Tens of thousands of ‘precarious’ UK workers are eagerly watching Uber’s court challenge this week against a landmark legal ruling that set a precedent for millions of people working in the so-called gig economy. Contributor Kirsten Cluer, HR Consultant and owner – Cluer HR.
Before the hearing at the Court of Appeal on Tuesday, hundreds of protesters attended a demonstration organised by the Independent Workers Union of Great Britain (IWGB), as the taxi-hailing app company bids to overturn a landmark ruling made in a previous employment tribunal, that could pave the way for Uber drivers in the UK to receive the national minimum wage and paid holiday.
With huge ramifications now expected, UK employers in the gig economy should be more cautious when looking at hiring contractors, due to the ruling blurring the line of knowing when a self-employed contractor with no employment rights, becomes an employee that is entitled to paid holiday and the national minimum wage.
But what are the benefits and pitfalls of hiring contractors? Well, a case can be put forward for both hiring and avoiding contractors and subcontractors, depending on the circumstances of the task at hand.
For instance, a company may engage a contractor and/or subcontractor if it needs more flexibility for a specific job or task. They can also be the most efficient option for one-off jobs that require specialist expertise or fast turnaround.
Another advantage of hiring a contractor and/or subcontractor is that most can start working at very short notice, even when large numbers of workers are required. Employers can also specify the type and duration of contract required for the job at hand.
Hiring a contractor also means a company’s permanent staff can concentrate on the core aspect of the business. But, if a contractor needs to be brought in to offer temporary cover for a permanent staff role, they won’t be entitled to employment rights, which can save a company a considerable amount of money. These rights include benefits such as sick pay, holiday pay and maternity and paternity pay. Employers also don’t have to make any PAYE or National Insurance contributions.
Alternatively, a contractor/subcontractor may cost a business more than the equivalent daily rate for employing someone to take on the job on a permanent basis. This could potentially cause workplace disputes as permanent staff may resent the contractor for being paid more money for doing a similar job role.
Employers must also understand the relevant tax implications and other rights of any subcontractors, who may be employed by the contractor they hired to carry out the work.
Another problem with hiring a contractor is that they may not appreciate the businesses’ culture and may lack the motivation and commitment of permanent staff. Also, by relying on contractors and/or subcontractors, a business will fail to acquire and develop skills in-house.
In addition, if the contractor brings in a team of subcontractors to help carry out the required task, companies will have no direct control over the quality of their work.
Overall, it depends on the circumstances of the work needed to be carried out. For instance, if the work requires specialist expertise and needs a quick turnaround, a contractor and/or subcontractor could be the most efficient option.
However, if a contractor and/or subcontractor is hired for a prolonged period, it could end up costing the company more money than it would to employ someone, and even result in the contractor being entitled to workers’ rights, as with the landmark Gary Smith case earlier this year. Therefore, caution must always be taken when weighing up the options of hiring a contractor, to avoid falling in the grey area that has now shrouded the gig economy.