Gig Economy and the Self Employed

Firstly – what is ‘gig economy’?

The term has spouted from companies such as Uber and Deliveroo, where drivers have a series of ‘gigs’ (in this case fares) and are paid for each gig rather than their time. Many of the companies who provide these ‘gigs’ do so over a platform. These are mostly online and could be through Apps. Another few examples are Airbnb, where individuals can advertise rooms for rent on the platform, and Hermes delivery service.

Gigging does not quite fall into a set category of employment status, e.g. worker, employed or self-employed. This doesn’t only raise issues of employment law, concerning statutory pay and leave amongst others, but also issues of tax, such as PAYE and NIC’s.

For those who wish to work to pick up a little extra cash, perhaps alongside studying, the flexibility which ‘gigging’ provides is ideal. It offers complete control over working hours and can, on a good week, pay well. For the companies, the administrative burdens are much less significant for the gig economy than they are for employees. On the other hand, being classed as self-employed means that these individuals do not get the protection of employment, such as statutory sick pay, maternity pay or holiday pay, and no rights against unfair dismissal.

The Office for Budget Responsibility has estimated that the cost to the Treasury of the gig economy, in terms of lost tax revenue, will reach £3.5 billion a year in 2020-21.

A breakthrough case was that of Uber.

In a case brought against Uber from two of its drivers, Mr. Farrar and Mr. Aslam, Uber stated that the drivers on the App were self-employed, and Uber simply provided a technology platform (the App) to connect these drivers with the fares. Farrar and Aslam argued this, stating that they were workers of Uber, and so should be receiving certain benefits such as holiday pay, sick pay and the national working wage. Uber argued that it is a technology company rather than a taxi provider, and that its drivers are independent self-employed contractors who use the technology to make money. The company does not own a single vehicle. However, the tribunal dismissed as ridiculous the claim that it simply linked thousands of small businesses through a technology platform.

Many of the facts do support a case for self-employment. Uber drivers provide their own vehicles, pay for all the related costs (such as private hire insurance), are permitted to work independently or for other companies, do not wear an Uber uniform and are free to accept work only when they want to by turning the Uber App on or off.

However, when the Uber App is turned on, the relationship was considered to be one of employment, with drivers generally having to accept most of the work offered to them. If a driver repeatedly turns down a fare, then Uber logs them out of the App for ten minutes, which shows a level of control which is inconsistent with self-employment. Drivers do not know the name of passengers, do not know the destination until a journey begins, have little control over the route, have no control over the fee charged, do not collect the fee and are discouraged from accepting tips. Uber, rather than the driver, accepts the risk of any financial loss and deals with passenger complaints. The company exerts considerable control over drivers, even going as far as accepting only a limited choice of permitted vehicles.

The drivers won the case, and now all Uber drivers are entitled to the national minimum wage, paid rest breaks and holiday pay. Uber has downplayed the decision and will be taking the case to the employment appeal tribunal. There could then be further hearings in the court of appeal and the supreme court.

The decision, if it stands, only applies to the Uber drivers involved in the case, but it would mean Uber having to amend contracts for all 40,000 drivers in the UK. The ramifications could extend throughout the so-called gig economy, to groups such as self-employed delivery drivers, food couriers, builders and even hairdressers. But it would depend on the working conditions in each case and whether workers want to be treated as employees.

It’s a very fine line to tread between employment and self-employment. Where the job is going to be your main source of income, you need to make sure you’re protected in the right way and so gigging may not be the way to go. From the company’s perspective, they must make sure all correct procedures are in place to cover them should the need arise. It may be preferential to have two classes of people – those employed by you with a watertight contract and those who are self-employed. For the self-employed, they must understand the realty of their situation, that is that you are not their employer and so the benefits of employment will not apply to them.

If you are unsure of the status of some of your team, or perhaps your own employment status then please do not hesitate to get in touch with us and we can talk through your situation.

*All information was correct at the time of writing and some may be subject to change