The Gig Economy, the worker and the duck test

Like everything else these days, the nature of work is changing more rapidly than ever. Entrepreneurs are testing the boundaries of what can be achieved, and the authorities are struggling to keep up.

The Gig Economy is a case in point.

Ed Hussey - Menzies AccountantThere has been an explosion in self-employment this century, particularly part-time. This is characterised either as people managing a flexible, portfolio career running their own business, or as low-paid, insecure work that people are forced into to survive.

Evidence from the Office for National Statistics (ONS Trends in Self Employment UK 2001-2015) indicates that most self-employed workers are older (mid to late career), are primarily in the finance and business services sectors, in higher occupational groups and are content with their self-employed status. The exception to this rule is amongst younger, part-time, self-employed men where there is greater dissatisfaction with their part-time status and more have come from unemployment. There is evidence of under-employment in this group.

So, it appears that most self-employed workers do so out of choice and are happy, whilst a small number appear to have been forced into it through economic circumstances. The point here is one of perspective. In the main, self-employment is not exploitative.

Media attention is drawn to a specific area – the so-called Gig Economy – and whether self-employed workers in this sector should actually be classed as a form of employee and given the protections that go along with it. The Gig Economy is where companies hire self-employed workers ‘job to job’ rather than taking them on as employees. This has been made much more possible with new technology that can allocate work automatically – as in the Uber example. Here, Uber claimed that they were providing their technology to small businesses (the drivers) who were able to grow their businesses off the back of it. The court, however, saw it differently, saying that the only way the driver could grow their business was by putting in more hours. They had too little control over the way in which they delivered their service, were subject to too many rules and conditions and could not agree their own prices.

Uber are appealing this case, but a more recent ruling against City Sprint has taken a similar view and there are further cases to come involving couriers and private hire drivers.

In all these cases, the individuals are arguing that they are ‘workers’ as defined in employment law. This is a status that, in short, can have a mix of features between employment and self-employment, but where some of the key tests of employment are present. These revolve around the requirement to undertake work personally, a mutuality of obligation and the exercise of control. Worker status often applies, for example, to casual employees where there is no obligation for the employer to offer or for the employee to accept the work, but there is a requirement for personal service and the employer controls all aspects of the work itself.

What’s at stake are the employment protections that worker status provides, primarily the National Minimum Wage, statutory holidays and rest periods, protections against discrimination, fair treatment as a part timer and statutory leave payments. Workers tend not to be entitled to protection against unfair dismissal, the right to request flexible working, time off for emergencies or redundancy.

From an employer’s perspective, getting this wrong can have implications for their cost base and, perhaps more significantly, the reputational damage of being seen as an employer that is trying to take advantage of that small section of the workforce who are elf-employed out of necessity rather than choice.

Employers should therefore think carefully about how they engage the labour force they need, remembering that it is what happens ‘on the ground’ that counts, i.e. a contract that describes a situation that turns out not to reflect reality will be worse than useless. In all cases, the Duck Test will apply, i.e. If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck.

For more information and guidance on these issues, please contact Menzies People Solutions team at Menzies.

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