What is the gig economy and how will it affect businesses?

Economy & Politics | Reports | South West
How will the gig economy affect South West businesses?

Business Leader Magazine talks to legal experts about the gig economy and what it means for South West businesses.

A phrase which has become more prominent within business circles is ‘the gig economy’. But what is it and what does it mean for business owners?

The gig economy is defined by its flexible working and short-term/freelance approach to work. According to the McKinsey Global Institute, almost five million people in the UK are currently employed this way.

Zero-hour contracts

Like the equally controversial zero-hours contracts from employers such as Sports Direct, workers do not have guaranteed hours but have even less job security.

Uber, Deliveroo, and AirBNB have seen a rapid rise in such working practices across the UK and with new businesses in the sharing economy coming to prominence all the time, businesses need to keep abreast of employment regulations and contractual obligations.

Taylor Review

This year, the government released the ‘Taylor Review of Modern Working Practices’ – an independent review into the implications of new forms of work for worker rights and responsibilities. The review also examines ­employer freedoms and obligations.

The review sets out seven principles to address the challenges facing the UK’s labour market.

Gareth Edwards, Employment Partner at VWV comments: “The Taylor Review takes a balanced view of the challenges faced when ensuring our employment laws keep up with the changing ways in which people work. It recognises the importance of labour market flexibility but also highlights the impact this can have on those who are self-employed, undertake agency work, or are on zero-hour contracts.

“The reforms proposed by the Review appear reasonable and should help move the debate forward on how employers engage with the gig economy and with resource work which is low-skilled or low-paid. As always, the devil is in the detail and the impact of the Review will depend upon how the government responds to it.”

Greg Chambers, Associate Director at Osborne Clarke, continues: “What is clear is that Taylor wants to see an end to gig working models being used simply to reduce costs. The Review is critical of gig economy practices which unfairly displace risk onto workers. However, the Review does not want to lose the UK’s existing labour-market flexibilities credited with helping to sustain high employment levels, or the opportunities which platform working offers for ‘two-way flexibility’, benefitting both worker and business.

“The immediate fate of the Review now lies with the government, which has indicated that it will respond by the end of the year.”

Review objectives

Joanna Boyle, Partner and employment law expert at Transatlantic law firm Womble Bond Dickinson, has her say on the Review in the context of zero-hour contracts: “The report also references zero-hours contracts, stating that they should not be banned as they are flexible and benefit all parties. However, the publication recommends that a worker on a zero hour contract should be able to request a fixed hour contract after 12 months on the job.

“Further recommendations are made on sick pay, advising that statutory sick pay (SSP) should become a basic employment right, with all workers eligible from day one.  These measures could increase employers’ costs significantly, but the potential benefit for employers is that new joiners would not be entitled to the full 28 weeks’ SSP. Instead, employees would receive SSP based on length of service.”

Legal battles

Despite the supposed positives of this line of work, it has led to a series of legal battles and high-profile victories.

Last October, Uber drivers won the right to be classed as workers rather than independent contractors. This meant that they would be entitled to national minimum wage and holiday pay, for example.

More recently, Uber were banned from operating in London but will contest the decisions.

On whether this will spell the end of such working practices, Joanne Boyle comments: “Despite the recent news that Transport for London has banned Uber from operating in London, I think the gig economy is here to stay as the demand from consumers is strong and the new model appeals to workers who are looking for flexibility, mobility, and freedom in the way they work.

“Some aspects of employment law are not keeping up though and, in order to survive, businesses will need to review the way they engage with their workforces and have clear contracts in place that reflect the reality of the situation.”

Pimlico Plumbers court case

Probably the most high-profile court battle has been one involving Pimlico Plumbers’ Charlie Mullins. He believes that there should be a clear outline from the government on workers and employers rights.

Mullins told Business Leader recently: “There are too many obstacles put in front of business owners. We also need more clarity on the Gig Economy. There is a high-profile case we’re involved in which saw a plumber, who worked for us, demand sick pay and holiday pay, even though he was a self-employed contractor. Unfortunately, the Court of Appeal agreed with him, which is why we’re appealing the decision to the Supreme Court.”

It seems that the current climate surrounding the issue has created more questions than answers so far and this has been seen in Chancellor of the Exchequer Phillip Hammond’s budget speech in which he said the gig economy was affecting government’s tax take.

He estimated it would cost the treasury in the region of £3.5bn by 2021 and stated that more needed to be done to align government with the shifting labour market.

Did you enjoy reading this content?  To get more great content like this subscribe to our magazine

Reader's Comments

Comments related to the current article

Leave a comment

Your email address will not be published. Required fields are marked *