• Employers and experts clash over rights of gig economy workers

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  • 24 Jan 2017
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Deliveroo tells government it ‘can’t function’ without self-employed drivers, but agencies urge clarity over employment status

The stage is set for a dramatic showdown between employers, employer bodies and academics, as a widespread consultation on the future of workers’ rights in the gig economy nears a conclusion.

The widespread review by the Business, Energy and Industrial Strategy Committee, which closed last week, received dozens of submissions. It was called to consider the implications of different employment statuses – including self-employed, worker, freelancer, contractor and employee – following the growth of the gig economy and the recent tribunal defeat for taxi app Uber, whose drivers challenged their self-employed status.

The review suggests the government is willing to consider creating a new employment status, alongside possible changes to the tax system that recoup lost national insurance contributions when businesses use large numbers of freelance or self-employed individuals. But the submissions demonstrate a notable schism between those on each side of the debate.

Takeaway delivery company Deliveroo, for instance, told the review it “would not be able to function” without the labour market’s current flexibility: “The value placed on maximum flexibility by the riders and the way our business operates is why we believe that the self-employed contractor status, rather than worker or employee, is appropriate for those working in gig economy companies. Without it, our business – and other gig economy companies – would not be able to attract the numbers of people we require.”

It was backed by Uber, which repeated its insistence that its drivers are “free to turn off the app and stop working at any moment” and said its roles suited those with childcare commitments who find ordinary part-time opportunities inaccessible. Manufacturers’ organisation EEF noted that the varied working patterns required by seasonal work meant many of its members valued those on irregular contracts.

But many other contributors – including the Employment Lawyers Association (ELA) and HR services outsourcer The HR Dept – called for greater clarity around employment status. The ELA said even those in the legal profession “struggle to apply these definitions with certainty” and said it was unsurprising that certain employers sought to structure relationships with their workforce so that they afforded them the fewest rights possible.

Many business advisers, accountants and bank managers have to conduct working status checks with HMRC because they do not understand the difference between self-employment and worker status, The HR Dept said in its submission. “Business owners frequently believe that choice of status is theirs to make and people working within their business believe that they can categorise themselves as self-employed even if they are actually workers,” it said.

This uncertainty causes issues around pay, tax and working rights, the agency added. It said it knew cleaning companies that had wrongly classified cleaners as self-employed while taking a cut of their pay, while hair salons had engaged in ‘false self-employment’ by establishing a ‘rent-a-chair’ arrangement while expecting stylists to adhere to a staff rota.

In its submission, the CIPD welcomed the potential for developing a ‘single test’ of employment status. But it pointed out that this alone would not guarantee better protection for individuals, urging instead greater awareness of employment rights, particularly among zero-hours contract workers. It added that “an individual’s rights to pay, hours, holiday etc are not solely dependent on employment status, but are determined by the terms of the employment contract”, and urged the government to require businesses to provide terms and conditions to all workers – not just employees – after two months.

Some submissions contained suggestions for additional legislation or guidelines aimed at offering greater clarity. The Association of Independent Professionals and the Self-Employed suggested that the government explore a proposal for a freelancer limited company status, which would offer certainty on tax and employment status, while also protecting revenue for the Exchequer. This proposal has already been endorsed by the Office of Tax Simplification, which said it was “worth considering further”.

Recruitment agency Randstad said it believed there was a need for an overhaul of legislation with a view to “simplifying matters”. It proposed three categories of rights: fundamental – for all people providing personal services; worker – reflecting a longer relationship, but not one where there is an obligation to provide or perform work and include holiday pay and pensions; and employment rights – for all longer-term engagements where there is any mutuality of obligation, including rights relating to termination and to benefits when not working because of sickness.

The imperative for change was made clear by the Equality and Human Rights Commission, which said it feared the right to freedom of association and collective bargaining was being undermined by the gig economy, while the Institute for Employment Research suggested an end to the euphemism ‘sharing economy’ when it said Uber and others could be seen as facilitating tax evasion.

The government said the submissions would help “inform its future thinking” on the issue, but gave no concrete details of the next steps.

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  • I find this a very odd article. What we have on one side is a group of companies who have based their business model/practices on an employment approach which seems to be (following recent tribunal cases) of dubious legality; on the other a lack of understanding from certain groups on the tests for employment status. The proposed solutions seem to be

    a) varying the existing rules on limited companies for "single person" organisations or b) giving a few more rights to the self-employed (the Randstad recommendations on workers/employees seem to replicate the existing situation)

    This seems to me to be a mini-Brexit debate for HR; people arguing for a view that suits their own purposes without any real understanding of what the current rules do and don't allow. Perhaps we need a Supreme Court judge to explain it?