Another day and another story about the “Gig Economy”. After the national insurance U-turn by the Government this week, the issue of employment status and associated taxation status is hardly ever out of the news.
This is due in large part to the significant increase in ‘self-employment’ that has taken place since the economic crash in 2008. One of the successes that the UK Government can point to is the increase in levels of employment since 2010, but a significant amount of this increase is down to an increase in self-employed people. There are now nearly 5 million people who are self-employed in the UK, and when you consider that the entire public sector (including the NHS) employs 5.4 million then the significance of self-employment can be seen. Indeed, it is anticipated that in the next 1-2 years there will be more people self-employed than working in the public sector. This represents a huge change in working practices in a relatively short period of time.
In relation to the self-employed it is possible to draw an (admittedly quite broad) distinction between the ‘privileged’ and the ‘precarious’. The privileged are those people who have chosen to work as self-employed, such as barristers and consultants, and who are generally very happy with the flexibility and the tax advantages that this status gives them. They would not want to change their status from self-employed to one of a worker or employee. These were the people that the Chancellor was trying to tax a little bit more with his proposed changes to national insurance.
On the other hand, there are the precarious self-employed. Perhaps they can be exemplified by the recent Employment Tribunal (ET) case involving Uber where the drivers complained that they were wrongly classified by Uber as self-employed. As such, they were not receiving the national living wage or any holiday or sickness pay. Uber are appealing against this ET decision, but this and the recent ET decision in the City Sprint case indicates that the Employment Tribunals are critically assessing any claims by any business that its people are all self-employed. The suspicion is that businesses are doing this to avoid having to comply with certain employment laws that would apply if the person was deemed either a worker or an employee.
The legal concepts of ‘employee’, ‘worker’ and ‘self-employed’ were all introduced over 40 years ago and are no longer fit to regulate the ever-changing workplace. A fundamental review is necessary and this is currently being undertaken by Matthew Taylor who will report in the summer with his findings. The trick will be to introduce new rules which maintain flexibility for the privileged self-employed whilst increasing protection for the precarious.
Companies operating in the gig economy are “having their cake and eating it” by treating workers like staff while avoiding the tax and regulations on employing people on full-time contracts, according to a study. A survey of workers in the gig economy found that most believed their employers were exploiting a lack of regulation to grow quickly. Almost two-thirds said the government should step in to guarantee basic employment rights.