Workers are being offered as few as 7.5 hours of work per week, keeping an employee’s weekly pay sufficiently low enough to avoid National Insurance contributions. This type of contract is labelled the ‘ultra low hours’ contract.
For those who earn less than £153 per week, an employer is not legally required to pay National Insurance, reducing their employee overheads by 14%. It is estimated that this could see the troubled supermarket saving around £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 has been the example investigated by Channel 4’s Dispatches programme.
Our advice would be that if you are considering an ultra low hours contract, make sure you keep up your National Insurance contributions so you don’t get caught out in later life.