Law and the Gig Economy

Posted on 3/4/2017 by Katherine Memery

As many as five million people now work in the UK gig economy, so it’s unsurprising that it’s become an increasingly hot topic for discussion. This new way of working, characterised by short-term contracts and freelance assignments, offers greater flexibility for both workers and businesses. Individuals are able to manage their work-life balance and decide when and for how long they work, businesses can reduce costs by only hiring when work is available.

The building and plumbing trades have used self-employed contractors for decades, but the rise of digital technology and mobile apps used by companies like Uber and Deliveroo have led to the gig economy being most commonly associated with delivery services, ride-hailing drivers and private hire companies.

But it’s not just these global platform-based enterprises driving growth within the gig economy; sectors such as advertising, banking and even law have also seen a large increase in self-employment.

This move towards flexible working is shaking up the economy. However, questions have been asked about whether current employment law is fit for purpose and able to protect the rights of the modern workforce.

Benefits of the gig economy

Flexible working

Many are attracted to the gig economy because it allows them to control their own working schedule. This flexibility appeals to people looking to balance work with other aspects of their lives such as study or family responsibilities.

What’s more, for some, gig work is not their sole source of income; increasing numbers of people are choosing to engage in freelance projects alongside their full-time roles.

Workers can be their own boss

Along with greater control over their time at work, gig economy workers generally have more autonomy than they would if they were working full-time. They can also choose the frequency and the types of jobs (‘gigs’) they do, allowing them to manage their working life, subject only to the availability of suitable work. 

Businesses can reduce costs

For companies looking for flexible labour, the gig economy business model is convenient and cost-effective. The ability to hire at will and pay per ‘gig’, whether that be delivering a pizza or creating an advert, is attractive.  Businesses only pay when work is available and are not, therefore, burdened by the overhead costs associated with full-time employment.

Problems with the gig economy

Employment status is not sufficiently defined in law

Although existing UK employment law makes the distinction between employees, the self-employed, and ‘workers’ (a half-way house between the two), many people are still unclear about their legal status. Research from Citizens Advice suggests that 1 in 10 people, including many engaged in the gig economy are conveniently, if not correctly, defined as self-employed, leading to them missing out on basic employment rights.

Whilst workers and employees are entitled to the national minimum wage and paid annual leave, employees are also eligible for statutory sick pay and protection from unfair dismissal (subject to 2 years’ service). On the other hand, self-employed contractors currently have no such rights.

Businesses often don’t view themselves as employers but as clients.

Some businesses within the gig economy have tried to impose a work status which simply does not reflect the reality. For instance, a number companies, including Uber and CitySprint have been found guilty of incorrectly ascribing self-employed status to their employees.

It can be alienating for workers

A major drawback of the gig economy is that people rarely meet or speak to their co-workers. There’s no staff room and no ongoing relationship with management, so fewer opportunities for collaborative work or constructive feedback, all of which are important factors in job satisfaction.

It’s costing the government billions

In addition to evading their legal responsibilities, by labelling their staff as self-employed contractors, companies are avoiding their financial obligations, causing the government to miss out on income tax and national insurance contributions. In last November’s Autumn Statement, it was estimated that in 2020-21, the gig economy will cost the Treasury £3.5billion.

Action so far

Increasingly over the last 12 months, campaigners have begun to challenge some new economy firms, by taking legal action against the way they treat their workers. An employment tribunal decision in October 2016, for example, held that Uber drivers are ‘workers’ and not ‘independent contractors’. This landmark ruling gave Uber drivers entitlement to holiday pay, paid rest breaks and the national minimum wage.

More recently, in the first reported gig-economy case to hit the healthcare sector, blood couriers working for The Doctors Laboratory launched a claim challenging their self-employed status. In this case, the claimants are going a step further arguing for employee rights, rather than mere worker rights. If they are successful, the couriers will be entitled to additional rights including holiday and sick pay and protection against unfair dismissal.

In another headline-grabbing case in February 2017, London-based Pimlico Plumbers lost their appeal against a decision that classified a long-standing plumber as a worker rather than an independent contractor. Garry Smith successfully argued that although he was contracted on a self-employed basis, he was entitled to basic workers’ rights from the company as he was contractually obliged not to work for anyone else. The case, hailed as a landmark victory, has certainly set a precedent.

Government review

Clearly, there are concerns that some strands of employment law are out-of-date and unfit for purpose. At the end of 2016, Prime Minister Theresa May revealed plans to overhaul workers’ rights to reflect modern employment practices and commissioned an independent review into the rights of self-employed and gig-economy workers.

The investigation, led by Tony Blair’s former policy strategist, Matthew Taylor, is expected to highlight the blurred boundaries between the self-employed and those classed as employees. A report highlighting the findings will be published in June.

While we await the government’s conclusion, there are steps firms can take to negotiate these modern working practices. Richard Whalley, Employment Solicitor and Partner at HRC Law, gives his advice to employers:

“The gig economy on any analysis is one of the hot topics in employment law this year and the Uber case is causing a lot of businesses to take a long hard look at how they engage their workers. As ever, the common sense approach should apply; all employers should make doubly sure that the terms that they are engaging people under and the working practices they adopt are as robust, clear and unambiguous as possible.”

As the labour market evolves, employment law must clarify the murky distinction between self-employed contractors, workers and employees. Not only will this protect those working within the gig economy, but clarity will encourage more people to take advantage of this new way of working, and help them better understand how to enforce their rights if treated unfairly.

Mobile technology and the emergence of the virtual workforce have enabled these workers to become a crucial part of the business model and today’s gig workers can be key to a company’s success. It’s likely that as the gig economy continues to grow, more and more corporate structures will adapt in order to take advantage of this new way of working.

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