Author Mark Richards

You couldn’t open a newspaper or switch a TV on last week without hearing about workers’ rights. Plus, a phrase that seems to be on everyone lips now, the ‘gig economy’.

The Court of Appeal had given a ruling which could well have far-reaching implications for freelance contractors. Along with the companies which ‘employ’ them, and for wider employment rights in the UK.

The case in point concerned Gary Smith, a plumber from Kent.

Gary ‘worked’ for a company called Pimlico Plumbers. That is to say, he used one of their branded vans and worked when and where the company told him to work. He was VAT-registered in his own name and paid tax on a self-employed basis. But for six years his only source of income was the work he did for Pimlico Plumbers.

So, was Gary self-employed? Or was really an employee of the company?

That question came to a head in 2010 when – sadly – Gary had a heart attack. He wanted to cut his work down: three days a week instead of the five he had signed up for with the firm. ‘Sorry’, Pimlico Plumbers said. ‘Won’t do it’. They took away Gary’s branded van and that was that.

Gary claimed that because Pimlico Plumbers was his only source of income he was effectively employed. He took them to court, claiming that he had been sacked and he was entitled to basic workers’ rights such as the national minimum wage, paid holidays and the right to bring a claim for discrimination or unfair dismissal.

Pimlico Plumbers fought the claim all the way to the Court of Appeal. Saying plumbers, like Gary were hired on a self-employed basis and provided their own materials. While they did not have workers’ benefits, but they were paid significantly more because of that.

The original court found in Gary’s favour. They ruled that plumbers like him were ‘workers’. They were not employees but they were not self-employed as they were contracted to Pimlico Plumbers and it was their only source of income. This judgement was upheld in the Court of Appeal.

Have there been other cases like this one?

‘Yes’ is the simple answer. Last October Uber drivers in the UK won the right to be classed as workers rather than independent contractors. The ruling by a London employment tribunal – meant drivers would be entitled to holiday pay, paid rest breaks and the national minimum wage.

And in January, another tribunal found that Maggie Dewhurst, a courier with the firm City Sprint, should also be classed as a worker. In addition, a group of takeaway couriers working for Deliveroo also announced that they were taking legal action to win union recognition and workers’ rights.

Why do these rulings matter?

Over the past few years, there has been an explosion in what’s been dubbed ‘the Gig Economy’. Companies like Uber and Deliveroo have built their business in the UK on independent contractors. Whether they have been offering ‘ride sharing’, effectively turning their own cars into taxis. Or pedalling furiously through city streets with a Double Pepperoni on their back.

What is the Gig Economy?

According to one definition, the Gig Economy is a labour market characterised by the prevalence of short-term contracts or freelance work. As opposed to permanent jobs’.

How does the Gig Economy work? And why is it so popular?

In the Gig Economy workers do not receive a regular wage. They get paid for the ‘gigs’ they do – whether that is giving someone a ride, delivering their pizza or – in Gary Smith’s case – fixing a burst pipe. Working like this has advantages. It is flexible and it gives people the chance to earn money while they are juggling other priorities in their life. Such as childcare or caring for an elderly relative.

Make no mistake, a lot of people like the freedom that comes with this type of flexible working. And it can open significant employment opportunities as well. These days it is not uncommon to find growing companies employing talented freelancers in different countries and different time zones.

But the opponents of the Gig Economy would argue that all too often ‘the other priority’ for the clear majority of contractors is not childcare or freelancing for someone in Silicon Valley. It is finding another job to make ends meet.

Contractors, freelancers and the gig economy

Inevitably, this new way of working has proved popular with employers: it offers them big advantages. They are only paying for staff when they need them. With their workers classed as independent contractors, they are not liable for employers’ national insurance contributions, holiday pay or sick pay. And the independent contractors have no right to redundancy pay or the national minimum wage.

It is all these issues that have made the Gig Economy so contentious, with the lack of basic rights for people leading to the recent spate of court cases.

Is the Gig Economy the same as being on a zero hours’ contract?

There can’t be many dirtier words in the employment sector right now than ‘zero hours’ contract’ – the arrangements used by companies like Sports Direct and JD Wetherspoons. And it’s easy to think they are the same as working for Uber or Deliveroo. But the answer is ‘no’. There are similarities between zero hours’ contracts and working in the gig economy. No guaranteed hours and no guaranteed income. But people on a zero hours’ contract are seen as employees. They are entitled to holiday pay but, like contractors in the gig economy, they are not entitled to sick pay.

Is the Gig Economy bad news for the UK Government?

The Gig Economy is definitely not good news for the Government. More people working on a self-employed basis means the government will collect less tax. Also, that employer’s national insurance contributions are not payed. The Chancellor admitted in the Autumn Statement that the Gig Economy is cutting into his tax take. And the Office for Budget Responsibility reckons that by 2020/21 the Treasury will be losing £3.5bn a year thanks to this new way of working. That is very nearly the equivalent of putting a penny on income tax – or the cost of building two to three new hospitals a year.

Small wonder that the Department for Business is holding an inquiry. They are saying it wants to make sure employment rules are up to date and reflect the ‘new ways of working’. The review will apparently consider four key issues – job security, pensions, holiday pay and parental leave rights.

Final thoughts

Reading between the lines, it looks like Philip Hammond may well be looking not so much at new ways of working. But, at new ways to tax people in the more flexible labour market. Having already announced a crackdown on the tax perks of a ‘privileged few’. Thus, our new Chancellor’s next crackdown might be on plumbers and pizza deliveries…