With on-demand platforms Deliveroo and Uber both at the centre of high profile legal rulings in recent weeks, Grid Law founder David Walker helps Business Advice readers understand the roots of the current controversy in the gig economy.
The gig economy is once again in the news with high profile legal cases trying to determine the employment status of people working for companies such as Deliveroo and Uber.
The law treats the employed and self-employed very differently and as the gig economy grows, this issue is going to affect more and more people. This makes it a very important issue, not only for those people working in the gig economy, but also for those start-ups embracing it as their business model.
Very briefly, let me explain the main differences between employment and self-employment.
Employees are guaranteed certain employment rights. For example, they’re entitled to the minimum wage, sick pay, holidays and they have rights against being unfairly dismissed. The business is very much in control of the relationship and dictates what the employees do and how they do it.
The self-employed don’t have these employment rights. The only rights they have are those which they negotiate as part of their contracts. When they work, they get paid, but when they’re not working, for whatever reason, they don’t have an income. However, they are (or should be) in control of what they do.
Looking at these differences, it’s easy to see why the gig economy creates such controversy and why some people love it while others hate it.
Personally, I’ve always preferred self-employment. I’m in control and I can agree terms with my clients. In theory, I have flexibility and can choose the hours I work. (In practice, I probably work far more than if I was employed.)
However, the main reason I choose to be self-employed is that ultimately, the success of my business is down to me. I can make a clear business decision about whether I take on a particular piece of work for a client and whether it’s likely to be profitable or not.
Just like every other industry, as a solicitor I work in a competitive market so I have to choose the clients I work for very carefully. It’s important to me that I make a difference, that I actually solve a client’s problem and at the same time, deliver great value for money. To me, this is the very essence of being self-employed and this is what makes my business a success.
But let’s say I chose to work in a different industry.
Let’s say I was trying to build a successful business with only one or two clients and both were loss making tech startups. What if I had no opportunity to compete on the quality of my services? What if the terms my clients offered were “take it or leave it”? What if the work from these clients was limited because of the sheer volume of freelancers they have on their books?
Could I build a successful business on these terms?
I think my chances would be very slim indeed.
The tech startups in the gig economy are promoting flexibility as the main benefit of self-employment but that’s not true. Flexibility is not the main benefit of self-employment because employment can be flexible too.
The main benefit of self-employment is the opportunity to build a successful business and that’s not something they offer. But they’re not offering employment and all the benefits that go with it either. This is why there are so many problems with the gig economy.
So, what’s the solution?
This is what the courts are trying to determine and whilst the two sides battle it out, everyone needs to take a step back and look at the real situation.
As I said, I love being self-employed and if I was still at university I think the gig economy would be perfect for me. Building a successful business wouldn’t be my priority but the flexibility would enable me to take the jobs I want and fit them around my studies. Studying would also fill the “down time” between gigs so this would work for me.
However, if I needed a regular income or wanted to build a successful business, this wouldn’t work so I would have to find something else to do.
Building a business isn’t for everyone, but many people still need flexibility. If you need regular income and are being paid per job, you can’t take the risk of downtime. If you’re not guaranteed a certain amount of work, a minimum wage becomes essential so employment would be a far better option.
For people in this position, the gig economy in its current state clearly isn’t working which is why they are pushing for increased rights and a minimum wage.
The tech startups keep saying they are offering flexibility and that this is what their workers want. I think the truth is that these tech startups simply can’t afford to take on a workforce of tens of thousands of people.
They are already running at a huge loss whilst they focus on growing their user base so it’s easy to see why using a pool of self-employed individuals is so attractive. They may not even survive if they had to guarantee a minimum wage and other employment rights to their whole workforce.
If you run a startup business in the gig economy and have any questions about taking on employees versus the self-employed, feel free to email me at email@example.com and I’ll happily answer them.
Read David’s small business guide to hiring freelancers and using the gig economy
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