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The ‘Gig’ Economy

We are witnessing the increasing growth of the ‘gig’ economy. A gig economy is an environment in which temporary positions are common and organisations contract with independent workers for short-term engagements. Some of the largest players are Uber, Deliveroo and Hermes, all of whom have recently been under the spot light regarding the employment status of their drivers.

Deliveroo riders went on strike after the company tried to replace their hourly rate with payment-per-delivery. The riders said the change would leave them vulnerable to low pay during quiet periods. The company, which delivers for well-known restaurants such as Gourmet Burger Kitchen and Wagamama, have now said it would not force workers to accept the new contracts.

Workers at Uber took the company, which enables people call a taxi using their phone, to an employment tribunal in July. Drivers argue they are technically defined as employees and should receive benefits such as sick pay. One driver said he was placed under “tremendous pressure” to work long hours. The tribunal has not yet reported its decision.

Delivery business, Hermes, pays drivers for using their own cars to deliver items ordered online for retailers. Its 10,500 workers are all classed as self-employed. This means they are not entitled to the national living wage, pension contributions or holiday and sick pay. HM Revenue and Customs are proposing to investigate Hermes couriers’ complaints about their employment status. If HMRC finds that the drivers’ status is that employed workers the company may have to pay six years’ worth of NICs.

There is a difference between genuinely self-employed people, workers who are not employed but work casually and employees. An employee is someone who works under an employment contract and has a large number of employment rights. Workers have fewer rights but are entitled to the national minimum wage, unlawful deductions, statutory paid holiday, rest breaks, right not to work 48 hours or more, protection against unlawful discrimination, protection for whistleblowing and not be treated less favourably on grounds of a protected characteristic.

Self-employed people run their own businesses. There is no mutuality of obligation with their customers, they carry their own costs, pay for their own equipment and find their own customers. They still have the right to work safely and their rights and responsibilities are set out by the terms of the contract they have with their clients.

Getting employment status wrong – even inadvertently - can be very expensive. As well as the back pay of NICs, if you incorrectly categorise an individual as self-employed rather than a worker or employee, you could face significant penalties – including possible criminal sanctions – for failing to comply with auto-enrolment obligations and a wide range of employment tribunal claims, including claims for unpaid holiday pay and the minimum wage.

We deal with the good, the bad and the ugly of HR. If you need help determining an individual’s employment status or any other HR issues, give us a call on 01908 262628.

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