Minimum overtime pay: a nudge for lazy managers

The most interesting proposal in Matthew Taylor’s report on employment is this one:

Government should ask the Low Pay Commission (LPC), in its next remit, to advise on the impact of bringing in a higher National Minimum Wage for hours which are not guaranteed in a contract.

This new higher rate should be set at a level which incentivises employers to schedule guaranteed hours as far as reasonable within their business. Businesses would still have the ability to offer zero or short-hours contracts, or to request that an individual works longer hours than those guaranteed in their contract, but would have to compensate the most vulnerable workers (those on low wages) for the additional flexibility demanded of them.

For example, if an individual is on a contract which only guaranteed them 6 hours a week, but is regularly asked to work more than this, they should be entitled to the standard National Minimum or National Living Wage rate for the first 6 hours they worked in a week, and then this new higher rate for any hours beyond
that.

So the lower the number of contractual hours, the more hours a worker would be paid at a higher rate should they be required to work overtime. And, of course, if a worker is on a zero-hours contract, every hour is above their contractual hours would therefore be paid at the increased rate. If, for example, the minimum overtime rate were to be set at time-and-a-half, anyone on a zero hours contract would be paid 50 percent above the minimum wage for every hour they worked.

This is an ingenious way of saying to employers that it is still fine to employ people on zero hours but that they must pay for the privilege and, as Gavin Kelly says, share some of the benefits of flexibility with their workers. It also gives employers an incentive to guarantee hours, and therefore income, to employees. The higher the guaranteed hours, the less you have to pay out in overtime.

This measure would call the bluff of lazy employers. Is it really that crucial that employees can be called in at a moment’s notice or is it just because bosses can’t be bothered to plan?

A recent TUC report on insecure work found that those sectors which had seen higher increases in productivity over the last five years tended to be those which had experienced smaller increases in insecure employment.

The report emphasises that correlation doesn’t necessarily imply causation. It does not mean that insecure workers make a workplace less productive. It is likely, though, that low productivity and reliance on insecure forms of work are symptoms of the same problem. Low pay and flexible labour is what enables that long tail of poorly managed and low productivity organisations to exist. Some of them probably wouldn’t have started up in the first place without it. Why train people when you can rely on someone else to do it? Why invest when you can maintain your profits by throwing more poorly paid people at the problem? Why waste time on planning when you can call people in and then send them home without pay if they are not needed?

The UK’s employment framework, with its plentiful supply of cheap labour, relatively low employment protection and, until recently, very low risk of punishment for those that flout the law, encourages too many managers to take the low road, pushing risk onto their workers.

There are signs that high employment and the tight labour market is already encouraging firms to give workers more secure employment contracts. The Resolution Foundation believes the UK has passed peak insecurity, noting that most of the job growth over the past year has been due to full-time employment.

Nevertheless, a nudge in the form of Matthew Taylor’s minimum overtime rate might speed up the conversion of precarious jobs into ones with that bit more security. It would, at least, encourage managers to think about whether they really do need a job to be as casual and flexible as they think. It would be good to see this proposal enacted. It might just be the jolt our labour market needs.

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3 Responses to Minimum overtime pay: a nudge for lazy managers

  1. YL says:

    Not to be nostalgic but any hour worked over contracted should be paid first of all and that should be enforced by criminalising managers and colleagues who allow it not just the firm. Give them the power to say no.

    Then any extra hour should be paid at time and a half and then any hour over 37.5 or in asocial hours such as Sunday or declared religious day, public holidays, outside school hours etc at 2 times.

    Businesses will squeal but it will forces some consolidation.

    And children doing adult work should receive adult rates of pay.

  2. Blissex says:

    «encourages too many managers to take the low road, pushing risk onto their workers.»

    Another interpretation is that it is not lazyness of managers the motivation for imposing worse working conditions, but a way to improve their negotiating leverage by constantly reminding workers of how much they are willing to bear to keep their “jobs”.
    Even if the worse working conditions result in lower motivation and lower efficiency, which the manager can work around by cutting effective pay. For many managers a docile workforce is ultimately more important than an efficient one.

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