Employment Status in the “gig economy”

by Emma | Feb 5, 2019

There have been a number of recent legal rulings finding that individuals who are categorised by businesses as self-employed contractors are, in reality, workers or employees who are entitled to minimum worker benefits, such as the National Minimum Wage, statutory paid holiday and sick pay.

The trend has been for more and more individuals working for businesses, where the work they do is largely controlled by the business but they do not enjoy employee or workers’ rights, to be recognised by the tribunals as workers. Unfortunately, determining the employment status of individuals is a complex task for businesses. There have been calls to simply the law in this area.

In 2016, the Government commissioned an independent report on modern working practices and the employment status of contractors working within the “gig economy”. The Government finished consulting with businesses and other interested parties on this report in June 2018. The Government have introduced draft legislation to Parliament. The new legislation, which is scheduled to come into force in April 2020, includes:

closing a loophole by repealing the Swedish derogation – which currently allows agency workers to be employed on cheaper rates than permanent counterparts
extending the right to a day one written statement of rights to workers, going further to include detail on rights such as eligibility for sick leave and pay and details of other types of paid leave, such as maternity and paternity leave
increasing the maximum employment tribunal fines for employers who are demonstrated to have shown malice, spite or gross oversight from £5,000 to £20,000
extending the holiday pay reference period from 12 to 52 weeks, ensuring those in seasonal or atypical roles get the paid time off they are entitled to
lowering the threshold required for a request to set up Information and Consultation arrangements from 10% to 2%

Additional proposals set out in the Government’s response, for which the Government has not yet introduced legislation or a timetable of reforms include:

Empowering the Employment Agency Standards Inspectorate to monitor the role of the umbrella companies and to ensure that agency workers are receiving adequate pay without inappropriate deductions being made.
Introducing a new single labour market enforcement agency to support workers and advise them of their rights.
Clarifying the employment status test and aligning the employment status frameworks for employment and tax purposes in order to reduce any differences between the two systems.
Introducing a right for “zero hour” or “casual hour” workers to request a more predictable and stable working pattern after 26 weeks of service.
Extending the time required to break a period of continuous service between contracts from one clear week to four clear weeks to make it easier for employees to access their statutory rights, which are based on length of service.
Prohibiting deductions from staff tips.

To clarify, there are no plans to end the use of “zero hour” contracts. The Government has made clear that it recognises the varied ways of working, wants to ensure the workforce remains flexible, but whilst guaranteeing key protections for workers which the above proposals and legislation is designed to address.

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