Workers are being offered contracts with minimal hours—as few as 7.5 hours of work per week—ensuring that employees’ pay stays under the legal threshold of the company’s tax contributions.
The contracts are legal and can save businesses a lot of cash, but are they really a good idea?
For those who earn less than £153 per week, an employer is not legally required to pay National Insurance, thus reducing employee overheads by 14%. It is estimated that this could see the troubled supermarket saving a staggering £100 million in tax.
While these contracts offer flexibility to those who may have caring or educational responsibilities, the long-term implications for these employees could be serious. Those who fail to pay enough National Insurance throughout their working life are putting their state pensions in jeopardy.
So while this type of contract can benefit Tesco’s customers by ensuring optimum staffing levels at peak times, the cost to its employees could be high in the long term.
Tesco is certainly not alone in offering this type of contract, but it is the example investigated by Channel 4’s Dispatches programme. It is more unwelcome publicity for the supermarket who is facing difficult times in the wake of a profit scandal and the recently announced planned store closures.
If you are an employer looking at ways of reducing your employee overheads, and would like legal advice on the best way to do this, please get in touch.