The flexible contract system is modelled on a scheme in Germany, under which workers can earn up to €400 a month tax-free while their employers pay an easy-to-administer flat rate to cover pensions, social insurance and wage taxes. People can hold several mini-jobs up to the €400 a month tax-free limit.
It has been hailed as part of Germany’s “jobs miracle”, with Germany having one of the lowest unemployment rates in Europe. But, critics say the reforms that helped create jobs also broadened and entrenched the low-paid and temporary work sector, spurring wage inequality.
Despite that, an ally of Chancellor George Osborne told the Financial Times that the idea was being given serious consideration. “What I can tell you is that this is being looked at in government,” said the Conservative MP. “There are lots of ideas that are being looked at as part of the deregulation drive, and this is one of them.”
A Treasury official added: “As the chancellor and Danny Alexander [chief secretary to the Treasury] have said, it’s a relentless focus on the economy and the consequence of that is we’re looking at lots of things.”
Liberal Democrats were also thought to be were watching the progress of the scheme and would look at the options, despite the party having been critical of the radical proposals to overhaul employment law put forward by Adrian Beecroft.
But in a statement, the Department for Business, Innovation and Skills – headed by Lib Dem Vince Cable – said: “This proposal is a German solution designed to deal with particular issues in the German labour market, driven by their relatively high taxes on labour. This is quite different to the situation in the UK.
“The government is already taking action to take more people out of income tax and we are carrying out a root-and-branch reform of labour laws to make business more effective while maintaining protections for employees.”
The “mini-jobs” idea has long been championed by Conservatives in the Free Enterprise Group, which includes Elizabeth Truss and Dominic Raab.
But Len McCluskey, general secretary of the Unite union, warned that the scheme would lead to an “underclass” of workers without real prospects.
He told the FT: “Mini-jobs are a sticking plaster, a quick fix, which threatenes to create an even more divided society. They will do nothing to help Britain out of recession.”