The emergence of the gig economy has presented obstacles when attempting to determine the employment status of individuals and their consequent employment rights and tax liabilities.
In the gig economy, in which companies such as Uber and Deliveroo operate, individuals are engaged on a very flexible, ad hoc basis. This relatively new model of work does not neatly fit into the recognised categories of employment status (see “Employment status” below).
The Prime Minister commissioned the Independent Review of Employment Practices in the Modern Economy, led by Matthew Taylor (the Taylor Review). This review considered the implications of these new models of working.
Many companies operating in the gig economy assert that their business hinges almost exclusively on immediate supply and demand, requiring the flexibility which cannot be fulfilled by engaging individuals as employees or workers. Such companies have insisted that the individuals they engage are self-employed (see “Employment status” below).
Whilst such companies also tend to assert that the degree of flexibility is also preferred by its contractors (although this itself is not entirely clear cut), the Taylor Review highlights the disadvantages faced by many contractors in the gig economy. It seems that individuals in the gig economy do not always have the same bargaining power and level of independence enjoyed by a ‘true’ self-employed individual. Individuals in the gig economy often had low pay, inflexible working times, long hours, instability and reluctance to take time off for fear that they would not get their “rounds” back.
The Taylor Review suggests that such individuals should be classed as ‘dependent contractors’, which seems to be a hybrid between a worker and a self-employed contractor. This new category proposes to provide the workers with certain base level benefits, many of which are currently only afforded to individuals with ‘worker’ or ‘employee’ status.
Clearly, the question is whether these ‘self-employed’ contractors in the gig economy are truly self-employed, or whether companies are attempting to mask their true employment status to evade national insurance and other legal responsibilities.
There are currently three main types of employment status, as follows:
Companies are able to exercise a greater control over employees, and employees are generally required to provide their own personal service, without being substituted or subcontracting their allocated work to someone else. There is also a mutuality of obligation i.e. the company is obliged to provide the employee with work and the employee is required to accept it.
After a fixed period of time, employees have the full suite of employment rights. This includes rights such as statutory sick pay, statutory redundancy pay, parental pay, the right to request flexible working and protection against unfair dismissal.
Workers are engaged on a similar basis to employees although they tend to operate with a slightly higher degree of flexibility compared to employees.
Workers have some employment rights, such as the right to national minimum wage, minimum levels of paid holiday and protection against discrimination. The rights of workers are however not as wide ranging as the full suite of rights afforded to employees.
Self-employed individuals generally operate through a contract on their terms. They have relatively little rights at work which are limited to health and safety protection and some protection against discrimination.
If you would like to speak to James Simpson, surrounding any of the matters highlighted in the article, or for any other issues related to employment, please contact her on firstname.lastname@example.org or 01494 478689.