Gig Economy and Employment Status

Gig Economy: An Advanced Way of Workforce Exploitation? 

The purpose of this article is to highlight the significance of employment status, an emerging issue in the UK economy. An increased awareness of human rights has made people more apprehensive about safeguarding their rights. The government of UK is also showing concern in resolving the issues related to the basic rights of workers, by making changes in the legislation about the gig economy workers.

Gig economy refers to the labour market which is based on short term contracts with flexible working hours, as opposed to permanent jobs. Organisations hire individuals from the market on temporary basis, as per the demand (Blanchard, 2017). There has been a rise in the ratio of contractual employees, which has raised the issue of rights of employees in the gig economy. The emerging economy is claimed to be exploited by employers. The issue has it that the organisations are exploiting the working class through their inappropriate terms and policies which are insufficient to protect the mandatory employment rights (Butler, 2017).

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Employment Status

Employment status is defined by the rights and protection given to employees. Individuals working in the UK economy are categorised as an employee, a worker or as self-employed, depending on the characteristics of the employment contract (Gov.UK, n.d.a).

Who is an Employee?

Before diving further into the rights of an employee, it is pertinent to clearly define what an employee is. An individual who has been employed under the employment contract is called as an employee (Maozami, 2016). Contract of employment refers to the service contract or apprenticeship which can either be expressed or implied. It is the employment contract that differentiates between the categories of employment status. The distinguishable features of employment contract include mutual obligation i.e. the employer has an obligation to provide task while employee has an obligation to perform the given task, personal service whereby it is the duty of individual to perform the task on its own rather assigning or sub-contracting with someone else and control which refers to governing the employees (Sargeant, 2017).

Who is a Self-Employed Person?

A person who provides services but does not comply exactly with the characteristics of an employee or a worker is regarded as a self-employed person (Donovan et al., 2016). A self-employed person is not entitled to the rights and protection which employees enjoy. Self-employment refers to the client-contractor relationship where individuals work on their own terms and set their own flexible timings (Ryan, 2017).

Who is a Worker?

The category of worker lies between the employees and self-employed individuals. A worker is commonly defined as an individual who, under the employment contract, which can either be implied or expressed, undertakes to perform the work or services for the second party involved in the contract, which can be a customer or a client belonging to a profession of a business (Gingell, 2016).

Rights of Gig Economy Workers: A Hot Debate

The employment status of gig workers is subjected to a hot debate and individuals, who have been a part of gig economy, are claiming about their rights in the employment tribunal. Gig economy, also called as on demand and sharing economy, is based on consultants and independent contractors (Donovan et al., 2016). Many issues have been reported where employers exploit employees working on zero hour contracts and deprive them of their rights. Of the most famous issues were those related to Uber, Deliveroo and City Sprint in which workers raised their complaints against employers and argued that their due rights are not provided to them. A number of working individuals, who are a part of gig economy, have claimed that they are not self-employed because the terms and conditions of their work match with that of full time workers. The employees contend that working individuals belonging to gig economy should be facilitated with the perks and benefits that are provided to regular employees. The claimed benefits include national minimum wage, paid holidays and annual leaves (Blanchard, 2017).

Image courtesy: BBC News (2018)

Taxation

HM revenue and customs- HMRC, uses the employment status to determine the taxation policy for each category of working individual (Gov.UK, n.d.a). HMRC has broadly categorised employed and self-employed individuals. The category of workers are either treated as employed or self-employed individuals depending on the scope and terms and conditions of employment contract. The taxation department uses the employment categorization to decide the amount of income tax and national insurance contributions. HMRC also uses the employment status to determine the eligibility for tax expenses, benefits, allowances, leaves etcetera (Gov.UK, n.d.a).

Employment Status Tests

Employment tests are important for employers to determine the status of employees and classify them as employees or self-employed. Following are different tests that can be used by employers to distinguish between employees ad self-employed person.

  1. Contract: Employers can distinguish between the statuses through employment contracts. Wordings are important for employer to categorise an individual in a specific status. In an employment contract, contract of service refers to an employee and contract for service refers to self-employed.
  2. The control test: If an employer facilitates an individual with the control of how, where and when to perform the job assigned, that individual will then be classified as self-employed. Lack of the autonomy will classify working individuals as employees.
  3. The integration test: If an employer treats a person as an integral part of an organization, that person is employed, otherwise he is self-employed.
  4. The economic reality test: A crucial test which decides the status of a working individual is economic reality test. This test takes into account the analysis of degree of control, method and frequency of payments, working hours, right of substitution, degree of financial risk taken, mutual obligation, provision of own equipment and ability to hire help (Gov.UK, n.d.b)

Employment status tests serve as a yardstick to evaluate the legal status of employees and to determine their rights. As gig economy is heavily dependent on self-employed workers, it is crucial to apply these tests to ascertain the rights of gig workers (Maozami, 2016). Working along these lines, Pimlico Plumbers, a London based plumbing firm, used employment status tests as a case argument in a legal case. A plumber, who had worked at the firm for approximately five and a half years, suffered from a heart attack, shortly after his contract with Pimlico Plumbers got terminated. The worker accused Pimlico Plumbers of wrongful dismissal and also claimed for the rights of a regular employee, for example, holiday pay and the right to be paid during medical suspension. Pimlico Plumbers took the case to The Employment Tribunal and appealed against the worker status. The employment contract indicated that the respondent was an independent contractor. He was not obliged to accept work, although it was documented that he had to work for at least 40 hours a week. Moreover, it was clearly mentioned in the contract that the worker was solely responsible for his insurance, and that he would pay taxes as a self-employed person. The control test was also applied and it was found that the plaintiff exercised greater degree of control than a regular employee. On the basis of these evidences, the Tribunal gave the verdict in favour of the firm and declared that as a self-employed worker, the defendant did not have the rights that regular employees enjoy (Croft, 2018).

The case of Pimlico Plumbers is a clear reflection of the fact that written contracts serve as the ‘bible’ in determining the legal status of any worker. Nonetheless, if there are discrepancies between the written contracts and practical employee-employer relationships, then conflicts can arise. As in the case of Pimlico Plumbers, although the worker could not practically reject any work due to the condition of working minimum 40 hours a week, yet he remained unable to claim his status as a regular employee, as the contract held him as a self-employed worker.

Workforce of Uber: Employed or Self-Employed!

The issue of employment status regarding the Uber Company is a very high profile case. Uber drivers claimed their rights in the employment tribunal as employed people on the basis of economic reality test. The drivers put forward their claim against the company that it is not accommodating them as employed workers, rather treating them as self-employed workers despite the fact that the terms and conditions of their work are that of employees (Maozami, 2016). The employment tribunal gave its verdict in favor of drivers and ruled that drivers are employees for Uber Company. The rationale behind the decision of court is the degree of control exercised by the company on its drivers. The control of the company includes the instructions given by Uber on how to perform the work i.e. fixing the fare, setting the default route for each trip and giving rebates to consumers (Ram et al., 2017). To sum it up, Uber has to go through its policies to concretely classify the employment status of its drivers which is based on a number of factors.  

Image courtesy: Pitas (2018)

 

Application of Tests on Gig Workers

The term ‘gig workers’ refers to the individuals who work on contractual basis and on demand basis. The economic reality test has identified many aspects that are considered important in determining the status of a working individual. Likewise, in the case of Uber, simply hiring drivers on contractual and demand basis does not define the employment status in the eyes of employment tribunal. The decision to classify a working individual ranges over a number of factors and a single factor cannot single out a person as a self-employed person (Wales and Amankwah, 2016). However, businesses like Uber hire individuals on self-employed basis but do not access them full liberty. Rather, they exercise much control in policy formation and regulating the terms and conditions. Drivers are bound to follow those conditions without negotiation. Uber reserves the power to alternate drivers’ term without their consent. The performance of drivers are directly monitored by the company as Uber has devised a mechanism of performance appraisal to rate and assess the performance of its drivers. Analysis of these facts reveals that the drivers, when examined on the basis of economic reality tests, can be categorised as employee, as the test holds that a higher degree of control on workers exits them from the category of self-employed persons. The Uber case signifies the importance of employment status for other similar business like Deliveroo, Pimlico Plumbers and City Sprint, and implies that these companies should make their policies distinctively clear in order to distinguish the employment status of their workers and to avoid conflicts.

Prospects of Uber Issue- Need of a Quid-pro-quo!

Uber’s issue of gig workers is subjected to a hot debate in the gig economy. Both the employers and workers have certain arguments to support their stance. As per employers, drivers have the advantage of flexible working hours and they have control over the working time which is the reason that they are categorised as self-employed or gig workers. On the other hand, workers claim their rights and benefits which are provided to regular employees. Employment tribunals had given the verdict in favor of Uber drivers to categorise them as employees rather than independent contractors. Employment tribunals entitle drivers to the right of minimum national wage and paid annual leaves. Uber appealed against the ruling of employment tribunal but lost the case. The company has a plan to re-appeal against the ruling. The issue might settle by creating a midway between both the parties where the interest of employers and drivers could be mutually settled. Drivers, on the basis of their association with Uber, should be categorised either as self-employed or employed. Drivers who have been associated for a longer time span should be treated as employees by giving them their due rights.

The chances of winning for Uber seem low which serves as an indicator for such businesses to review their policies and adopt a way that could satisfy their workforce, since workforce is the lifeblood of every company. When workers are satisfied with their jobs, their productivity increases, which leads to an increase in profit margin of the firms (Blanchard, 2017).

The rulings passed by the employment tribunal law need to accommodate both parties, as discussed in the Taylor Commission report on modern working practices. As per the report, the law should maintain a fair balance of rights and responsibilities that everyone feels protected and there should be a clear opportunity for everyone to make progress (Gov.UK, n.d.c)
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Conclusion

Employers all around the world are exploring cost efficient ways to run their businesses, which has given rise to gig economy. Gig economy is characterised by labours who work on demand basis and enjoy flexible working hours. With the entry of several big companies in gig economy, it is now seemingly used as a source for exploiting workers in the name of self-employment. Nevertheless, gig workers in UK have become more concerned about their rights. The fact that employment tribunal courts are giving their verdict against employers, poses threat to the sustainability of big businesses like Uber, Deliveroo, Pimlico Plumbers and City Sprint. It is the need of the hour that employers show flexibility in their practices and give due rights to employees. It will not only be beneficial for the workers but also for the companies, because ultimately a satisfied workforce paves the way for success.

References

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Blanchard, J., 2017. ‘Workers in the “gig-economy” are demanding proper employment rights’ [Online]. Mirror. Retrieved from http://www.mirror.co.uk/news/uk-news/wokers-gig-economy-casual-contracts-10041604 (Accessed 19th February, 2018).

Butler, S., 2017. Change law to protect gig economy workers, MPs’ report urges [Online]. The Guardian. Retrieved from http://www.theguardian.com/business/2017/nov/20/change-law-protect-gig-economy-workers-mps-report-urges (Accessed 23rd February, 2018).

Croft, J., 2018. Pimlico Plumbers faces landmark ruling on gig economy [Online]. Financial Times. Retrieved from https://www.ft.com/content/6e0bd478-127e-11e8-940e-08320fc2a277 (Accessed 26th February, 2018).

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