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Overview of the UK Gig economy

The gig economy has had a dramatic impact on the traditional workplace and UK employment law is embracing the challenges that this presents.

2 minute read

Published 3 July 2019

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  • Employment law for employers
  • Employment law for employees

The gig economy as a labour market is characterised by short-term contracts or freelance work rather than permanent jobs. It is very much a product of the IT revolution enabling agile working and alternative business models such as Uber or Deliveroo. The gig economy has therefore had a dramatic impact on the traditional workplace and UK employment law is embracing the challenges that this presents.

The gig economy needs workers. In the past, businesses with fluctuating demands had a core workforce with casual employees or workers filling in the gaps. The term “casual worker” includes many different types of arrangements but commonly meant bank staff, seasonal workers, those on zero hours contracts and guaranteed minimum or short-hours contracts. Although a casual worker has fewer rights than an employee, they are entitled to more limited employment protection such as the national minimum wage and paid holidays.

However, the gig economy has rejected this model and prefers to engage individuals as self-employed contractors, with the freedom to accept work (the “gig”) or reject it. However, some individuals (and their trade unions) are claiming that they are workers with increased protection. Consequently there is a significant financial risk for employers engaging people on a purportedly self-employed basis as they may turn out to have greater rights including the national minimum wage, retrospective holiday pay, rest periods and limits on their working time.

In some cases, self-employed contractors in the gig economy have been able to argue not only that they are workers but that they are employees with full employment protection including the right not to be unfairly dismissed. Many of the cases have concerned couriers, taxi drivers and plumbers. In some of these cases the employer has stipulated the terms of the contract, rates of pay, exercised a significant degree of control, and the individuals appear to the outside world to be integrated within the business. These are classic signs that the relationship goes beyond a “gig”.

Because of concerns that workers were open to exploitation, the government instigated the “Taylor Review” that made a number of recommendations, some of which the government will take forward including:

  • a new right for workers to request a more stable and predictable contract;
  • making the permissible gaps in continuous employment longer (from one week to four weeks) so it’s easier for casual staff to establish continuity of employment;
  • banning employers from taking administrative fees or other deductions from staff tips;
  • from 6 April 2020 the following will come into force:
    • a new right for all workers (not just employees) to a written statement of terms on or before the first day of employment, rather than the current obligation to provide this within two months of the start date;
    • a right for agency workers to be provided with a “Key Facts Page”, to include information about the type of contract, the minimum expected rate of pay, how they will be paid and by whom (for example, by an intermediary or umbrella company), any deductions or fees to be made, and an illustrative example of what this might mean for take-home pay;
    • lowering the threshold required for a request to set up information and consultation arrangements from 10% to 2% of employees (subject to a minimum of 15 employees); and
  • increasing the reference period for determining an average week’s pay for holiday purposes from 12 weeks to 52 weeks, so that workers who do not have a regular working pattern throughout the year are not disadvantaged by having to take their holiday at a quiet time of the year when their weekly pay might be lower.

Whilst employment protection in the gig economy remains fluid recent cases show a desire to categorise participants as either workers or employees thereby giving more rights and protection than to the previously “self-employed”. There are also tax consequences some of which are not entirely welcomed by the workforce but are likely to benefit the economy.

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Longer Reads

Overview of the UK Gig economy

The gig economy has had a dramatic impact on the traditional workplace and UK employment law is embracing the challenges that this presents.

Published 3 July 2019

Associated sectors / services

Authors

The gig economy as a labour market is characterised by short-term contracts or freelance work rather than permanent jobs. It is very much a product of the IT revolution enabling agile working and alternative business models such as Uber or Deliveroo. The gig economy has therefore had a dramatic impact on the traditional workplace and UK employment law is embracing the challenges that this presents.

The gig economy needs workers. In the past, businesses with fluctuating demands had a core workforce with casual employees or workers filling in the gaps. The term “casual worker” includes many different types of arrangements but commonly meant bank staff, seasonal workers, those on zero hours contracts and guaranteed minimum or short-hours contracts. Although a casual worker has fewer rights than an employee, they are entitled to more limited employment protection such as the national minimum wage and paid holidays.

However, the gig economy has rejected this model and prefers to engage individuals as self-employed contractors, with the freedom to accept work (the “gig”) or reject it. However, some individuals (and their trade unions) are claiming that they are workers with increased protection. Consequently there is a significant financial risk for employers engaging people on a purportedly self-employed basis as they may turn out to have greater rights including the national minimum wage, retrospective holiday pay, rest periods and limits on their working time.

In some cases, self-employed contractors in the gig economy have been able to argue not only that they are workers but that they are employees with full employment protection including the right not to be unfairly dismissed. Many of the cases have concerned couriers, taxi drivers and plumbers. In some of these cases the employer has stipulated the terms of the contract, rates of pay, exercised a significant degree of control, and the individuals appear to the outside world to be integrated within the business. These are classic signs that the relationship goes beyond a “gig”.

Because of concerns that workers were open to exploitation, the government instigated the “Taylor Review” that made a number of recommendations, some of which the government will take forward including:

  • a new right for workers to request a more stable and predictable contract;
  • making the permissible gaps in continuous employment longer (from one week to four weeks) so it’s easier for casual staff to establish continuity of employment;
  • banning employers from taking administrative fees or other deductions from staff tips;
  • from 6 April 2020 the following will come into force:
    • a new right for all workers (not just employees) to a written statement of terms on or before the first day of employment, rather than the current obligation to provide this within two months of the start date;
    • a right for agency workers to be provided with a “Key Facts Page”, to include information about the type of contract, the minimum expected rate of pay, how they will be paid and by whom (for example, by an intermediary or umbrella company), any deductions or fees to be made, and an illustrative example of what this might mean for take-home pay;
    • lowering the threshold required for a request to set up information and consultation arrangements from 10% to 2% of employees (subject to a minimum of 15 employees); and
  • increasing the reference period for determining an average week’s pay for holiday purposes from 12 weeks to 52 weeks, so that workers who do not have a regular working pattern throughout the year are not disadvantaged by having to take their holiday at a quiet time of the year when their weekly pay might be lower.

Whilst employment protection in the gig economy remains fluid recent cases show a desire to categorise participants as either workers or employees thereby giving more rights and protection than to the previously “self-employed”. There are also tax consequences some of which are not entirely welcomed by the workforce but are likely to benefit the economy.

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