Is the ‘gig economy’ creating a new type of worker?
01 September 2016 -
With Uber facing increasing levels of legal action from its staff, what rights do freelance workers have, and what does that mean for employers?
Guest blogger Philip McCabe
The term “gig economy” has firmly entered employment vocabulary, becoming a catch-all term for anything from Airbnb hosts and freelance professionals selling their skills through websites like Fiverr, and TaskRabbit, through to people working on a portfolio of different assignments for a number of businesses.
But what does this highly flexible way of working mean for employers?
The freelance world is still a relatively small workforce. Following the crash of 2008 the proportion of people working for themselves has grown from 12% to 16%. The UK is still some way behind the US, where 53 million Americans work freelance including 21 million independent contractors, but it is a growing workforce and could soon overtake number of employees in the UK public sector.
Despite the growing size of the freelance market, most of us still have “proper” jobs that pay a fixed monthly salary with holidays and let us plan for the future with protected employment rights. And this is the issue here in the UK: employment rights were created to reflect the traditional employment methods.
Those working short-term gigs may never acquire those rights.
On the front line of the legal challenge is Uber, and some 385,000 cases in California and Massachusetts have already been settled for around $100million.
Here in the UK, the trade union GMB is supporting Uber drivers’ claims that they should be paid the National Living/Minimum Wage.
The driver’s status matters, both to the company and to its drivers: some estimates suggest that being classed as employees can make a difference to the employer's costs of over 30%.
The company argues that traditional businesses are based on an outdated model, and that their way of operating is healthy for the market. It also claims that it creates jobs.
But if the drivers are employees, they have the protection of all the rights traditional employees already have - and the associated costs.
When the Uber cases are finally heard, they will highlight the unsatisfactory state of the law.
In order to establish an employment relationship, there are three tests: the individual has to show that she/he is required to perform the service in person; that there is an obligation to be offered and accept work; and that the employer is able to control the way she/he does the job.
A ‘worker’ has to show the first two of these – personal service and mutuality of obligations – but, rather than the employer being in control, the employer is a customer or client of the individual worker.
If the application of these principles were straightforward, however, we wouldn’t have so many cases before Employment Tribunals.
The growth of the gig economy has only exacerbated a pre-existing problem: how do employment judges determine employment status where the evidence is so ambiguous? Judges can often be motivated to protect individuals where they believe that employer falsely claims that the individuals are self-employed, aimed at denying people their employment rights, but this is not always the case.
The government had promised to review the problem and the Department for Business, Innovation and Science is understood to be considering a public consultation on the issue.
And most HR departments have not got to grips with this new way of working.
In their report The future of work, PwC found less than one-third of employers have a strategy for the rise of the gig and portfolio worker, despite nearly half expecting at least 20% of their workforce to be employed this way by 2020.
So there is still some way to go before the gig economy is well and truly part of the mainstream.
Philip McCabe is head of employment at Spencers Solicitors
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