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Could “dependent contractors” destroy the gig economy?

Article by: Julie Taylor | Published: 14 July 2017

The Taylor Review has recommended some positive changes to UK employment practices that recognise the way today’s modern business market operates, but does it go far enough? The review focuses on recommendations intended to address the low quality work in the flexible contractor market, reduce exploitation of these workers and to increase opportunities for development and fulfilment: From Julie Taylor, senior associate in the employment team at Gardner Leader.

Employment status: addressing the power balance
We already have employees, workers and self-employed contractors as distinct ways of working and a key recommendation is clarifying the rights that apply to those who fall into the middle “worker” category and renaming them “dependent contractors”. This category would most likely catch those working for companies such as Deliveroo and Uber and ensure that they are entitled to sick pay and holiday pay. This recommendation reflects the suggestion from the previous report from the Work & Pensions Committee that those engaged on such terms should be workers by default, which would entitle them to holiday pay and is intended to recognise that the existing categories are out of touch with our current labour market. This proposal may well help to maintain the flexibility currently valued by so many, but this change to the categories could simply increase disputes and the additional costs will be a heavy burden for employers so even if implemented, this is unlikely to be a quick fix.

Quality of work & the British way
A key theme of the report is a focus on employee engagement and an emphasis on ensuring access to good quality work for all. It highlights that the same basic principles need to apply to different forms of employment, with a fair balance of rights and responsibilities between the workers and employers. The emphasis in working towards this is on making use of technology, which can maintain rather than remove the flexibility in the labour market. Many employers for some time have recognised the value of a happy workforce in growing their business and therefore it is not surprising that the report has included this.

Potential earnings calculator: not a guaranteed minimum wage.
One of the more curious recommendations appears to have been inspired by “piece work” used in the agricultural sector. The idea is that new “dependant contractors” should be able to have access to a payment system that tells them how much work they have to complete in order to be paid at least the minimum wage. This will also require that they work when there is high demand, but will give the option of working at other times and the individual can choose whether they are prepared to work for the lower pay. A further proposal is to task the Low Pay Commission with examining whether a higher NMW rate can be applied to workers who do not have guaranteed hours.

Zero hours contractors: survive scrutiny
Many expected that the review would recommend the abolition of zero hours contractors, however, instead the review recognises that many individuals actually value the flexibility these arrangements allow. Instead, the sensible recommendation is that those on zero hours contracts are given the right to request fixed hours. This would appear to be supported by industry, particularly given the recent experience of McDonalds who offered all their zero hours employees the option to move onto fixed contracts and only 20 per cent of them took up the opportunity.

So what next?
Fifteen percent of the workforce is now self-employed which has led to a large number of positive developments and opportunities for workers, employers and the wider UK economy, as well as the ‘explosion’ in the gig economy. The recently elected Government must think carefully before making any significant changes to employment rights and categories of employment status. Any regulation changes must be equally fair to both the individual contractors and employers and continue to offer the flexibility and opportunities that all parties are currently benefiting from.

Employers concerned as to how these recommendations may affect them should review their recruitment policies and procedures to ensure compliance with the current law, paying particular attention to issues that may arise from taxation; particularly regarding the non-payment of national insurance contributions due to confusion over whether the person is self-employed or actually an employee or worker. It is also imperative that employers issue written terms and conditions to these workers clarifying pay rates, hours of work, role and responsibilities, sickness provisions, holiday entitlement and health and safety and equal opportunity policies.