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The Work and Pensions Select Committee on the gig economy

Posted on 05 May 2017 by Matthew Wood

The Work and Pensions Select Committee on the gig economy

On 1 May 2017 the Work and Pensions Select Committee published a report on self-employment practices, with a particular focus on the gig economy. This report has been published earlier than expected due to the general election and comes ahead of the Taylor Review, an inquiry commissioned by the government into modern working practices expected to report in June.

The report highlights the positive developments and opportunities which the gig economy has brought and its contribution to the current record employment levels, however highlights a number of concerns around the effect these practices are having. In particular, the report highlights the favourable tax treatment that self-employed workers receive which is leading to "substantial losses to the public purse, and potentially increases the strain on the welfare state" and raises concerns over the potential abuse by companies who are labelling employees as self-employed workers to avoid employment rights and liabilities and to benefit from the favourable tax treatment.  

To deal with this issue, the report makes a number of recommendations, most significantly that the presumption of employment status should be "worker" by default rather than "self-employed" in order to protect workers and the public purse. The suggestion is that if employers want to deviate from this they would need to present a case for doing so, shifting the burden of proving employment status to the company.

How these findings and recommendations will align with those in the Taylor Review is yet to be seen, however Taylor indicated in an interview in March that he would be recommending changes to the rights of self-employed workers. For him, the important question was one of "control" and if companies want to "control" their workers, that has to come hand in hand with employment rights and entitlements. It is likely therefore that one of his key recommendations will be to change the test of employment status in some way to better reflect this idea of "control" as fundamental to the assessment of whether an individual is an employee or self-employed worker.

Given the sustained media and political attention around this topic, as well as the increasing activity of HMRC in this area, the spotlight on non-traditional employment models is unlikely to go away soon. As a result, it is likely that changes to how the law treats self-employed workers, especially in the gig economy, will be high on the agenda of whoever forms the next government. What form these changes will take is not yet clear, however employers who are concerned about the impact these changes might have on their businesses can take a number of steps now to ensure they are in the best position to deal with any changes as and when they are introduced.

Principally, employers would be well advised to ensure that they understand and take legal advice on how their employment practices fit within the current legal landscape and give consideration to how any changes in the law may affect their businesses. In order to fully evaluate this, employers should review their contractual documentation and any additional policies and assess how this reflects the reality of working practices. This is particularly important where an employer has a mix of employees and self-employed workers to ensure that, in practice, each group is treated appropriately and in line with their contractual status.  

Additionally, employers should give consideration to both internal and external communication strategies around this issue. As well as the importance of public perception around how an employer treats its workforce, a key part of any strategy dealing with this issue should be to ensure that there is an open dialog with both current employees and self-employed workers so that they understand both what is expected of them and what they can expect from the employer.

If you have any queries about any aspect of employment status, please do not hesitate to contact Susannah Kintish or your usual Mishcon contact.