What you need to know about the gig economy

In February Uber lost the third and final stage in a five-year, and highly publicised, legal battle with its drivers who claimed that they had been wrongly classified as ‘self-employed’ and were therefore not entitled to the same pay and benefits as workers.

19th March 2021

The Supreme Court dismissed the appeal and upheld the earlier decisions, ruling that Uber’s drivers were in fact workers, which means that they are entitled to the minimum wage, holiday pay and pension rights.

Uber has now responded to the judgment saying that it “…will not increase fares as a result of the decision and that its 70,000 drivers will be given a minimum wage, holiday pay and pension rights.”

Now that Uber has come out in response to the judgment, and chosen to fundamentally change its working model rather than fight on, will have far reaching consequences for the wider gig economy. It is likely to encourage other businesses in the gig economy to review their working model and for many this may mean that they are simply unable to continue to trade or will need to look to restructure their business.

Allison Lewis, Head of Employment at DAS Law, looks at what you need to know.

What is meant by the term ‘gig economy’?

It’s a phrase used to describe the growing trend of companies employing temporary workers to carry out irregular, short term work eg app based on demand freelance workforce. This type of working model has fown in popularity in some sectors, and with companies such as Airbnb and Uber, but are now commonplace in other areas, including food delivery and retail.

How many people work in the UK’s gig economy?

It is difficult to say exactly how many people are engaged in the gig economy, but it is estimated that there are over 1.3 million people in the UK working in this way. What’s more, there is substantial growth in the gig economy which suggests that this is the future for a sizeable proportion of the country’s workforce.

As an SME business owner, how can you assess the status of somebody doing work for you?

There are actually three options: ‘self-employed’, ‘employee, and ‘worker’. They all have different rights under employment legislation so it’s really important to be clear on this. And assessing their status isn’t just about what their agreed status is; a tribunal may decide it is something else if it looks and functions that way.

It is not all based on what is written in a contract though. A tribunal will look closely at the relationship. Do they get paid holiday? Do they do their work under supervision? Do they drive one of your company vehicles? It’s essential to look really closely at exactly what they do for your business and how they do it along with how much control the business has over the work carried out and when.

How do their rights differ?

Self-employed people are distinct from the other two classifications, and should have their rights – agreed terms and conditions of work – set out in a written document. As for employees and workers, they have very different entitlements so the distinction is important, with workers having significantly less rights than employees.

Although workers are entitled to things like the national minimum wage, paid annual leave, a maximum working week and the right not be discriminated against unlawfully, unlike employees, they do not have rights around unfair dismissal, redundancy, written reasons for dismissal, maternity leave, or statutory sick pay.

Those are not exhaustive lists but should help make the point that there are important differences between them, and also illustrate why using zero-hour contracts appear a more attractive proposition for many businesses.

Finally, what can SME owners do to help ensure that they have the right contracts in place for their workers??
  • You need to think about what your business needs and what you want to achieve from your workforce. If you need to be able to rely on a person to turn up when you need them, then it may make better business sense to employ them. If flexibility is critical to your business then a zero-hour contract may be an option.
  • If you want a more flexible arrangement, make sure the contract is well drafted and accurately documents the reality of the situation. Remember, in the event of a case going to an employment tribunal, the contract will be the starting point in determining the person’s status, and may ultimately be the deciding factor.
  • Ensure that you review contracts and working arrangements on a regular basis, and consider what your business requirements are. There is a risk that the longer the relationship lasts, the more scope there is for it to drift from what was set out in the original contract.

Further information on this topic can be found on DAS Householdlaw. To find out if you have access to this resource, please consult your policy documentation or contact your insurance broker.

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Disclaimer: This information is for general guidance regarding rights and responsibilities and is not formal legal advice as no lawyer-client relationship has been created. Note that the information was accurate at the time of publication but laws may have since changed.

Allison Lewis

Head of Employment, Solicitor

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