International trends in insecure work

Report for the TUC by Nathan Hudson-Sharp and Johnny Runge of the National Institute of Economic and Social Research (NIESR).

Executive Summary

An increase in insecure forms of work has been identified in most European countries. Arrangements such as fixed-term contracts, temporary working and employment via agencies have proliferated, arguably undermining ‘standard’ employment relationships and the securities they offer workers. However, while there is widespread agreement on the international expansion of insecure forms of work, the drivers and subsequent nature of that insecurity are thought to be highly variable across countries.

This report uses a case study approach to examine different employment relationships that are thought to be at risk of insecurity. We use the UK as our benchmark case study and in each contractual arrangement, compare to one or more other European countries. The cases were selected purposively to provide an account of variations of how specific labour market institutions and traditions characterise the nature of work insecurity.

The importance of policy in driving or limiting non-standard work arrangements

The main lesson from this report is that labour market institutions, regulations and traditions matter. The rise of insecure forms of work is not an inevitability of macroeconomic change. Rather policy decisions play an essential role in determining the level of non-standard work arrangements and the insecurities associated with them. For instance, strict employment protection for permanent jobs and/or liberal rules on temporary employment relationships is likely to increase the incidence of nonstandard employment, as we see in Spain and the Netherlands. Similarly, the highly deregulated labour market in the UK provides incentives for a variety of atypical working relationships such as zero hours contracts, temporary agency working and bogus self-employment. It is therefore not surprising that the UK has seen a larger increase in insecure work since the financial crisis than many other countries. For instance, the increase in the number of temporary workers in the UK since 2008 is the third-largest in the EU.

Our case studies reveal that in some ways, the UK stands as an exceptional case regarding the drivers and nature of the increasing use of non-standard forms of work. Firstly, whilst insecure work in other case study countries has often expanded or declined dramatically following episodes of substantial deregulation or re-regulation, the highly deregulated and liberal UK labour market, with comparatively low levels of employment protection for permanent and temporary workers, has not been substantially altered in recent decades. As such, changes in types of non-standard employment have to a larger extent been organic responses from employers and employees to changing labour market conditions, most recently in response to the economic crisis. Whilst the high usage of zero hours contracts and self-employment is certainly grounded in the UK labour market traditions and institutions which allow for departures from the traditional model of employment, the more immediate drivers for the increasing use of such arrangements appear to differ. In this regard, it should be noted that the absence of new legislation, in the context of other changes, can be regarded as a policy decision in itself, as it can be seen as an endorsement of the already existing deregulated and liberal labour market.

The most insecure forms of work are arguably those that depart from the traditional employment relationship

Secondly, whilst many European countries have seen an increase in what we can call ‘traditional’ insecure forms of work, such as fixed-term contracts or marginal part-time work, the liberal UK labour market has seen expansions in more atypical forms of work, such as zero-hours contracts, temporary agency working and (bogus) self-employment. Such contractual arrangements are arguably at the highest risk of precariousness, as they depart from the traditional employer-employee relationship. Whilst fixed-term contracts and marginal part-time work generally fit into European labour markets and welfare states, in the sense that they are built around a standard employment relationship with employer obligations as a given, the unclear contractual relationship in more atypical forms of work may place the individual at the periphery, or indeed, outside labour market regulation and social protections.

The most clear-cut example of the challenge to the traditional employment relationship is the trend towards bogus self-employment, platform workers and umbrella companies. In these arrangements, the nature of the employment relationship may be uncertain. This uncertainty can create difficulties for individuals seeking to enforce employment rights. On paper, the individual is classified as an independent self-employed contractor, but in practice the employment relationship is characterized by the same subordinate relationship that exists between an employer and an employee. This means that the individual incurs all the risks associated with self-employment, but receives none of the advantages such as flexibility and autonomy. Such contracts are not only a new phenomenon with the emergence of the sharing economy, but have a long history in some sectors, and particularly in construction. This group is likely to be part of the recent wider increase in self employment in the UK. The rapid growth in self-employment in the UK, the highest in the EU, increasing by 800,000 people from 3.8 million in 2008 to 4.6 million in 2015 (15% of the total workforce), is likely to reflect not only a cyclical adjustment to the economic downturn, but has become an entrenched and structural feature of the UK labour market. In contrast to the UK, France is an example of a wider European trend towards creating self-employment schemes that provide labour and tax incentives to boost self-employment, often with the aim of reducing unemployment. In particular, after a 2008 law provided so-called micro-entrepreneurs with tax and social contributions benefits, France has seen a rise of self-employed, but often with high level of job insecurity and sometimes resembling bogus self-employed.

Temporary agency work can also be characterised by a somewhat uncertain, or at least atypical, employment relationship due to the triangular relationship between workers, user organizations and agencies. The number of temporary agency workers in the UK is disputed, ranging from 300,000 to 1.2 million, but it is clear that this is a much more prominent employment form than in most other European countries. The UK represents a comparatively lightly regulated temporary agency sector. In particular, in all other EU member states except Ireland and the UK, agency workers are treated as employees of the agency, working under the supervision of the hirer company. In the UK, the situation is ambiguous. The agency worker can be employed by the agency on an ‘employment contract’ (as an employee), a ‘contract to provide services personally’ (as a worker) or on a self-employed basis. In the UK, most agency workers are entitled to protection provided by general labour market legislation such as the working times directive and the national minimum wage, and most recently by the (forced) implementation of an EU directive, which provided the right to equal pay and treatment after a 12 week placement. However, due to their uncertain employment status and the intermittent nature of their work, they often lose out on other employment rights, including some family friendly rights and protection from unfair dismissal. In contrast, the German case study highlights the role of the state, legislation and collective bargaining in influencing the usage and insecurities of agency workers. After deregulatory reforms throughout the 1980s, 1990s and early-2000s, the German state facilitated the increase in temporary agency working, and conversely has recently acted to re-regulate the industry, via sectoral agreements with pay supplements and the introduction of a minimum wage.

Finally, since people on zero-hours contracts often have multiple and changing employers, this may undermine traditional employer obligations. In the UK, there continues to be a rise of zero-hours contracts, with the most recent LFS estimate indicating that around 900,000 people work on zerohours contracts. These workers are covered by general labour market legislation such as the national minimum wage and the working time directive, but the regulation on zero-hours contracts, such as the recent ban on exclusivity clauses, is of comparatively minimal scope. In contrast, the two other case studies, Italy and the Netherlands, have a range of provisions regulating zero-hours and on-call contracts, including on the maximum contract duration and minimum hours per shift, as well as provisions detailing that employers are required to provide regular contracts when reaching a certain number of weekly hours.

Governments and trade unions need to find innovative ways to adapt to new employment practices

In light of the increasing use of such highly atypical employment relationships, it is welcome that the UK government, alongside their European counterparts, have started to look into how modern employment practices relate to worker rights and employers’ obligations. As the UK case studies contained with this report demonstrate, and in particular those on bogus self-employment, temporary agency working and zero-hours contracts, there is a need in the UK to align the distinctive rights given to “workers”, “employees” and “self-employed” to modern working practices.

For trade unions, this process should also include finding innovative ways to adapt to new employment practices, particularly concerning increasing union membership and collective bargaining. This report demonstrates that trade unions across Europe have sometimes played an important role in shaping insecure work, but it has also shown that atypical forms of employment presents trade unions with a number of challenges. Non-standard workers are less likely to be union members; they are less likely to be aware of their statutory rights, and indeed they are often afraid of asserting their rights. This reflects the underlying challenge that unions must balance their obligation to fight unfair work practices with the fact that these employment contracts for some workers represent their only opportunity to gain a foothold in the labour market. Another challenge is that atypical workers are a highly fragmented group of workers with high turnover rates. The case studies show that trade unions might still have the willingness and capability to effectively represent these workers, but they are much more effective when workers are concentrated in specific sectors and industries, rather than being disbursed across the wider economy. This presents a significant challenge for trade unions.

The importance of taking a cross-national perspective

Whilst reshaping our labour market institutions to accommodate for new employment practices, it is important to learn from the experiences of other countries. That said, one of the main conclusions from this report is that no single type of atypical employment relationship will be characterized by the same level of insecurity in different countries. The most obvious example is fixed-term contracts, which in some countries are mainly used as part of educational schemes or as organised routes into permanent employment, whilst fixed-term contracts in other countries tend to be short term and primarily taken up out of necessity. Another example is short-hours work, which in some countries provides students with an opportunity to gain experience and supplement student bursaries, whilst in its most extreme variation in the form of zero-hours contracts can be used by employers in an exploitative way.

Further than this, the report shows that country-specific circumstances matter when determining the impact of specific mediating forces on the insecurity of work. This implies that the success of policy measures at a national level will depend on national contexts. This does not imply that countries cannot learn from each other and use the experience of other countries to guide them, but ultimately each country is constrained and enabled by their labour market institutions, legislation and traditions, as well as other specific factors.