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A Labour Market Divided: COVID-19 and employment regulation

The UK Government’s nationwide lockdown meant that the majority of British businesses were told to close their premises, save for those deemed ‘essential’ in industries such as childcare, education, health, social care, transport, refuse, cleaning and supermarkets.

Women, the working class and non-white populations are disproportionately represented amongst this grouping. The Women’s Budget Group report that 77% of healthcare and 83% of social care workers are women. In addition, the TUC report that structural racism within these sectors means that people of colour are more exposed to the virus whilst at work, due to being forced to undertake riskier front-line tasks that ‘white colleagues had refused to do’ and denied access to Personal Protective Equipment and appropriate risk assessments.

A report published by Public Health England confirms that occupation is a significant factor in terms of exposure to the virus and risk of death. Those working in security, transport, food production, retail, construction, processing plants, and health and social care had significantly higher rates of death from COVID-19 than those in non-front-line positions. Yet despite the ‘essential’ nature of this work, and the increased health risks borne out by these workers, their labour is considered ‘low-skilled’ and thereby subject to poor working conditions and ‘poverty wages’.

Whilst many of these workers felt apprehensive about continuing to work during the peak of the pandemic, they were left with little other option in fear that refusal to work would result in a loss of employment. Other personal narratives recount a sense of duty in continuing to work. These workers are portrayed as ‘soldiers’ on the ‘front-line’. But they did not ‘enlist’ for these positions, nor the heightened risks posed to themselves and their families when signing their contracts.

The pandemic has brought the importance of front-line jobs into sharp focus. Yet amongst the ‘claps for carers’ and other vacuous platitudes, demands for increased wages have largely been ignored. The intention instead is to maintain the status quo and preserve a low paid, precarious and disposable workforce attendant to acute shortages in the labour market. Despite claims from Rishi Sunak, Chancellor of the Exchequer, in May 2020 that we are ‘all in this together’, the reality is that front-line workers face a much greater level of exposure to the virus.

The remaining workforce can be divided into two camps: the white-collar workers able to work remotely from home, and those whose employers or businesses experienced a total cessation of work, with risks in terms of job security.

Remote working was largely granted to middle-class workers considered to be ‘professional’ who maintained relative security in terms of wages and employment. However, the most negatively impacted workers were those for whom lockdown meant a total cessation of work. ONS data shows that the youngest workers, oldest workers and those in ‘manual or elementary’ occupations were most likely to be temporarily away from paid work during this period. In order to avoid an economic crisis, Rishi Sunak has announced an unprecedented package of measures because the Government “believe[s] in the nobility of work”. Yet this conflicts with years of Conservative rule which has reduced the rights of workers and undermined the possibility of the recovery measures succeeding.

Workers’ rights and employment status under market rule

Before COVID-19 struck, the UK’s regulatory labour framework was already problematic. It separates those undertaking work into three categories: employees, workers and independent contractors with different rights and entitlements attaching to each. Whereas ‘employees’ are given the highest level of protection, ‘workers’ are restricted to basic rights including the national minimum wage, holiday pay, rest breaks and protection from detrimental treatment owing to unlawful disclosures. For independent contractors who are in business on their own account, employment protections do not apply.

The current definition of ‘worker’ is set down in a number of statutes which distinguish workers from employees on grounds that despite having to provide work personally, ‘workers’ maintain greater control over their work and mutuality of obligation (the obligation to provide and perform work) is less stringent than in the context of ‘employees’.

Yet for many workers, the ostensible ‘freedoms’ attached to worker status are not enjoyed in –reality as individuals feel compelled to accept this form of ‘flexible’ work because there are few other options available. Economic pressures coerce workers into accepting compromises on their rights. Accordingly the majority of workers are low paid with low levels of education, in occupations such as childcare, waitering, catering, cleaning, sales and customer service roles that are disproportionately occupied by women and ethnic minorities. The idea that this group deserves lesser rights due to the ‘flexible’ and precarious nature of their work is fanciful and instead needs to be framed within the context of a deregulated labour market which employers and the Government consider an economic advantage.

The disparity in protection was made even more obvious by the pandemic. Statutory sick pay, statutory notice pay, redundancy and protection from unfair dismissal are only available to employees, and the latter two rights are only available to those who have worked continuously for the business for over two years. Accordingly, it is much easier for struggling businesses to dismiss workers, who are then left without recompense and the dismal prospect of having to claim Universal Credit. In order to alleviate the haemorrhaging of the workforce during lockdown, Rishi Sunak announced the ‘Coronavirus Job Retention Scheme’; but this scheme has failed to bridge the existing gap in protection regarding employment status, instead mirroring its existing insecurities.

The Job Retention Scheme

During June and July 2020, the scheme allowed HMRC to reimburse up to 80% of employees’ salaries that had been ‘furloughed’, capped at £2,500.00 per employee, per month. Employers can ‘top-up’ the salaries of their furloughed employees should they choose to do so. Research reveals that 70% of furloughed employees received a discretionary top-up.

‘Furlough’ applies only where there is a cessation of work, meaning that workers should not engage in work when placed on this form of leave. Yet numerous reports suggest that this restriction was routinely ignored. Accordingly, only 17% of furloughed employees report working zero hours.

Without doubt, the Job Retention Scheme was sorely needed. As of 14 June 2020, 9 million people (a third of all employees) were reported to have been furloughed at a cost of more than £20 billion to the Treasury. Research shows that women were significantly more likely to be furloughed than men with inequality in care responsibilities being a key factor. Indeed, mothers were 10% more likely than fathers to initiate the decision to be furloughed, with no gender gap amongst workers without children. Women and those on low incomes were also less likely to have their wages topped up by their employers above the 80% threshold.

Whilst the premise of the Job Retention Scheme was a sound one, there were still fundamental problems, primarily because the scheme was restricted to ‘employees’ despite extending to ‘any type of employment contract’ where individuals are paid via PAYE. PAYE only applies to those whom the employer categorises as ‘employees’. The language of ‘employee’ governed the Job Retention Scheme, resulting in a confusing policy which replicated the exclusions present within the existing employment status framework, prioritising ‘employees’ over ‘workers’. The scheme was also discretionary, with no rules obligating employers to furlough their staff and no enforceable, standardised model of protection for all workers. Accordingly, the scheme depended on the good-will of employers to provide for their workforce. Yet this conflicts with the character of the UK labour market which is built upon the tenets of flexibility, casualisation and minimal responsibilities between businesses and staff.

As reflected by the increased number of mothers on furlough, the Job Retention Scheme also failed to account for individuals who may be unable to work due to caring responsibilities. There is a serious risk that as furlough measures are withdrawn and childcare options are not put in place as is necessary, these women could be forced out of the labour market.

Short Term Work Schemes

Data from the ONS reveals that the claimant count for Universal Credit increased by 116.8% between March and July, totalling 2.7 million claimants. Increased usage of Universal Credit supports the theory that the Government’s Job Retention and Self-Employment Income Support Scheme left large swathes of workers without protection. Because the goal of these schemes was to maintain job retention, rather than provide welfare, there is a huge risk that the money poured into the schemes will have been wasted should it fail to meet its intended objectives of reducing unemployment.

The Bank of England has warned that the number of unemployed persons in the UK will spike to 2.5million by the end of 2020, almost doubling the unemployment rate to 7.5%. The concern here is that as furlough and self-employment support measures are withdrawn, unemployment figures will rise significantly. To redress this the Government announced the Job Retention Bonus in July 2020 which will provide additional support to employers who keep their furloughed employees in ‘meaningful employment’ after the government’s Coronavirus Job Retention Scheme ends on 31 October 2020.

The bonus is a one-off payment to employers of £1,000 for every employee who was previously claimed for under the job retention scheme. In order to qualify, the staff must remain continuously employed until 31 January 2021 and must earn at least £520 a month on average.

Despite the numerous issues outlined above concerning the Job Retention Scheme, it still represents an alternative to business closures, job losses and increased claims on unemployment benefit. The advantage of adopting a short term work scheme is that it preserves the businesses human capital meaning that both workers and employers do not have to undergo a long and protracted process of recruitment and training when the economy picks up again, thereby reducing inefficient dismissals and redundancies.

Short term work schemes also support businesses in periods of low productivity, allowing business activities to continue. These schemes also prevent deskilling and maintain job ties for workers who may well enjoy their work and the prospect of career progression. This is particularly important as many people claiming the unemployment component of Universal Credit end up taking on unsuitable, short-term positions in order to avoid sanctions. This results in high staff turnovers and a transitory workforce unable to build upon their skills or plan for their futures.

As noted by others, short term work schemes have been present in several European countries for many years as a means of countering periods of low economic productivity. The German Kurzarbeit scheme is one of the oldest and most comprehensive which allows businesses to reduce employees’ working hours for a period of up to 12 months. During this period, the Government will replace 60% of the employees’ net monthly earnings, up to a capped amount. In order to prevent businesses taking advantage and claiming subsidies whilst getting employees to work from home, payments are only available where firms can prove a downturn in production. Following the German model’s lead, and in response to increasing unemployment figures in the UK, the UK Government announced a further ‘job support scheme’ in September 2020 which will open on November 1st 2020 and will run for six months until April 2021. This scheme is designed to protect ‘viable’ jobs and businesses facing lower demand over the winter due to COVID19. Accordingly, the Government will pay a third of hours not worked by ‘employees’ on PAYE up to a cap of £697.92 per month, leaving employers to pay the other third, and employees to make up the other third via a shortfall in wages. The payment is only available where employees are working at least 33% of their normal hours, subject to increase after a three-month period. This will ensure that employees earn at least 77% of their normal wages and can be claimed alongside the Job Retention Bonus for those that qualify.

In order for these schemes to be truly successful however, they must extend for the duration of the economic shock, and include as much of the workforce as possible so that substitutions cannot be made between different workers. Government schemes should be sensitive to the economic downturn and remain in place for longer. Failing to do so will likely lead to increased unemployment, undermining the goals of both schemes when they were first set out which was largely job retention and economic stability. Indeed, if administered correctly, short term work schemes could represent an important part of the UK’s future socio-economic support programme and buoy up a welfare state stretched by the growing number of claims for Universal Credit.

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Without question the UK Government’s coronavirus employment support packages were unprecedented and ‘one of the most remarkable announcements in the history of peacetime labour law’. Yet in many ways the measures do not go far enough in protecting low paid, short term, and precarious workers. The foundations on which the packages were built remain unstable, resting on an existing labour framework that is fraught with issues concerning status, regulation, enforcement, and access to rights. Increased protection in both the short and long term is needed, and a radical restructuring of the ways in which we attach value to certain forms of work so that those deemed ‘essential’ receive the recognition they deserve in terms of pay and improved working conditions.

 

Katie Bales is Lecturer in Law at the University of Bristol and a co-editor of Futures of Work.

Image credit: Étienne Godiard on Unsplash