Mandate Decent Work Policy Report

WHAT NEEDS TO BE DONE! POLICY PROPOSALS TO ADDRESS THE PROBLEM OF PRECARIOUS WORK

DECENT WORK — the way forward. policy proposals to address the problem of precarious work

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1 introduction Retail workers often struggled during Ireland’s boom years. Low pay, few working hours, and flexible employment terms meant they reaped little benefit from Ireland’s Celtic Tiger. The current recession is making this bad situation worse. Mandate’s report – Decent Work? The Impact of the Recession on Low Paid Workers – details the devastating impact the recession is having on retail workers. Caught between the rock of low pay and low hours, and the hard place of high flexibility, many can no longer make ends meet.

These workers are trapped in jobs that don’t allow them to earn a living wage, but at the same time, deny them the opportunity to work a second job, or even to qualify for social welfare supports. Although their working hours have been cut, they are still required to work most days, to frequently changing and unpredictable schedules. Most work part-time, but most don’t want to – a clear majority of part-time workers want to work full-time hours. When they look for more hours, their requests are mostly denied. With no other options, more are turning to social welfare for help, only to find that the system doesn’t cater for the reality of precarious working lives. This leaves around a third borrowing to pay day to day expenses, and falling behind with bills. The Report’s key findings are set out at note i below.

The problem of low paid precarious work is approaching crisis level in Ireland: we have the highest level of under-employment in the EU1; new legislation requires even more flexibility from these workers, while established policy denies many access to income support (note ii).

1 Eurostat Supplementary indicators to unemployment, annual average, by sex & age groups (lfsi_sup_age_a)

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2 What needs to be done?

Addressing the problem of precarious work requires co-ordinated action across a number of fronts: •

The flexibility trap: precarious workers don’t get enough hours to earn a living wage, but can’t get another job. The PRSI system incentivises the creation of precarious part-time jobs. We need:

– A new Code of Practice to help workers access reasonable working hours;

– PRSI reform to remove the incentive to increase the number of precarious jobs.

•

The income trap: precarious workers can’t earn enough to make ends meet, and can’t qualify for social welfare payments for the low paid or for under-employed. We need:

– Reform of Jobseeker’s payments to recognise the reality of precarious work;

– A temporary reduction in the number of working hours required to qualify for FIS;

–

•

The low skills trap: precarious workers need better training opportunities to better jobs. We need:

– An effective training support system for under-employed and low skilled workers.

A refundable tax credit for low paid workers.

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2.1 The Flexibility Trap Recent legislation on pay setting mechanisms in many low paid sectors in Ireland (the Industrial Relations (Amendment) Act 2012, see note iii) failed to consider the issue of precarious work. Mechanisms to support precarious workers in securing sufficient hours to earn a living wage are urgently required.

A Code of Practice on Working Hours Problem: The current Code of Practice on Access to Part-Time Working doesn’t cater for employees who want longer, and more stable, working hours. Neither does it require employers to put in place a formal process to consider requests to change working hours. Employees have no access to independent review of unreasonable denials of preferred working hours (note iv).

The solution: A revised Code of Practice on Working Hours, with a broader focus on working hours and working time flexibility, is needed.

This reformed Code should include: • A mandatory procedure for decision-making on changes to working hours: All workplaces should be required to have a formal process for making and assessing requests to change working hours – currently, employers are only required to consider establishing such mechanisms. The Code should require that employers clearly set out the rationale underpinning their response to the request, and should specify a reasonable timeframe in which requests must be considered.

• Factors that the Code should include: The current Code lists a number of factors to be considered in relation to applications to change working hours. These should be expanded to include: – The balance of full-time and part-time contracts in the workplace.

Where there is demand from current employees for additional working hours, and the balance of employment is shifting from full to part-time, and/or additional hours are only made available to part-time workers, employers should have to provide reasonable justification for why the absolute or relative size of the part-time workforce is increasing.

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– The working time flexibility required. Employees working parttime hours should be entitled to a reasonable degree of certainty in relation to their working schedules; particularly where they are underemployed, to allow them secure additional employment elsewhere if desired.

• Independent review of decisions: Where employees are not satisfied that a refusal to grant a working hour request is reasonable, they should have recourse to an independent review of the decision, with the power to overturn decisions.

Employer’s PRSI Problem: The structure of Employer’s PRSI incentivises the replacement of full-time with part-time jobs for low paid workers (note v).

Solution: Raise the threshold for the higher rate of Employer’s PRSI to €450 as a short-term measure. Over time, smooth the transition between lower and higher rates to remove distortionary effects in the labour market.

2.2 The Income Trap Supporting the incomes of low paid and under-employed workers can be an important way of maintaining employment during a recession2, and Ireland urgently needs reform in this regard.

Jobseeker supports Problem: Where workers have their hours cut, but not the number of days they work, the social welfare system doesn’t recognise the underemployment of precarious workers (note vi).

Solution: The D/SP has already identified that measuring unemployment as a percentage loss of employment would be a measure of unemployment better adapted to modern labour markets, as is the case in the Swedish system3. However, these proposals have not yet been implemented.

2 European Foundation for the Improvement of Living and Working Conditions (2010) ERM Report 2010: Extending flexicurity – The potential of short-time working schemes.

Luxembourg: Publications Office of the European Union 3 Department of Social Community & Family Affairs (2001) Report of the Working Group on Atypical Employment. Dublin: Department of Social Community & Family Affairs.

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• The initial qualification for an unemployment payment should be a 20% loss of employment; additional unemployment can be measured in increments of 10%4.

• To cater for precarious atypical workers who have not been able to establish an unemployment claim, this change should be introduced with a sunset clause allowing the workers affected establish their loss over a longer period.

In-work income support Problem: Many precarious workers cannot claim Family Income Supplement because their hours have been reduced below the 19 hour weekly threshold and/or because the irregularity of their working hours makes employers unwilling to sign off on their applications.

Solution: Two proposals are made, one that can be implemented immediately as a job maintenance measure, and a longer term reform to deliver income support through the tax system.

•

Family Income Supplement: As a temporary measure, the eligibility threshold to claim FIS should be reduced from 19 to say 15 hours per week. This measure could be targeted on precarious workers by making lowered threshold available to only workers who have been denied additional hours in their current job.

•

Working Tax Credit: A refundable tax credit for workers could deliver income support directly into the pay packets of workers, without requiring them to apply for social welfare. This system is used in many countries, the USA and UK among them. The administrative difficulties experienced in the UK can be overcome by assessing income and entitlement annually, as is the case with FIS currently.

4 The Department recommended that the required loss of employment be 40%; however, a threshold of 20% is used in Sweden, and is equivalent to the current loss of one days’ employment standard.

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2.3 The Low Skills Trap Problem: Precarious work is concentrated in low-skill sectors; workers have few opportunities to engage in training and education that would allow them to compete for better jobs.

Solution: Introduce a training support scheme for underemployed and low skilled workers (note vii). The scheme should incorporate the following elements: •

Training or education should be FETAC accredited, and should enhance workers’ future labour market prospects i.e. it should not be restricted to the current employer;

•

In-company training should be eligible for support where it is quality assured;

•

Where possible, training / education provision should be modular, to allow employees combine work and upskilling during the hours they are not working;

•

All underemployed and low skilled workers should be eligible – participation should not be limited to those working systematic short-time hours, as precarious workers cannot meet these criteria;

•

Employees should receive income support when upskilling;

•

Employers should be incentivised to provide workers with sufficient working time regularity to enable them engage in training e.g. a PRSI incentive;

•

Both employers and employees stand to gain from workplace based training.

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NOTES i THE REALITY OF PRECARIOUS WORK IN THE RETAIL SECTOR The problem of precarious work in Ireland has received little study or debate. Official data sources provide very limited information on the working lives of the Irish precariat. Mandate trade union commissioned Behaviour & Attitudes (B&A) to conduct a survey of its membership to help fill the information gap. The survey provides valuable new data on the working lives of its members, and how these have been impacted by the current recession. A research report – Decent Work? The Impact of the Recession on Low Paid Workers – explores the survey findings, along with key data and recent research on the position of low paid workers in the retail sector. The report reveals the precarious nature of retail employment that is placing its workforce under considerable financial and psychological strain.

Key points from the research report include: • Most precarious workers are women: 70% of the Mandate membership is female.

• P art-time contracts dominate: only a third of members were employed on a full-time contract.

• M andate members have extensive experience in the sector: 69% of members had been working in retail for at least five years.

• Part-timers have few working hours: over a third of those working part-time were contracted to work less than 19 hours a week, on average, part-time employees work just 22 hours a week.

• P art-time employees work most of the week: the average part-time employee works on 4 days a week, four in ten work at least five days a week, while just 11% work three days or less.

• T ake home pay has fallen significantly: four in ten members reported that their take home pay had fallen over the last year. The average loss was €109 per week, with more than a fifth reporting a cut of over €110. To get a sense of the scale of these cuts, the CSO reported that average weekly pay for clerical, sales and service staff in Q1 2010 was just €363.

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• W orking hours are being cut: over the last year alone, part-time workers reported that their working hours had fallen by 5.6%. This is additional to the average fall of 6.8% in working hours for clerical, sales and service staff in the sector reported by the CSO from Q1 2008-10.

• Retail workers want to work more hours: six in ten respondents said they were willing and able to work longer hours in order to make ends meet. Half of those who wanted more hours had actually had their hours cut in the last one to three years.

• D emand for more hours is strongest among part-time workers: On average part-time employees want to work seven more hours a week.

In fact while just a fifth of part-timers work over 28 hours a week, three-fifths want to – a clear majority of those employed on parttime contracts actually want to work full-time.

• Of those who requested more hours, most were turned down: half of all part-time workers had requested more hours from their employers, 53% didn’t get them. In contrast, of the two-fifths of student workers who had asked for more hours, two-thirds got them.

• Working time flexibility is very high: 45% of part-time employees report that their working schedules are changed by their employer monthly, or even more frequently. Research by Turner & O’Sullivan (2012) found that 97% of workers at JLC pay levels received neither shift allowances nor bonuses.

• Workers want more certainty about their schedules: overall, 27% of part-time workers said they would like more certainty about their working arrangements. A fifth of part-time workers were dissatisfied with the certainty they had about the days of the week they were scheduled for, while 16% were dissatisfied with the level of certainty they had about the times of the day they were required to work.

• F lexibility makes it harder to access social welfare supports: over the last year, one in ten members reported that changes in the number of hours they work, or the days of the week on which they work, had made it harder for them to access social welfare.

• F lexibility makes in harder to find additional work: over the last year, one in eight members reported that changes in the number of hours they work, or the days of the week on which they work, had made it harder for them to find a second job.

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• Not having enough working hours leaves many failing to make ends meet, getting into debt, feeling a lot more stressed and finding it difficult to cope:

– Four in ten are having difficulty keeping up with their mortgage or rent payments;

– More than half are struggling to pay household utility bills;

– Over a third find it difficult to keep up with repayments on household loans;

– More than three in ten are struggling to adequately feed and clothe their families;

– Seven in ten said they are far less likely to visit a doctor or dentist because of the cost;

– Three quarters said they were finding it more difficult to cope in general, and are a lot more stressed now than a couple of years ago;

– About a third had borrowed money from a credit union, and 15% borrowed from a bank or building society. Three in ten had borrowed from family or close friends.

The full Report is available at: http://issuu.com/mandate/docs/mandate_decent_work_report_2012

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ii THE GROWTH OF PART-TIME UNDEREMPLOYMENT IN IRELAND In 2000, just over one in six people employed in Ireland worked parttime. Since the economic crisis hit in late 2008, the share of part-time work has increased considerably. By the first quarter of 2012, close to a quarter of all those employed, or over 417,000 employees, worked part-time.

CSO data shows that the share of involuntary part-time working, or underemployment, is growing. By the first quarter of 2012, there were over 135,000 underemployed part-time workers, a 46% increase from the third quarter of 2008.

The level of underemployment in the Irish economy was hidden by the old measure used for this indicator. The old measure required that a part-time worker was looking for an additional or replacement job.

The B&A for Mandate survey shows that, because of the working time flexibility they have to provide, many part-time retail workers are not in a position to look for such work. The new measure of doesn’t include the job search requirement, it counts those who are working part-time and who are willing and available to work additional hours.

Figure 1: Old and new measures of part-time underemployment New measure

Old measure

0.35

140

0.3

120

0.25

100

0.2

80

0.15

60

0.1

40

0.05

20 0

Q1 –0 8 Q2 –0 8 Q3 –0 8 Q4 –0 8 Q1 –0 9 Q2 –0 9 Q3 –0 9 Q4 –0 9 Q1 –1 0 Q2 –1 0 Q3 –1 0 Q4 –1 0 Q1 –1 1 Q2 –1 1 Q3 –1 1 Q4 –1 1 Q1 –1 2

0

CSO Databank: QNQ34: Persons aged 15 years & over by Principal Economic Status, Sex, ILO Economic Status & Quarter

new – old measure (thousands)

% part-time underemployed

No. underestimated

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Comparing the new and old measures, it can be seen that the involuntary part-time employment of over 80,000 workers was undercounted. Both measures however, reveal the same trend of increasing underemployment.

Underemployment is also reflected in the growth in the number of Jobseeker claims by part-time and casual workers. Increases in this category of claimant started during 2008, with the biggest monthly increases occurring in January and February 2009. Since January 2009, more men have claimed Jobseeker payments as part-time and casual workers than women, reversing the pattern of previous years. By June 2012, there were just under 88,500 workers receiving Jobseeker payments on this basis, a fifth of all claims. Therefore, there are at least 47,000 part-time and underemployed workers who are not in receipt of Jobseeker support.

In the current labour market, a significant increase in claims for Family Income Supplement (FIS), a top-up for low paid families, might be expected. In fact, while FIS claims had been increasing over the last number of years, the number of claims fell in 2009, and rose to just above the 2008 level in 2010, when over 28,000 families were claiming the payment. Many FIS claims are from full-time, but low paid workers. The fact that claims have not significantly increased may be partially explained by the number of low paid families who were made unemployed, but also indicates that there are families who have lost eligibility because their working hours were cut – at the very time when they need it most.

These figures, together with the findings from the B&A survey of Mandate members, demonstrate than many underemployed Jobseekers have not been able to access income supports during this recession.

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iii INDUSTRIAL RELATIONS (AMENDMENT) ACT 2012 The issue of precarious work was not considered in the Industrial Relations (Amendment) Act 2012. For example, considering the impact in relation to ‘socially excluded or vulnerable groups’, and in relation to gender equality, the Regulatory Impact Analysis (RIA) in the Financial and Explanatory Memorandum for the Bill simply assumed that any job in the sectors covered would protect workers from poverty, and that where an unemployed person secured a job in one of these sectors, significant benefits will accrue to the state, including from increased tax receipts and consumer demand.

This assumption discounts the reality of poverty among those in work.

The CSO Survey on Income and Living Conditions 2010 shows that the rate of income poverty among those in work increased by over 40% from 2009 to 2010, while the rate of consistent poverty – which combines low income and enforced deprivation of basic necessities – increased by over 60%. In 2010, over 144,000 workers had incomes below the poverty line, and more than 33,000 workers were living in consistent poverty.

Without an improvement in the working conditions of precarious workers in these sectors, there is also little hope in generating increased consumer demand – the B&A Mandate survey shows that a significant proportion of retail workers currently cannot cover their basic expenses; tax receipts will be negligible, as many simply don’t earn enough to pay much tax. Indeed many precarious workers, facing further reduction in their working hours, limited access to income supports, and unable to secure a second job to support themselves may have little option but to leave these jobs. In the current labour market, they face a high risk of long-term unemployment, in which case rather than saving money for the state, precarious jobs will end up costing the state money.

Finally, allowing the unchecked growth of precarious work can only exacerbate gender inequality. Women are over-represented in the sectors where precarious work is prevalent.

It is vital that the high level of unemployment is addressed in Ireland, but underemployment in a precarious job does not constitute a solution.

The Act failed to provide safeguards to ensure that jobs in the low paid sectors covered will give employees access to decent work which would protect them from poverty.

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iv CODE OF PRACTICE ON ACCESS TO PART-TIME WORKING This Code is intended to reflect the European Framework on Part-time Work, the stated purpose of which is: (a) to provide for the removal of discrimination against part-time workers and to improve the quality of part-time work; (b) to facilitate the development of part-time work on a voluntary basis and to contribute to the flexible organization of working time in a manner which takes into account the needs of employers and workers.

The General Principles of the Code state that: As far as possible, employers should give consideration to •

Requests by employees to transfer from full-time to part-time work;

•

Requests by employees to transfer from part-time work to full-time work or to increase their working time should the opportunity arise.

However, the content of the Code is overwhelmingly focused on access to part-time work, with only a fleeting reference to requests to increase working hours.

The practice recommended in the Code doesn’t consider the situations of employees who are restricted to part-time work, when they want to work longer hours. Nor does it cater for employees who may accept shorter hours as a temporary job maintenance measure, but who want the security of being able to return to their previous hours in the future. The Code contains no safeguard to check an unwarranted increase in precarious work contracts, whereby the share of part-time employment in a workforce grows despite the desire of its employees to work more hours.

Further, the Code simply asks employers to “consider” establishing a procedure for making and assessing such requests – there is no requirement that a formal procedure be put in place, and employees have no access to independent review of decisions made.

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For flexible labour market regulation to achieve positive effects, there needs to be a reasonable balance between the flexibility demanded by employers, and the needs of employees. The Code as currently constructed is poorly equipped to support the achievement of a fair balance between the needs of employers and employees, and without reform, will facilitate the further growth of precarious employment in Ireland.

The European Framework Agreement on Part-time work (available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31997L 0081:EN:HTML) was incorporated into Council Directive 97/81/EC of 15 December 1997; S.I. No. 8/2006 — Industrial Relations Act 1990 (Code of Practice on Access to Part-Time Working) (Declaration) Order 2006 gives effect to the Directive in Ireland.

v Employer’s PRSI The lower rate of Employer’s PRSI – 4.25% – applies to earnings up to €356 per week, approximately equivalent to a full-time wage for a worker on the minimum wage. Where weekly earnings are above this, employers must pay a rate of 10.75% on the full wage. For employers of low paid workers, their PRSI bill is therefore lower if two part-time workers are employed to work the same hours as one full-time worker.

In the example below, an employer would pay over two and a half times more in Employer’s PRSI for one full-time worker than for two parttime workers.

Example: An employer pays €10 per hour for 40 hours work •

Employer’s PRSI for a full-time employee is €43 per week i.e. €400 x 10.75%

•

Employer’s PRSI for two part-time employees is €17 per week i.e. (€200 x 4.25%) x 2

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vi Income supports Ireland’s social system fails to provide effective income support to low paid precarious workers for a number of reasons: •

Underemployment of flexible workers is not recognised: Unemployment is defined in Irish social welfare legislation as having no work for at least three days in six. Although most have had their hours cut, only 9% of Mandate members surveyed work three or less days a week.

•

Flexible workers cannot meet the substantial loss criterion: To claim JB, an applicant must demonstrate a ‘substantial loss’ of employment – defined as losing at least one day of employment in any period of six days, resulting in a loss of income. As the D/ SP acknowledges (in its 2006 Review), workers who lose hours, but work the same number of days, cannot meet this condition.

•

A ‘normal’ pattern of work is required to assess underemployment: To determine underemployment, the D/SP compares a person’s current pattern of working days to their ‘normal’ pattern. But many retail workers don’t have a normal pattern of work – 45% of parttime workers in Mandate reported that their working schedules change at least once a month.

•

Flexible workers cannot qualify for systematic short time work supports: These arrangements cover only full-time workers whose hours have been temporarily reduced; a partial JB payment is made in respect of days unemployed. Only a third of Mandate’s members have full-time contracts, and three in ten of these have their working schedules changed at least monthly, so they cannot meet the ‘systematic’ criteria for this payment i.e. (a) work fewer days per week than normal, (b) work on at least one day of their ‘normal’ working days, and (c) have a systematic working pattern i.e. a clear, repetitive, pattern of weekly employment. All three of these elements are denied to precarious retail workers by the terms of their employment contracts.

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•

Low pay supports exclude many precarious workers: To qualify for FIS, a household must work at least 19 hours a week. Over a third of Mandate members surveyed who work part-time are contracted to work less than this. Even though a smaller percentage actually works less than 19 hours, employers may be unwilling to sign a FIS form for workers whose contracts do not actually entitle them to this level of work each week. For employees who were claiming FIS, but whose hours are subsequently cut below the 19 hour threshold, their entitlement to FIS ceases immediately – just at the time this support is most needed.

vii Training supports for workers on reduced hours In a study on short-time working schemes in European countries during the current recession, the European Foundation for the Improvement of Working and Living Conditions identified a consensus that reduced working hours should be used for training, both to support the employment and job security of workers, and to enhance the competitiveness of firms. Even where reduced working hours are not capable of preventing job losses, the workers concerned are better prepared to secure new jobs.

To achieve this, many instruments of public support for workers on reduced hours were developed during the course of the recession to relate income support to training. Most of these schemes required that the training be meaningful in terms of enhancing workers’ future labour market prospects i.e. it should not be restricted to their current employer.

Different income support incentives aimed at making training participation more attractive for both employers and employees are available. The ProAct scheme in Wales was identified as being particularly successful. It was promoted as a support for training during hours not worked, which also offered income support, rather than an income support for workers with reduced hours that also provides training. The focus on training as the primary goal, with appropriate income support, was seen to be particularly important.

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A number of factors were identified that hindered the take up of training: •

A lack of interest among workers, particularly those who were lower skilled and/or older;

•

A lack of interest among employers in paying for training – where this is seen as an additional cost rather than an investment;

•

Difficulties in identifying the most appropriate training;

•

Smaller companies, without specialised HR staff, can find it particularly difficult to engage in the process to identify future skills needs, draw up training plans, and in identifying and locating the most appropriate training

•

Reconciling high levels of working time flexibility with training participation

•

Training not being completed when firms’ workloads increased, as work was prioritised over training

•

Some schemes only provide support for accredited training, as a quality safeguard; the ProAct scheme found that companies interest in participating was greater if in-house training was eligible. It is important in this context however the quality of incompany training can be guaranteed, and that it enhances the employability of the workers participating.

Source: European Foundation for the Improvement of Living and Working Conditions (2010) ERM Report 2010: Extending flexicurity – The potential of short-time working schemes. Luxembourg: Publications Office of the European Union.

Available at: http://www.eurofound.europa.eu/pubdocs/2010/71/en/1/ EF1071EN.pdf

Mandate Head Office O’Lehane House 9 Cavendish Row Dublin 1 Tel: (01) 874 6321/2/3 Fax: (01) 872 9581 www.mandate.ie