For many people, the nature of employment is changing. The proliferation of technology in the modern economy is beginning to shift the dynamic between employers and those undertaking work. Flexible work is increasing to the point where the state needs to address how this fits in to the employment environment, or whether the entire framework requires an overhaul.
The latest statistics show that self-employment in the UK is on the up. According to the ONS there were 3.3 million self-employed workers in 2001 compared to 4.8 million in 2017, a rise from 13 per cent to 15 per cent of the total working population. It can be assumed that much of this increase has been driven by the growth of the ‘gig economy’, with the advent of platforms like Deliveroo, Uber and TaskRabbit. Workers in the gig economy accept jobs, or ‘gigs’, and are paid per gig rather than per hour. Because the platform acts as more of a broker than an employer, by law they do not have to provide certain rights such as sick pay and holiday pay to those undertaking this work, who are classified as self-employed.
This has led to a dilemma over workers’ rights, where a single categorisation of self-employment covers different models of employment. A rider for Deliveroo, for example, has the same classification as a self-employed architect or accountant, although the nature of this work is much the same as a delivery driver who is employed by a restaurant with a contract and employee rights. This contract might entitle the delivery driver to paid and sick leave as well as career progression and support from the employer, whereas the Deliveroo rider has none of these benefits despite doing the same job. As more and more people take on work in the gig economy its saliency as a political issue has increased, particularly in industries where traditional employment practices are being undercut by cheap, flexible labour.
The Government has sought to address this tension by setting out to reform employment law. Matthew Taylor, the Chief Executive of the Royal Society of Arts and a former adviser to Tony Blair, was commissioned to undertake a review of UK employment practices and an independent report was published in 2017. Following several consultations on the Taylor Review, and a joint inquiry undertaken by the Work & Pensions and BEIS select committees, the Government published a White Paper – the ‘Good Work Plan’ – in December 2018.
The Good Work Plan takes forward most of the Taylor Review’s recommendations – including a statement of rights from day one of employment setting out entitlements to paid and sick leave, an increase in the pay reference period to 52 weeks to improve holiday pay calculations, the right to request more predictable working hours, and an increase in the maximum fine employers can face at a tribunal.
The reforms have been welcomed by groups like the CBI and TUC, although the latter has criticised the preservation of zero-hours contracts. The Government is also yet to indicate whether it will bring forward legislation that addresses the legal classifications of employment status.
As it stands, there is a two-tier employment status framework in the tax system – employed and self-employed – and a three-tier framework for employment rights that consists of two statutory statuses of employee and worker, and a third self-employed category that is not defined in legislation. Employees undertake regular work and are entitled to all statutory rights, workers undertake more casual work on a job-by-job basis and are entitled to rights such as the minimum wage and holiday pay, and self-employed individuals do not, in theory, require legal protections to treat themselves fairly.
The Taylor Review recommended the Government retain the current three-tier approach as it remains relevant in the modern labour market but a ‘dependent contractor’ status should replace the category of people eligible for worker rights, with greater emphasis on control rather than the requirement to perform work personally when determining employment status. The joint select committee report conducted between the Taylor Review and the Good Work Plan also suggested a ‘worker by default’ model, which would apply to companies with a self-employed workforce above a certain size. So far, the Government has not taken up either proposal via reform of primary legislation and has instead opted for more minor clarifications in statutory instruments.
This is not to say the existing framework is wrong. As Taylor’s proposed reforms accepted, the gig economy is a beneficial and unavoidable component of the modern economy. Its very nature means that too much state regulation will break it – it relies on flexibility to function. Here lies the Government’s dilemma – there are many calls for greater protections for gig economy workers but any new model should not stifle the growth of the digital platforms that have been able to flourish and innovate within existing frameworks.
Is there an answer? Ultimately it lies in elaborating the difference between someone who is genuinely self-employed and someone who is entitled to statutory rights based on the nature of their gig work. Taylor’s recommendation runs the risk of opening a can of worms if it is to be more than a cosmetic name change, requiring a complete overhaul of existing definitions and tests to ensure robust clarity between employees, dependent contractors and the self-employed. The Work & Pensions and BEIS Committees’ ‘worker by default’ proposal arguably risks addressing the symptom rather than the cause.
A recent deal struck between Hermes and the GMB trade union perhaps offers a model on how to progress. Under the company’s new ‘self-employed plus’ status, Hermes couriers can now opt to receive up to 28 days of holiday pay and hourly pay rates above the minimum wage. This is in exchange for delivery drivers following the most efficient delivery routes as specified by Hermes rather than routes of their choosing. The new model means Hermes couriers can choose whether they want to continue with a self-employed status and the maximum flexibility this brings, or a relationship closer to that of a ‘worker’ where responsibilities are recognised by both sides.
In response to the Hermes deal Matthew Taylor has questioned whether the model is sustainable as it begins to increasingly look like an employer-employee relationship.
He has pointed out that HMRC could assess whether Hermes couriers would have to pay more national insurance (self-employed individuals currently pay less than employees) and whether the company itself would face a larger tax bill, as the hirers of self-employed labour are exempt from paying national insurance whereas a company with employees is not. Hermes insists that couriers remain self-employed under its new offer, having sought legal advice.
The contention links back to the fact there is no statutory definition for a self-employed person, and arguably there does not need to be given that a self-employed individual should be responsible for oneself. Going forward, the Government could work out how to approach the grey area between the genuine employed and the genuine self-employed without breaking and over-regulating the existing framework. ‘Self-employed plus’ is an interesting solution which seems palatable to companies, unions and workers and could be explored as an option if it works for other companies in the gig economy. The Government has not set itself an easy task, but incremental reform means it is in danger of being outmanoeuvred by a rapidly modernising economic environment.