Government committee states it’s time to ‘call time’ on “bogus” self-employment practices

12th May 2017

The Work and Pensions Committee has published a hard-hitting report saying the Government must close the loopholes that are currently allowing “bogus” self-employment practices in the UK. The inquiry had been set up to consider the effects of the gig economy on the welfare system and the economic position of workers.

The Committee had heard evidence from “gig economy” companies including Uber, Amazon, Hermes and Deliveroo, and from the couriers and drivers who work with (or for) them. The companies had argued that their flexible employment models were dependent on self-employed workforces but the Committee disagreed.

The report’s findings

The Committee made the following key findings:

• The apparent freedom that businesses have to choose whether an individual is an “employee” or a “worker” fails to protect workers from exploitation and poor working conditions. This model is used to avoid the extra costs of NI contributions, pension auto-enrolment and the apprenticeship levy, all of which impact on government finances.
• Businesses’ ability to designate workers as self-employed means that contracts do not always reflect the reality of an individual’s employment status. The recent Employment Tribunal decisions in Uber and Citysprint and the Court of Appeal decision in Pimlico Plumbers , suggest that the courts recognise this reality. However, individuals may find it difficult in practice to challenge their employment status.
• The Committee believes that a default assumption that all individuals are ‘workers’, rather than “self-employed”, would provide greater protection to workers and the public purse. It would then be up to businesses to persuade the courts as to why an individual was not a worker. The tax status of individuals would not be affected by this presumption.
• The incoming government should set out a roadmap for equalising the National Insurance Contributions made by employees and the self-employed.

Frank Field MP, the Chair of the Committee, said;

“Companies in the gig economy are free-riding on the welfare state, avoiding all their responsibilities to profit from this bogus “self-employed” designation while ordinary tax-payers pick up the tab. This inquiry has convinced me of the need to offer “worker” status to the drivers who work with those companies as the default option. This status would be a much fairer reflection of the work they undertake which seems to fall between what most of us would think of as “self-employed” or “employed”. 

It would also protect them from some of the appalling practices that have been reported to the Committee in this inquiry. Uber’s recent announcement that it will soon charge its drivers for sickness cover is just another way of pushing costs onto the workforce, to reinforce the impression that those workers are self-employed.

Self-employment can be genuinely flexible and rewarding for many, but “workers” and “employees” can and do work flexibly. Flexibility is not the preserve of poorly paid, unstable contractors, nor does the brand of “flexibility” on offer from these gig economy companies seem reciprocal. It is clearly profit and profit only that is the motive for designating workers as self-employed. The companies get all the benefits, while workers take on all the risks and the state will be expected to pick up the tab, with little contribution from the companies involved.”

Our comment

The Committee’s findings add weight to the growing body of opinion and case law that individuals working for ‘gig’ economy companies in lower paid roles as ‘self-employed’ contractors are likely to have the status in law of a ‘worker’. Worker status is not the same as employee status (for example, workers do not have the right to claim unfair dismissal or a redundancy payment) but it does carry the right to be paid in line with the national minimum wage, receive paid holiday and to be auto-enrolled into a pension.

The Taylor review on modern employment practices is currently pending and it will be interesting to see what its recommendations are.  Early indications, however, are that its findings will be in tune with those of the Work and Pensions Committee.  This is a subject that is not going away and we may well see legislative change over the course of the next administration.

If you would like any further information on this subject please contact David Smedley or Andrew Rayment.