who provide security at work. There are examples of functioning sectoral bargaining models in Scotland in local government, construction, the NHS and in the agricultural industry.
- Pay transparency and defensibility should be a core organisational objective. This should incorporate pay levels, benefits provision and pay structures that are openly shared with workers and can provide the basis for more equal pay and more defensible pay dispersion.
Security in practice
W Munro (Rehab) Ltd. is a successful Clydebank-based family business employing 35 people. The company supplies, demonstrates and maintains specialist patient moving and handling and rehabilitative equipment. The success of this specialist business relies heavily on the skills and knowledge of its employees to deliver a good service and to support their customers and patients with the technical information relevant to assistive technologies. Job security is central to achieving this goal. Ken Munro, Managing Director, explained, "We wouldn't have someone just on zero-hours - absolutely not! If someone is coming on the phone with a medical condition, they want the person taking the call to know something about their situation or be in a position to pass the person to an experienced and trained colleague who can deal with their enquiry knowledgeably and with empathy. That knowledge takes investment in training and development. It is not gained just dipping in and out of employment. Employees on temporary or on-call arrangement cannot get the necessary level of knowledge and on-the-job experience if the employer is phoning someone up on the day and saying 'can you come in and do a couple of hours?' Providing security for employees goes hand-in-hand with providing a quality service for their customers". The company also offer employees flexible working time that aligns to their circumstances. Many of the office staff are part-time to suit their needs as well
as the needs of the business. There are employees who "work from ten until two because they've got child care situations or they're looking after other relatives - we'd always be flexible. There are also some people that have been part-time that have gone to full-time as their families have grown up". To enshrine their commitment to fair work, the company recently became Living Wage Accredited and have signed the Scottish Government's Business Pledge83.
Like many other educational institutions, the University of Strathclyde in Glasgow has used zero hours contracts (ZHCs) to cover a range of functions. In 2015, aligned with the University's 'People Oriented' value and its stated aim to be a socially progressive employer, it was decided that no further ZHCs would be issued. From January 2016, remaining zero hours contract staff were transferred onto new arrangements. With recognised trade unions, ZHCs have been mapped onto a range of different arrangements depending on individual circumstances, including part-time contracts and guaranteed minimum hours contracts with no detriment where an employee does not wish to take up an offer of hours of work. This allows staff
to know, in advance, the minimum amount of work that they are guaranteed. Offering greater security of work is a fairer way of working that can benefit staff and the university. Avoiding ZHCs is consistent with the University of Strathclyde's status as a Living Wage Accredited Employer and holder of a Healthy Working Lives Gold award84.
Since 1999, partnership working in NHSScotland has been enshrined in the Staff Governance Standard, on an equal footing with Financial and Clinical Governance. Partnership working recognizes the fundamental importance of worker participation, consultation and job security for all Health Boards. The partnership approach and the employment relations framework offer the opportunity for staff and their trade unions to be fully involved in the formulation and implementation of change. Given statutory backing in 2004, the Staff
Governance standard supports an informed and participative workforce working collaboratively with employers to improve service delivery in what has been described as "arguably, one of the best
examples of effective industrial democracy in the world"85. Partnership has delivered important security benefits to NHSScotland employees, notably a commitment since 1999 to no compulsory redundancies restated each year by Scottish Minister which offers security of employment for staff which facilitates service reshaping and modernisation to meet the demands placed upon health care services. In 2011 the Scottish Partnership Forum decided that NHSScotland would become a Living Wage employer. This not only helps workers but helps to address issues of poverty, deprivation and health inequalities. The Living Wage is good for workers as they benefit from higher pay, improved health and motivation. It is also good for employers as it reduces turnover, improves productivity and attracts better staff. And, good for society supporting the local economy and ultimately less stress on NHS services.
Return to 'Contents' section // go to next section