What is the Gig Economy?
We all know that the “gig economy” is a particularly topical subject, but from an employer point of view, are you sure that you really understand the rules?
The gig economy is a labour market where work is contracted on a freelance basis to fulfil short-term contracts or “gigs”. Some employers prefer to determine those who work for them as being self-employed because this does not incur additional costs associated with employer National Insurance contributions.
Case law surrounding the employment status of gig economy workers has been carefully followed by many employers to ensure they don’t inadvertently offer work on the wrong type of contract and become liable for payments to the individuals.
To understand this further we need to understand the different employment types and the relating legal entitlements for each one. There are three types: employee, worker and self-employed (this blog excludes the self-employed).
Have less statutory rights than an employee. They are recognised in law as neither employees or self-employed. Some of those rights include:
- Paid annual leave, rest breaks and maximum working week
- Protection against unlawful deductions from wages
- National minimum wage
- To be auto-enrolled into a qualifying pension scheme
- As a part-time worker, not to be treated less favourably than a comparable full-time worker
In contrast to employees, workers are not entitled to be referred to a disciplinary or grievance procedure under s.1 of the Employment Rights Act 1996.
Have a full suite of employment rights and, as an employer, it is vital that you have an awareness of this, or you may place your business at risk of an employment tribunal claim. With employee status the following is required to be satisfied:
- An employment contract, which must be issued within 2 months of the start date in writing. This will be a day one requirement from 6th April 2020
- For the work to be done in person
- Mutuality of obligation (each party being under an obligation to the other)
- That the employer controls the work which is done and the way it is carried out
Some of the additional employment rights for a worker include:
- The right not to be unfairly dismissed after 2 years’ service
- Statutory redundancy payment
- Family-friendly rights, such as pay
- The right to request flexible working
It is essential to ensure your employment documents are accurate for each category of worker.
Gig Economy Case law
There has been much publicised case law surrounding the Gig Economy, including Uber, City Sprint, Deliveroo and Pimlico Plumbers. The most recent case law involved Uber drivers; the Court of Appeal held that the Uber drivers are deemed to be workers and as such are entitled to the national minimum wage and paid annual leave. The challenge is still continuing with the Court of Appeal having granted Uber permission to appeal to the Supreme Court.
In December 2018, the High Court held that Deliveroo riders are not workers and are, therefore, not entitled to a collective bargaining arrangement. In 2016, the Independent Workers Union of Great Britain representing members who worked for Deliveroo failed to obtain voluntary recognition from the Central Arbitration Committee (CAC) for collective bargaining purposes. The reason was due to the contractual documentation that clearly outlined that the riders have a genuine right to use a substitute to perform deliveries, which does not fit the definition of “worker” where it includes a reference to “where work is performed under a contract to perform work personally for another party to the contract who is not a professional client of the worker”.
Guidance for Employers
Check your employment contracts and ensure they accurately reflect the status of the individual performing work on your behalf.
Ensure that you are familiar with the rights associated with the employment type you offer.
If you are not making correct payments to individuals, rectify this immediately, as this will stop a series of potential unlawful deductions which could be claimed from you.
If you require additional guidance or help in this area, please call Jude Read HR Consultancy on 01455 231982 or send an enquiry via our contact page.