Managing risk around the gig economy

1 Aug 2017 , 3:16pm

The ever-expanding gig economy is coming under the spotlight of government as evidenced by the recent Taylor report in the UK. Luxury businesses must be prepared to manage risks on the employment front, says CM Murray partner Sarah Chilton.

The last few years have seen a huge shift in the way services are provided, people work, and businesses engage staff.  Businesses offering technology based on-demand services have grabbed the headlines. However, the so called “gig economy”, zero-hours contracts and flexible working practices are used widely across an increasing number of industries.  Currently, it is estimated that there are 1.3 million workers working in the gig economy.  

The law is playing catch up with these working practices and following a series of cases brought by workers who had atypical working arrangements with on-demand services, the UK Government commissioned Matthew Taylor, Chief Executive of the Royal Academy of Arts and a team of colleagues to look at modern employment practices.  Their report, ‘Good Work -The Taylor Review of Modern Working Practices’ was published on Tuesday 11 July.  

The work of the Review is said to be based on a single overriding ambition: that all work in the UK economy should be fair and decent with a realistic scope for development and fulfilment.   

The current position 

Under UK law an individual can be categorised as self-employed, a worker or an employee.  The genuinely self-employed are at one end of this spectrum: where the individual has few rights and does not satisfy any of the criteria for a worker or an employee; an employee at the other end: where the individual satisfies a material amount of the “employee status” criteria and gets the full set of statutory employment rights.  Then there is the worker, sitting in the middle, who satisfies some of the criteria, but not enough to be an employee, so gets some rights, but not as many as an employee.   

Worker status: A worker is an individual who has entered into or works under a contract to do or perform work personally for someone who is not a client or customer of any profession or business undertaking carried on by the worker.  They are entitled to some employment rights, including paid annual leave; a right to daily and weekly rest breaks; protection from detriment as a result of whistle-blowing; and the right to be paid the national minimum wage.  Workers are also entitled to protection from unlawful discrimination under equality law. 

Zero-hours contracts: Zero hours contracts are used frequently in the retail sector but have received negative press for the lack of certainty they give workers and the financial instability that causes.  But there are advantages: they enable businesses to be flexible, respond quickly as demand for workers changes and they allow some employees the flexibility they want to combine work with something else, such as another job or education.  

However, so called “exclusivity clauses” can prevent a worker from working for another employer, even if they have no guarantee of being given work.  This practice was widely criticised as unfair and in response, new legislation was passed.  Since January 2016, if a worker is dismissed or subjected to detrimental treatment because they work for another employer in breach of an exclusivity clause, they can claim compensation from the employer.

What next?

The Taylor Report makes many recommendations to address the challenges produced by the modern world of work.  Below we have highlighted just a few to give a taste of what changes might be to come.  

• Retain a distinction between employees and workers but rename workers who are not employees ‘dependent contractors’.

• Introduce greater clarity about how to distinguish workers (or dependent contractors) from those who are legitimately self-employed. 

• There should be no requirement for a dependant contractor to have to perform work personally and instead more emphasis should be placed on how much control the “employer” has over the dependent contractor.  

• Businesses operating in the gig economy should be able to show that people working for them earn in excess of the minimum wage and workers should be able to see how much their hourly rate might be in quiet periods when less work is available.

• Those seeking justice in the courts should be able to find out whether they are eligible for the rights they wish to pursue before incurring a court fee. 

• Continuity of employment should be preserved where any gap in employment is less than one month, rather than one week.

• The report does not go so far as to outlaw zero hours contracts but says their overuse will have to be addressed.

There is a focus on responsible corporate governance, good management and strong employment relations within an organisation.  

Quite how much these recommendations will impact the UK workforce in the short to medium term remains to be seen and much will depend on the extent to which and the speed with which the recommendations are implemented.  

Be aware of the pitfalls

For now, the advice to businesses is to be aware of the potential pitfalls when engaging people on a flexible on-demand basis.  If your business has not already done so, it would be well advised to manage any risks by conducting an audit of all staff, their employment status and their associated employment rights so that you can effectively deal with issues such as minimum wage, holiday pay and discrimination.  Being proactive in this way will help protect the long term sustainability of your workforce, brand and business.