What you need to know about the ‘gig economy’

In February this year Uber lost the third and final stage in a five-year 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.

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 responded to the judgment, and choose to fundamentally change its working model rather than fight on. This is likely to have far reaching consequences for the wider gig economy and may encourage other businesses involved to review their working model. For many this may even mean that they are simply unable to continue to trade or, at least, will need to look into restructuring 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 e.g. app based on demand freelance workforce. This type of working model has fallen in popularity in some sectors including and with companies such as Airbnb and Uber, but they are now commonplace in other areas, including food delivery and retail.

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

It is thought that there are approx. 1.3m people in the UK working in this way. However, 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.

What can SME owners do to help ensure that they have the right contracts in place for their workers?

• They 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 they 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 contracts and working arrangements are reviewed on a regular basis, and consider what thee 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.

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.