It was perhaps not a coincidence that on 1 May, namely International Workers’ Day, Parliament’s influential Work and Pensions Committee published a report slamming the growing use by employers of self-employment and the so-called “gig economy”. This is very much a prominent issue amongst politicians and policy-makers, particularly since the Employment Tribunal’s conclusion in October 2016 that Uber’s taxi drivers were workers and not self-employed, and will no doubt be an important area of reform during the next parliament.
The Committee’s report on “Self-Employment and the Gig Economy” (link here) found that 5 million people, or 15% of the UK workforce, were now self-employed, and the level of self-employment would continue to grow in the future with further advances in technology.
The classification of a person as being self-employed has significant employment law implications, including the absence of basic protections such as paid holiday, statutory sick pay and minimum wage rates which are available to persons with “employee” and “worker” status. The report found that as self-employed persons and their employers do not have to pay national insurance contributions, there is an additional strain placed on the remaining workforce to fund the safety net of universal benefits available under the Welfare State, such as state pension and Universal Credit.
Whilst the report acknowledged the potential benefits the flexibility of self-employment offers to both employer and individual, it concluded that it was a “fiction” that this can only be achieved in self-employment, and that flexibility is “not the preserve of poorly paid, unstable contractors.” In a strongly worded criticism of the gig economy and employers’ practices generally, the report stated that “profit, not flexibility, is the motive for using self-employed labour in these cases”, and that employers were propagating a myth that flexibility is only available in self-employment. It found that the freedom given to employers to engage persons on a self-employed basis meant that there was a failure to protect those persons from exploitation and poor working conditions, and leads to a substantial loss of tax revenues.
Crucially, the report made the recommendation that there should be an assumption an individual has “worker” rather than “self-employed” status in order to protect those persons and the public purse, and provide the basic safety net of standards of rights and benefits. If an employer wishes to engage a person on a self-employed basis, the report proposed that the onus would fall on the employer to show that the person was genuinely self-employed.
The priority the Government has placed on reviewing and reforming the gig economy is further highlighted by the Department of Business, Energy and Industrial Strategy’s review of modern working practices, led by Matthew Taylor, which is widely believed will recommend that self-employed gig economy workers should be granted greater protections and benefits. The abandoned rise in national insurance contributions in the recent budget for self-employed individuals, and the Conservative Party’s current refusal to rule out tax rises in the future also underlines the concern within government that the growth in the gig economy is adversely affecting tax receipts. It is also understood that the Uber case is being appealed, so will be a critical authority on the boundary between worker status and genuine self-employment. It may well be the case that any appeal outcome and guidance from the Uber judgment will be placed on some form of statutory footing in order to provide much needed clarity on where worker status ends and self-employment begins. Given the likely reforms to self-employment and so-called “casual” working practices in the near future, it may be a good time for employers to review their working practices and the extent they currently engage with self-employed individuals.
Companies in Britain’s growing gig economy are forcing workers into bogus self-employment and free-riding on the welfare state, an influential committee of MPs has said. In a damning assessment of modern employment practices, the parliamentary work and pensions committee calls on the next government to bring laws up to date so that workers are better protected from exploitation. Given concerns about the rising number of workers classed as self-employed contractors with no access to sick benefit or holiday pay, it wants the default status for people in the gig economy to be “worker” rather than “self-employed”.