March 19, 2021

The Jig Is Up for the Gig Economy

After a five year legal battle, Uber’s recent announcement heralds a big change for the gig economy. One month after Uber are obligated to award their drivers with worker status, they have now guaranteed their drivers minimum wage, pensions and holiday pay.

This significant milestone in employment rights is predicted to have far-reaching consequences on other businesses operating with a gig business model.

The Background

In February 2021, the Supreme Court ruled Uber’s drivers are workers and not self-employed (as they were previously), a category that means they are entitled to minimum legal, holiday and pension rights.

There is still some progress to go in this case, as drivers and the TUC union body have raised concerns that there has been no mention from Uber about compensating for past missed entitlements. Besides this, drivers are not considered as workers (with the accompanying rights) whilst waiting between journeys – only between accepting a trip until the drop off.

Despite these issues however, this is still a significant case that shows that no company (however big) is above the law, and all employers are responsible for providing the correct rights and entitlements for the people who work for them.

Employment Categories

Traditionally, work in the UK has been divided between three main groups:

Employed

Being directly employed means a relationship of mutual obligation between the employee and  employer. The employer exercises complete control and direction, and in return employees enjoy a package of terms and conditions, often with contractual enhancements exceeding statutory provisions.

Workers

Workers, which Uber drivers have now been categorised as, are more arms-length in the employment relationship. They receive basic provisions including minimum wage, statutory sick pay and holidays, but little more. Those finding work through an agency (currently estimated at close to one million in the UK) are typically classed as workers.

Self-Employed

Here there is no mutuality of obligation, control or direction. In the past, the self-employed tended to be craftsmen – builders, plumbers, electricians, decorators. You agree a price with them and they, or someone they appointed, arrive to do the work, direct themselves, and manage their own schedules, time off, and so on.

How the Gig Economy Disrupted the Traditional Model

Some organisations have always relied on people external to their organisation. Agency workers, seasonal, casual and bank staff , and the self-employed often provided ad-hoc support. But today’s high technology workplace is wreaking havoc with the traditional employer/employee model.

The changing technologies of the 21st century have brought a more transient workforce than ever before – flitting from project to project and workplace to workplace.

The gig model means that staff can (hypothetically) enjoy a flexible self-employed lifestyle  whilst employers cut costs due to a lack of obligations. However this case and others suggest this arrangement disproportionately favours the company (and their savings) over the wellbeing and rights of staff involved.

The Role of Tech and Apps in the Employment World

With the explosion of technological innovation over the last twenty years, the line between employment and self-employment has become increasingly blurred. There is no better example than Uber.

Uber disrupted the market by providing easy access to drivers via the app and low fares, owing these to its gig economy business model which placed Uber as a 3rd party booking agent for its drivers.

Unfortunately, that’s not a view shared by the London employment tribunal in 2016, which said: “The notion that Uber in London is a mosaic of 30,000 small businesses linked by a common platform is to our minds fairly ridiculous.”

The tribunal identified thirteen major considerations which, in its view, proved drivers work for Uber, and not that Uber works for its drivers, saying: “The driver carries Uber passengers to their destination. Uber is not a client or customer of a business carried on by the driver.”

And they’re not the only major technology business facing similar challenges.

HMRC launched a major inquiry into logistics giant Hermes and its parcel delivery drivers around the same time. Take-away food delivery company Deliveroo is facing similar challenges, and there are many more waiting in the wings. At the heart of the matter is the assertion that those providing services for Uber, Hermes, Deliveroo and the like are all self-employed.

So What Does the Uber Ruling Mean for Employers?

This move could have repercussions around the world for the gig economy model. Already other giant businesses operating with ‘self-employed’ staff members are being investigated.

The House of Commons Select Committee on Business, Energy and Industrial Strategy launched an inquiry into the gig economy and the future world of work, whilst HMRC is investigating whether such companies are avoiding tax and national insurance obligations.

Are we just witnessing the relentless march of progress once again? Or is the gig phenomenon a more sinister lurch towards the casualisation and tax avoidance of an increasingly low pay economy?

Whatever the answer, employers will have to think twice before deciding on the employment status of their staff members.

If you have any particular concerns or queries, contact the team or call 0345 184 4615.

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About the author

Mike Fitzsimmons

About the author

Mike Fitzsimmons

Mike is a Senior HR Consultant within the Moorepay Policy Team. He is responsible for the developing of employment documentation and is an Employment law advisor. With over 30 years of senior management and HR experience, Mike has managed teams of between 30 and 100 employees and is familiar with all the issues that employing people brings. He has also served as a non-executive director on the Boards of several social enterprises and undertook a five year tour of duty as Executive Chair of a £30+ million annual turnover Government agency.

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