The ruling that Uber drivers should be classed as employees rather than self-employed contractors is the latest development in a long-running debate about the nature of the flexible workforce in the UK. The growth of the so-called ‘gig economy’, whereby workers are contracted on a temporary basis or for short-term or flexible engagement, has meant that the lines between full time employment and self-employment have become increasingly blurred, particularly when a ‘contractor’ works for a single company for a prolonged period of time.
The key issue in this case (as well as a number of others in the spotlight at the moment – Hermes, Sports Direct and Deliveroo, for example) is that whether you are defined as a full time worker or a self-employed contractor has a very material impact upon the workplace benefits to which you are entitled – the National Minimum Wage, maternity, sick and holiday pay that those of us on a PAYE structure largely take for granted. Critics of the gig economy have raised concerns about these flexible working practices, arguing that they are designed to exploit workers and artificially lower overheads for the businesses that employ them.
The number of people working as self-employed contractors has grown massively over the last two decades, thanks to a combination of cultural preferences and socio-economic drivers. The financial crash of 2008 saw many full time workers made redundant, only for them to re-emerge as contractors. Self-employment numbers have also been bolstered by people looking for a better work-life balance, or wanting to return to work after a prolonged period away from the labour market. The government, too, has incentivised this move towards greater levels of self-employment in the economy, recognising that today’s entrepreneur is tomorrow’s small business, and the tax receipts that come with it. So much so that the UK has been identified as an international example of best practice. There is also cross-party recognition of the important role contractors play in the economy in terms of providing a highly skilled and flexible workforce, which will be of crucial importance in the post-Brexit world.
However, the incentives put in place by the government (preferential tax structures, exemptions from onerous health and safety legislation and parity for the self-employed following the introduction of the single tier state pension) come with a number of problems. In particular, there is a significant problem in identifying who is genuinely entitled to them. The rules and regulations defining who is, and who is not, a self-employed contractor has been the subject of much discussion and debate by government over the last few years, with several parliamentary interventions and consultations taking place. Both the government and contractors themselves find the current ‘disguised remuneration’ regulations (commonly referred to as ‘IR35’) to be unfit for purpose. However, there is also a general consensus that neither the government, nor industry, has come up with an effective alternative. As it stands, the IR35 regulations provide a generally effective deterrent to the majority of people thinking about artificially lowering their tax liability through claiming to be self-employed. Successive governments have tinkered round the edges of the regulations to try to make them more effective, which has often resulted in more, rather than less complexity (the shift in responsibility for IR35 compliance to employers in the private sector is a case in point).
The government under Theresa May has taken an early interest in this issue. Perhaps unsurprisingly, given the Prime Minister’s pledge to support workers’ rights for people ‘just managing to get by’, May has hired Matthew Taylor, a former aide of Tony Blair, to undertake a review of modern working practices to understand the new market dynamics and to ensure that the rights of low-paid workers in particular are protected. Politically speaking, this is a clear move that Theresa May wants to reach out to traditional Labour voters whilst their party is in disarray. Pragmatically speaking, this is an issue that the government recognises will be important for ensuring the health of the economy over the coming years, where more and more people are choosing to adopt non-traditional working practices.