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HR & Development Services

Employment Status in Gig Economies

Tuesday, 22 August 2017
Over the course of this year and the last we’ve seen a massive rise in the number of employment tribunals related to the status of workers in gig economies, with 2016 seeing a case that the GMB Union described as a “monumental victory” that allowed Uber drivers the same rights as any ordinary worker including holiday and sick pay. 
But first, what exactly is a ‘Gig Economy’?
By definition a gig economy is “a labour market characterised by the prevalence of short-term contracts or freelance work, as opposed to permanent jobs”. In other words, workers will get paid for “gigs” they do, such as a car journey or courier service, rather than an hourly wage or monthly salary. The most well-known examples of businesses that benefit from a gig economy set up are places such as Uber, Deliveroo and CitySprint. 
uber gig economies
What does this mean for workers?
In the UK an estimated five million people are employed in the gig economy, where they are classed as independent contractors. Being an independent contractor does have its benefits – independent contractors are effectively self-employed freelancers and therefore benefit from the flexible nature of their work - it is well known that Uber drivers and newest faction of Uber, UberEats, are able to choose their own working hours meaning workers have more say in their own work/life balance.
 
However, being an independent contractor comes with some major pitfalls; they have no protection against unfair dismissal, no right to redundancy payments, and no right to receive the national minimum wage, paid holiday or sickness pay.
 
What does this mean for employers?
In 2016 The Central London Employment Tribunal ruled that Uber drivers were employed workers, rather than being self-employed drivers. They rejected Uber’s claims that Uber was simply a platform for drivers to utilise and not a transport provider itself. This was a great win for Uber drivers that are now entitled to holiday and break pay, as well as the right to be paid the National Minimum Wage.
 
Following this, organisations are at risk of being hit with multiple claims for various workers benefits such as holiday pay, causing big issues for the companies’ bottom line. Obviously due to the case being won in the first place this will mean Uber has much greater costs than before, part of the ruling was that now Uber drivers were not to just be paid for the individual “gig”, but they would now be classed as working, and therefore requiring to be paid, whenever they were on the app and available to work in the area that they cover. To avoid running into these complications we recommend that employers become fully confident in what work status an individual has, and why.   
 

Overall, with consistently increasing innovation in the way that businesses run and an also increasing desire for flexible working amongst the labour market there still appears to be a place for gig economies to thrive and providing the high level of flexible working and other benefits outweigh the negative aspects of a gig economy we see no reason why this shouldn’t work for both employees and employers alike when done correctly.
 
To check your own employment status for tax purposes click here. Alternatively, if you want to speak to us about anything discussed in this article then please feel free to contact us here.



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