REWARD INSIGHT
The gig economy
Danny Done, managing director at Portfolio Payroll, discusses the changing face of employment law
L arge brand name employers such as Deliveroo, Hermes and Uber have faced recent criticism for their working practices which fall squarely into the so-called ‘gig economy’. It is a recent phenomenon which has quickly gathered speed due to the increase in the ‘on demand’ nature of consumers. The gig economy pitches flexibility and employment rights against each other because it relies heavily on self-employed contractors to pick up the work when it is available. Employers are favouring the self-employed concept for this type of work which can have fluctuations in demand because it releases them from any employment law obligations: self-employed people have very few, if any, employment rights compared with employees who have many. The problem encountered by the gig economy comes from the very people within it who claim that they should be afforded some employment rights. They say that, although they may be taken on with documentation stating that they are self-employed, the practical reality of the working relationship dictates otherwise. It is a sensitive question due to the floodgates that could be opened if their claims were substantiated. Typical gig economy employers are parcel delivery drivers, courier companies and food delivery businesses. Those engaged in gig economy industries are paid by the job (e.g. by the parcel delivered etc) and often this does not equate to the level of the national minimum wage/national living wage that would be legally required if the individuals were identified as falling into the traditional categories of ‘employee’ or ‘worker’. This makes up the crux of their argument: their documentation says that they are self-employed but the everyday
relationship that they have with the employer does not reflect that, and the only other two possibilities are ‘employee’ or ‘worker’, both of which attract varying amounts of employment rights. Whilst contracts are a key factor in determining someone’s employment status, it is the practical reality of the situation that gives the definitive answer. So, in order to be self-employed with no recourse to employment rights, an individual would have to be in business on their own account. This isn’t an easy test to apply, but it was recently analysed in the case of the Uber taxi drivers, who successfully claimed in the Employment Tribunal that they were not self-employed drivers; the label that had been attached to them by Uber. The tribunal judgment shed significant light on the Uber business model which, although not likely to be replicated by other gig economy employers, may be sufficiently similar to alert others involved in the industry to the risks. Uber describes itself as the seller of a platform which matches drivers with passengers who need transportation; in its argument to the tribunal it denied that the company itself was a provider of transport. Passengers register by providing certain personal information including debit/credit card details. They use the Uber service by downloading an app on to their phone and logging on. They are not obliged to state their destination when booking a trip, but often do. Once the request has been received, Uber locates from the pool of available drivers the one estimated ...the practical reality of the situation...
by their equipment to be closest to the passenger and informs him/her via his/ her smartphone of the request. Payment is taken from the passenger’s debit/credit card; no cash changes hands. The tribunal found the notion that Uber was attempting to argue that there are 30,000 small businesses linked by a common platform was “faintly ridiculous”. This was compounded by the lengths that the tribunal found Uber go to in order to control the operations of the drivers. The tribunal found that Uber controlled the drivers because, amongst other things, it: ● uses an ‘onboarding’ process in which it interviews and recruits drivers ● controls key information (e.g passenger’s surname, contact details) and intended destination which the driver is not party to ● sets the default route to the destination and expects the driver to follow it ● fixes the fare and the driver cannot agree a higher sum ● imposes numerous conditions on drivers (for example: a list of car makes and models which are acceptable; the age and colour of the car) ● subjects drivers to a rating system to what amounts to a performance management/disciplinary procedure. Uber will appeal the decision and claims that many of its drivers would prefer to be self-employed. This is likely to be a long and drawn-out legal process and unfortunately this means that, despite the judgment, we are not much further down the road of clarity for employers in the gig economy. The government is currently undertaking two separate reviews into modern employment practices, not least inspired by the amount of negative press focussed on the gig economy. So, it may be that, as a result, the law is changed in any event to better cater for such individuals. n
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| Professional in Payroll, Pensions and Reward | December 2016/ January 2017 | Issue 26
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