Those who don’t treat gig economy workers as genuinely self-employed may find themselves in hot water, writes legal expert Anthony Sakrouge

Self-employment was once seen as a sign of having successfully established oneself and of finally being able to pursue one’s ambitions on one’s own terms. However, the advent of the gig economy (in which people are paid by the job, rather than a salary or by time spent) has meant that many of those who are now classified as self-employed are not living the dream, particularly as they do not enjoy many of the basic rights that workers and employees do.

Despite the recent focus in the press on the gig economy, many self-employed people are self-employed through choice. A report by the Resolution Foundation found that 57 per cent of the growth in self-employment since 2009 has come from what has been referred to as the ‘privileged self-employed’, who tend to have good educational qualifications and higher than average earnings, and who may work in areas such as law, accountancy and management consultancy. The main attraction for this section of the self-employed workforce is the favourable tax treatment, which can save higher earners (and the organisations they work for) thousands of pounds.

At the other end of the scale are those employed in the gig economy, who will often be less well-educated, younger and/or immigrants. For this group, self-employment usually offers few advantages and was described by Frank Field MP, chairman of the House of Commons Work and Pensions Select Committee, as “a life of low pay, chronic insecurity and exploitation, in which all of the risks in the employment relationship are unloaded on to them by the company with whom they are working and the gains go almost exclusively to the company”.

This is consistent with the findings in a study by the Social Market Foundation that “a significant proportion of self-employed do not enjoy the autonomy associated with self-employment, and yet also fail to enjoy some of the rights and protections that those in employment, with similar levels of autonomy, have access to”.

Worker rights review

Late last year, as part of the commitment she made on the first day of her premiership to govern for those who were ‘just managing’, Theresa May commissioned a review of workers’ rights and practices. This review is expected to propose significant changes to working practices in the UK and to affect the balance of power between hiring companies and their workforces. Among the proposals apparently being considered are making it:

  • the hiring company’s responsibility to prove that a worker is genuinely self-employed; and

  • a mandatory requirement for temporary workers to receive written terms and conditions within a week of starting jobs (many employers delay advising workers about their rights, and migrant workers in particular will often not be aware of these).

In the meantime, the courts have also been playing their part in policing the situation, with recent decisions going against Uber and Pimlico Plumbers to the effect that their workers were not truly self-employed (and reasonably scathing comments about their attempts to pretend otherwise). The First-tier Tribunal Tax Chamber has recently reached a similar finding about the delivery drivers employed by RS Dillon & GP Dillon Partnership, and HMRC is now conducting an investigation into whether Hermes’ 10,000 couriers are genuinely self-employed.

What all of the above points to is the importance of employers accepting that, if they want their workforce to be truly self-employed, they must allow the flexibility that goes with self-employment. In other words, they cannot exercise the level of control that they would have over workers if they do not want also to have the responsibilities that go with that.

This article was first published on the People Management website.