Issues surrounding gig economy workers rights was one of 2016’s hottest employment topics, yet what does the term “gig economy” actually mean at the start of 2017? Here, employment team partner at London law firm Bircham Dyson Bell, Nicholas Le Riche, provides an explanation.
Almost every week there seems to be a different media story about gig economy workers. The judgment in the employment tribunal claim brought by two Uber drivers was issued at the end of last year, and several similar claims challenging workers’ employment status were also submitted.
Media interest in gig economy workers shows no sign of abating, with further employment tribunal judgments, and the outcome of a number of government investigations into the gig economy, expected later this year.
But what does the term “gig economy” actually mean? What rights do gig economy workers have and what changes might we expect to see in the coming year?
What is the gig economy?
Traditionally the gig economy has included musicians, freelancers and other creative professionals, but more recently it has been used to label short-term and unpredictable working arrangements.
The term has been used to describe people who do not work fixed shifts, are not required to carry out a minimum number of hours each day and who can, in theory, work as much or as little as they like.
The gig economy now often includes technology as an essential part of the particular services provided, with apps and other internet programmes allowing businesses to connect customers seeking delivery of parcels or takeaway meals with available members of its workforce.
The benefit of this technology for businesses is that they can have access to a large workforce which can provide services to customers at a moment’s notice without having the fixed costs of a permanent workforce.
Whilst this flexibility has been beneficial for businesses and customers, this type of work can often be an individual’s primary source of income and the inherent uncertainty of working in the gig economy has raised concerns over worker exploitation.
What rights do those working in the gig economy have?
The key question in the recent Uber and CitySprint employment tribunal cases was whether the individuals had employment status. A common feature of working arrangements in the gig economy is for individuals to be classified as self-employed.
Individuals who are genuinely self-employed have very little employment protection and the claimants in the Uber and CitySprint cases claimed that they should instead be categorised as “workers” and therefore have the right to receive the national minimum wage, holiday pay and sick pay.
Businesses operating in the gig economy often stress the value of self-employed status to the individuals they engage, but the lack of even the most basic employment protection has led to several individuals challenging this position and to trade unions such as the GMB and the Independent Workers Union of Great Britain (IWGB) calling for the government to sanction businesses who unlawfully deprive workers of employment rights.
Following public interest in the employment issues surrounding the gig economy, a number of government reviews into this issue have been set up.
The Department for Business, Innovation and Skills (BEIS) has launched an Independent Review of Employment Practices under the leadership of Matthew Taylor, a former head of the No.10 Policy Unit, which will focus on the implications of new working arrangements on the rights and responsibilities of workers and the BEIS select committee has also set up its own review of this area.
The issue of employment status in the gig economy not only impacts employment rights but taxation as well. One of the reasons why some individuals working in the gig economy have accepted self-employed status is that they tend to benefit from more beneficial tax rates than those which would be applied to workers or employees.
Given the potential loss of tax revenue that can result from these arrangements, HMRC has, unsurprisingly, set up an Employment Status and Intermediaries team to tackle “false” employment arrangements.
This level of attention could suggest the government is prepared to take steps to introduce wider reform in this area, including an interventionist role in tackling businesses who may be incorrectly categorising their workers as self-employed to provide greater protection for individuals working in the gig economy.
If the government does take a more interventionist approach in this area, and/or employment tribunals continue to hold that individuals working in the gig economy are not self-employed, then businesses may have to consider making significant changes to their operating models – either by offering less flexibility to customers and ensuring that the individuals they engage are self-employed or by accepting that these individuals are workers or employees and bearing the additional costs that such a change in status may cause.
In the coming months and years it will be interesting to see how employment law adapts to this rapidly changing area.
Nick Le Riche is a partner at Bircham Dyson Bell LLP.
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