In the first of a three-part gig economy minI series for Business Advice, employment law partner at PricewaterhouseCoopers (PwC), Nick Willis, clarifies the current status of gig economy workers.
The gig economy in the UK is growing rapidly. Analysis from PwC has suggested that in the wider sharing economy, transactions have accelerated over the last two years, and platform revenues have strengthened on the back of this rising activity, almost doubling year-on-year.
The gig economybusiness model has focussed attention on the question of the status of gig economy workers. Are they employees, self-employed or somewhere in between?
This issue has recently been highlighted by employment tribunal cases involving cab drivers and cycle couriers. These decisions are being appealed but new cases will be heard shortly where delivery riders are claiming employee status. So it’s very much a situation of watch this space.
Employment status has been the subject of cases in the context of tax and employment rights for many decades. The same tests, developed over years, apply to gig business models. There is a growing feeling that they are too difficult to apply, lead to uncertainty, and are falling behind the huge range of scenarios that make up today’s flexible workforce.
The tests involve looking at a whole range of factors, including such matters as the obligation to perform services personally or provide a substitute, “control” over the worker, and financial risk to the individual.
At one end of the status spectrum, there are genuinely self-employed individuals. Apart from certain discrimination rights, they have no employment rights. At the other end are employees, who have the whole range of employment rights including unfair dismissal and redundancy and family rights such as paid maternity leave. For the last 20 years or so, there has been a middle category, namely that of a worker.
People in this category benefit from some, but not all, employment? rights. The main ones comprise the National Minimum Wage (NMW), the right to five to six weeks? paid holiday and pension auto-enrolment. The recent and widely reported cases involving cab drivers and cycle couriers involved claims for worker? and not employment status.
it’s worth bearing in mind that the enforcing authority for NMW is HMRC, and the Pensions Regulator for auto-enrolment. So it’s not just an individual who can challenge their classification as self-employed.
It can be difficult enough to tell an employee apart from someone who is self-employed, so what is the test for the worker category? The statutory definition of worker is an individual who has a contract to perform personal services for another party who is not a client or customer of any profession or business undertaking carried on by that individual.
Some messages have come through the recent employment tribunal cases on worker status. The first is that the classification of status depends on the substance of the relationship between the parties and not just the description of that relationship in the written documentation.
Tribunals will be suspicious if these documents have been drafted by an army of lawyers? with the primary aim of avoiding employment/worker status. The second is that control over the individual’s activities is a very important factor, as is whether a genuine right to provide a substitute to perform the services. And all of these factors are likely to be used in future cases to argue full employment status.
We can expect these messages to develop as the cases come before the higher tribunals and courts but the overall point is clear. The status of contingent gig economy workersis coming under scrutiny as never before, and organisations should be reviewing their policies and practices here rather than waiting to be challenged by either individuals or enforcement authorities.
Nick Willis is a partner in the employment team at PwC.The definitive guide to hiring your first member of staff: Law and contracts