Gigging can be a rough ride for some
Author: Julia Kermode, FCSA
Will Shu, the chief executive and co-founder of Deliveroo has recently said that he thinks everyone, regardless of their type of work contract, should be entitled to certain benefits but wants to end any trade-off between flexibility and security. He is now calling on the UK Government to introduce a new charter to allow companies like his to be able to provide certain benefits, like insurance, sick pay and holiday pay without any risk that self-employed contractors will lose their employment status and the flexibility that comes with it. He believes such a charter would provide more clarity for companies that want to give more self-employed contractors more security, as well as other gig workers.
At FCSA, we welcome any opportunity to clarify valid working practices, and of course treat the whole workforce fairly, however we recognise the issue raised by Mr Shu that the provision of benefits could undermine the employment status of Deliveroo’s workers. His call to action comes a year after Theresa May spoke at the launch of Matthew Taylor’s review of modern working practices in the UK when she claimed she shared Taylor’s ambition that “all work should be fair and decent” and that “the government will act to ensure that the interests of employees on traditional contracts, the self-employed and those people working in the ‘gig’ economy are all properly protected.” It was a promise that some might argue was full of empty words. But, it’s a topic that is not going away any time soon as employment practices are changing. Over the last ten years, we have seen a massive economic shift in working practices and choices. Businesses are employing fewer permanent staff and people are shunning permanent employment for more flexible contingent working and they should be treated fairly and respectfully. The Government needs to focus on making that happen, regardless of employment status.
In a recently published discussion paper, the Office of Tax Simplification recommended compelling gig economy platforms, such as Uber and Deliveroo, to offer to withhold tax on behalf of workers and transfer it to HM Revenue & Customs. The move would ease the compliance burden faced by gig economy workers — who are treated as self-employed for tax purposes — while increasing tax payments to the exchequer. This is alarmingly similar to the recent IR35 reforms in the public sector, which taxes people as employees but without any of the accompanying rights or benefits. It is also essentially akin to the elective deduction model (EDM) whereby individuals are self-employed for employment status, but “elect” to have taxes deducted as if they are employed.
As self-employed taxpayers, gig economy workers currently enjoy a status that generally gives them lower national insurance payments. But they also have more compliance responsibilities, with significant tax bills at the end of the financial year that often plunge people into debt. Suggesting that gig economy workers should be paid via a system similar to PAYE and making their employers responsible for this is contentious, however the OTS state their proposal would be voluntarily implemented, giving people the choice. An interesting perspective, although out of kilter with most other tax regulation which does not usually offer much choice over how it is paid.
Last year, the Prime Minister tasked Matthew Taylor with reviewing modern employment practices, particularly with reference to security, pay and rights of different ways of working. He found that most professionals make an informed choice to be self-employed, and do so for many different reasons, primarily due to the flexibility it affords. They choose to shun any rights and benefits as they prefer to be engaged in a non-permanent manner. As the Government now reflects on the 50+ recommendations that Matthew Taylor highlighted in his report I would suggest policy makers take action to educate employers to treat their workforces properly, whatever their status, so that exploitation cannot happen.
In May this year, Sir David Metcalf issued the UK’s first ever Labour Market Enforcement Strategy in which he proposed measures to tackle non-compliance within the supply chain, placing joint responsibility on end-clients and their suppliers to ensure that the whole workforce is not being exploited in an important move to instil good working practices. Sir David has promised to punish rogue employers who undercut honest businesses which is a significant and positive step towards genuinely levelling the playing field for compliant businesses.
Sir David has also proposed that the Employment Agencies Standards Inspectorate has its powers extended to include intermediaries. FCSA has long campaigned for such regulation so that we can drive out the unscrupulous firms which have tarnished the reputation of the sector. Without regulation, we will not rid our industry of rogue businesses, and nor will we stamp out exploitation of workers.
Hardly a day goes by without the gig economy making the headlines with several cases being brought to tribunal around the issues of worker status. So, what do we actually know about the gig economy? We know from a BEIS report out in February this year that 4.4% of the population in the UK has worked in the gig economy in the last year, that’s about 2.8m people, with more than half aged between 18 and 34. We also know that 42% of those carry out courier services and one in four reported that they earn less than £7.50 per hour.
Recently, 65 Hermes couriers successfully won a tribunal case and were deemed workers not independent contractors. An employment tribunal in Leeds ruled the couriers had incorrectly been classified as self-employed and were entitled to receive the minimum wage and holiday. The ruling is likely to affect the wider network of 14,500 Hermes couriers who are engaged under the same contracts as the couriers, however we understand that Hermes will be appealing.
We also heard the case of Pimlico Plumbers v Gary Smith, who was required to work at least 40 hours per week, was required to wear a Pimlico Plumbers uniform and drive a branded van. He also had to ask permission to take time off. Unsurprisingly, the tribunal found that Mr Smith was clearly a worker, and not self-employed, despite the intention of Pimlico Plumbers.
There is a running theme underlying all these cases; whilst employment status is complex the problem doesn’t lie in how people are engaged, the problem lies in how they are treated. In other words there is nothing wrong with engaging a self-employed workforce, providing that this is clear to both sides at the outset, that both sides recognise what the self-employed engagement means in practice, and providing that the workers are treated appropriately and not exploited.
Temporary jobs, contract work and part-time roles are becoming more popular. And of course, hiring businesses benefit from the increased flexibility of the workforce, providing access to specialist, often niche skills, as and when needed – meaning that new developments within the business do not necessarily require an increase in headcount.
However, we must be mindful of the terminology. Most consultants and interims are self-employed and consider themselves to be knowledge professionals and certainly do not consider themselves to be part of the gig economy – which by comparison has relatively low barriers to entry. Given that in everyday parlance, most people perceive the gig economy to be a market disruptor – a mechanism of obtaining work (or gigs) using online platforms – then perhaps it would be more accurate to use the term “platform economy.”
The growing casualisation of work is a complex phenomenon that is here to stay and the difference between the balance of fairness between a ‘worker’ and the hiring company is crucial. So, it is not surprising that it presents many challenges to policy makers. Mr Shu may have a good point and I support him on the charter he is proposing to Government whilst being mindful that exploitation should be stamped out so that giggers, workers, self-employed professionals and permanent employees can choose to work with terms and benefits, or not, as appropriate.
Julia Kermode is chief executive of The Freelancer & Contractor Services Association (FCSA), the UK’s leading professional membership body dedicated to raising standards and promoting supply chain compliance for the temporary labour market.