What Is Precarious Work? (And how can businesses play a role in preventing it?)

For many individuals, the post-war dream of ‘traditional employment’ (a 9 to 5 job with a stable income, benefits, and job security) is simply out of reach. Instead, workers around the world are relying on informal, casual, or temporary work arrangements – from piecework jobs to the gig economy – to make ends meet. While more flexible types of employment can offer opportunities to both employers and workers, they can also create situations of precarious work that put progress towards decent work for all in jeopardy and leave workers vulnerable. At a societal level, the increasing prevalence of precarious work also jeopardizes the viability and effectiveness of social programs.

What Is Precarious Work?

While there is no legal definition of precarious work, it generally refers to work that is poorly paid, insecure, and has little institutional or legal protection. Precarious work involves a combination of employment instability, low wages or compensation, de-standardised working time arrangements, eroded workers’ rights and protections, exposure to a range of work‐based harm, limited training and progression opportunities, and imbalanced interpersonal power relations between workers and employers.

Precarious work can cover various forms of employment. It can encompass terms such as piece-rate or piecework jobs, temporary, informal, or casual work, and the gig economy.

Informal work, which refers to economic activities not regulated or formally protected, is prevalent around the world. The Organisation for Economic Co-operation and Development (OECD) estimates that informal workers make up nearly 60% of the workforce globally, and 90% in low-income countries. As the C40 notes, these workers include “waste collectors, landscapers, agricultural workers, day labourers, rideshare and taxi drivers, cooks and other roles that often fall outside labour legislation, taxation, benefits and social protection.”

In recent years, the use of flexible forms of employment such as piecework jobs and gig work has also been on the rise.

The International Labour Organization defines piecework or piece rate pay as “when workers are paid by the unit performed (e.g. the number of tee shirts or bricks produced) instead of being paid on the basis of time spent on the job,” with this type of work being most common in industries where tasks are highly repetitive, such as agriculture and textiles/apparel. Likewise, the Chartered Institute of Personnel and Development defines the gig economy as “a way of working based on people having temporary jobs or doing separate pieces of work, each paid separately, rather than working for an employer.”

What Is Decent Work?

In contrast, decent work, as defined by the ILO, is “productive work […] in conditions of freedom, equity, security and human dignity.” Decent work safeguards the dignity of workers by ensuring equality of opportunity and equitable treatment and a workplace that is free from discrimination. It offers fair income and ensures workers are paid a living wage that affords them and their families a decent standard of living as well as secure and safe working conditions. Across all this, decent work also gives workers a voice, hears their concerns and feedback, and respects their rights.

The Role of Business in Preventing Precarious Work

If your company is engaging in, or shifting towards, greater flexibility in its workforce planning, your executive team need to be attentive to the potential erosion of decent work that can arise with an increasing reliance on staffing models that lead to precarious work.

Broadly, businesses should not be creating precarious work. When businesses avoid providing workers fair compensation and instead rely on piece-work, gig work, zero-hour or low-hour contracts, or other similar employment arrangements, it makes it increasingly difficult to determine and ensure that workers are earning decent wages or have sufficient protections or benefits that allow them to meet their basic needs.

Companies need to provide stable and predictable compensation that ultimately leads to workers earning a living wage. They also need to avoid creating precarious work arrangements and adopt strategies that maintain flexibility while upholding decent work.

Increasing expectations for fair compensation

Precarious work is often strongly associated with low incomes or in-work poverty. As such, expectations for companies to provide fair compensation for such work are increasing.

Under the Fairtrade Standard, companies are required to ensure that piecework jobs “provide the same level of pay as hourly work, with a manageable workload and normal working hours” and that the employers “pay the proportionate minimum wage or the relevant industry average, whichever is higher.” Similarly, the Global Living Wage Coalition requires that “[f]or production, quota or piecework, the established pay rate must allow workers to earn a minimum wage based on an eight-hour workday under average working conditions, or in cases where these conditions cannot be met.”

Many jurisdictions around the world are also incorporating a fair wage for piecework jobs into legislation to ensure that workers are being paid at least the minimum wage per hour.

For example, the United Kingdom requires employers who are paying workers per task or piece of work to pay either the minimum wage per hour or to determine and pay a fair rate per piece of work done. Comparably, the Australian Government requires employers in the horticulture industry to have a minimum wage guarantee whereby “for each day a pieceworker works, they have to be paid an amount that is at least their hourly rate multiplied by the number of hours worked that day [… and] if the pieceworker would earn more than that minimum amount for the day based on the piece work rate and their productivity, they have to be paid the higher amount.”

Others have suggested using the minimum wage as a floor and optionally framing piece rates as an incentive to ensure the most vulnerable workers are earning at least the minimum wage with an opportunity to earn more based on performance.

Companies need to align with these expectations to ensure that they offer at least a minimum wage (or preferably living wage) guarantee for precarious work arrangements and develop strategies to use piece rates as a performance-based incentive.

Avoiding precarious work

As flexible work arrangements become commonplace, companies will need to take steps to ensure that they continue to provide decent work opportunities and don’t contribute to worker vulnerability.

Companies should understand where any forms of precarious work are used within their organisation and why. Where possible, they should set commitments to transition employees to contracts with guaranteed hours and benefits to ensure workers are able to accurately anticipate financial flows to meet their needs. They can also consider setting commitments for temporary contracts to only make up a certain percentage of the workforce to limit the use of precarious work as a tool, reduce labour costs, and ensure current employees can retain job security.

Companies should also understand how and when they may be relying on informal workers in their value chains. They should collaborate with suppliers to share the importance of supporting just transitions for informal sectors. Where feasible, companies can require suppliers to hold direct employment contracts and agreements with workers to safeguard against the erosion of decent work due to precarious arrangements.

Our Workforce Planning and Employee Development: A Getting Started Guide and Fair Compensation: A Getting Started Guide further explore how to get started on tackling precarious work within your operations and value chain.