But what is it?

“Gig economy” working is used to describe the trend towards workers taking work on a “gig” basis, on flexible, generally short-term assignments, in contrast to a traditional full-time employment model. Some businesses operating in the gig economy will now only offer work on such a basis, and this appears to be particularly prevalent with delivery, courier or transport services.

Supporters of gig working highlight the opportunities for development and innovation that such flexible working affords an individual, whilst critics denounce enforced “self-employment” models as a means of diminishing employment rights.

With the growth of the online marketplace, gig working is on the rise. Popular apps like Uber and Deliveroo use technology to connect workers to third parties requiring other services, transport (such as Uber) and food delivery (Deliveroo). With these tech platforms, the extent to which the business attempts to provide and control the ultimate service carried out for their customers, whilst insisting that their drivers/couriers are independent contractors with no employment rights, is proving their downfall, as recent tribunal cases are demonstrating. 

Such control is incongruous with an autonomous "self-employed" workforce.

With platforms such as TaskRabbit and MechanicalTurk, a further question may also arise: who engages/employs the individuals carrying out the services? This distinction is often blurred because some genuine businesses advertise their services on these platforms.

For workers carrying out such services, the working arrangements and relationship with the platform will have implications in relation to both their employment rights and tax status.

Employment Rights

What employment rights apply to gig workers will depend upon the employment status. Legally, there are three possibilities:

Employee: In simple terms, employment is akin to a master/servant relationship. Employees perform work personally, are under the employer’s control (e.g. when and how to do the work), and there is “mutuality of obligation”, i.e. work will be provided and work will be done.

Self-employed: In contrast, a person who is self-employed is operating a business on their own account. They will usually negotiate commercial terms, have numerous clients and autonomy over how and when they provide services, engage others to carry out the task, or elements of it (or the ability to do so), and will take some financial risk, for example by being paid a fixed price for the project rather than a daily rate. They are not integrated into the business and will normally pick up their own expenses, provide their own equipment and market their services generally.

Worker: A “worker” falls somewhere between “employee” and “self-employed”. A worker will perform work personally. They may not be subject to the same controls as an employee but will not the autonomy of the self-employed.

Employees will generally have full employment rights, including protection from unfair dismissal and statutory redundancy payments after two years’ service. “Workers” do not have such extensive rights but have the right to paid annual leave, the national minimum wage and protection in respect of whistleblowing and unlawful discrimination (amongst others). The genuinely self-employed will normally only have protection from unlawful discrimination.

Tax Status

For tax purposes you are either employed or self-employed. There is no “worker” tax status.

The self-employed can offset expenses of their business against earnings for tax and pay a lower rate of national insurance (with no employers’ national insurance payable). Given the lack of a middle ground “worker” status in tax terms, an individual may be treated by HMRC as self-employed for tax purposes but may still qualify as a “worker” for employment rights.

This is part of the confusion for gig economy working models where it appears that many businesses, including Uber and CitySprint the courier company, engage individuals on a purportedly self-employed basis.

Uber and CitySprint: Tribunal decisions

Uber’s working relationship with their drivers was examined by an employment tribunal last year. The tribunal found that Uber instructs and manages its drivers in such a way that they are “workers” and not self-employed contractors. This was notwithstanding the extensive written contracts between Uber and the drivers stating otherwise. The decision entitles their drivers to employment rights such as paid holiday and the national minimum wage. Given that Uber has around 40,000 drivers in the UK, the employment tribunal finding is costly and it is perhaps no surprise that Uber are appealing the decision.

To support their argument that their drivers are genuinely self-employed, Uber argued that the drivers can work for others, they meet their vehicle expenses, fund their licenses, and treat themselves as self-employed for tax purposes. The tribunal disagreed and described Uber’s contracts as containing “fictions” and “twisted language” which was inconsistent with how the drivers operated in reality, where they were offered, and accepted, trips only on Uber’s terms. The tribunal stated:

“The notion that Uber in London is a mosaic of 30,000 small businesses linked by a common platform is to our minds faintly ridiculous. In each case the ‘business’ consists of a man with a car seeking to make a living by driving it… if there is a contract with Uber it is…not a contract under which Uber is a client or customer of a business carried on by the driver.”

CitySprint appears to have a similar gig working model, where bicycle couriers are treated as self-employed. A claim for paid holiday was brought by a courier and CitySprint’s contractual terms with its couriers were subject to similar scrutiny. The employment tribunal in its judgment in January 2017, described the contractual arrangements and terms as “contorted”. The courier was a “worker” in practice and therefore entitled to paid holiday.

We can expect more news on gig working in 2017. Deliveroo is facing similar scrutiny where the riders are seeking union recognition and employment rights as “workers”. HMRC is currently investigating Hermes in relation to failure to pay its workers the national minimum wage.

Of course, it is not just transport/delivery businesses operating “gig” models. By way of example, hairdressing salons often rent out “chairs” to self-employed stylists rather than employing staff in the traditional sense. Likewise, therapists, physios and osteopaths will often operate on this basis. In many cases this will work as self-employment. Relevant factors will be whether the individual can genuinely choose when and how to carry out the work, whether they are subject to disciplinary control, whether they can and do provide services to other clients and whether they can control their charges, for example. In contrast a business with a specific brand, such as a celebrity named hair salon, is more likely to employ its staff in order to retain control over when and how the work is done and ensure that they have the exclusive services of the stylist/colourist. They are more likely to train staff in accordance with the brand, may require a uniform and will be able to discipline staff.

Legislative reform

Gig economy working has raised concerns about whether employment law and tax status are keeping up or simply becoming a barrier to innovative and entrepreneurial working. As a result, reform may be on the horizon.

In terms of employment status and rights, the BEIS Committee of Parliament has launched the “Future world of work and rights of workers” enquiry and the government has appointed Matthew Taylor, Chief Executive of the RSA to carry out a review of “Employment practices in the modern economy”.

Tax implications are also being considered by HMRC and the Office of Tax Simplification (OTS) published an interesting focus paper on the gig economy which raises questions about the contribution of the gig economy to the “hidden” economy, where HMRC may have a problem with its information gathering powers and practices, in order to assess and collect taxes for gig economy workers.

The government has also published a revised online form for workers to report complaints about the national minimum wage and work rights which can be found on the Gov.uk website.

What now?

We may now see employment claims for “worker” status from individuals treated as self-employed in similar circumstances, albeit that they risk losing their more favourable tax position. The individual will need to balance this risk against the value of the paid annual leave or minimum wage that they are claiming, and each case will turn on its individual facts.

In the meantime, given the current scrutiny of gig working, the prudent business engaging contractors, consultants, freelancers or casual workers will be reviewing the employment and tax status of the workforce and the contractual terms of those providing services.