The “Gig Economy”, and the employment status of those working within it, has certainly been under the spotlight this year.
This has now been brought under a whole new focus as a result of the recent publication of the Taylor Review into modern working practices. Whilst the proposals in the recent Taylor Review are only recommendations, if they come into legal force, businesses with self-employed contractors may find themselves subject to further challenges in respect of their status, seeking entitlements such as holiday and sick pay.
As well as making a number of recommendations regarding the National Minimum Wage, holiday and sick pay and agency workers, a large number of the substantive recommendations in the Taylor Review focused on the law governing employment status in light of the rise of the Gig Economy.
Currently, there are 3 main categories of individuals in the workplace: (1) Employees; (2) Self-Employed contractors and (3) Workers. The classification is crucial because it determines what rights and entitlements will apply. For example, an employee and a worker are entitled to holiday pay, but not a self-employed contractor.
Employment Status – Taylor recommendations
The Taylor Review makes the following proposals on the law governing employment status:
- Retain the 3 classifications (as above) but the status of “worker” should be renamed “dependent contractor”.
- In terms of determining who a “dependent contractor” is, a greater focus should be placed on the notion of “control” and less on the requirement for “personal service” by the individual. The Taylor Review considered it unfair that, where a contract provides for a genuine right of substitution (somebody who can undertake the work on behalf of the individual if they are unable), this could potentially defeat an individual being classed as a “worker”.
- Enshrine the key criteria that define the 3 categories of employment status in primary legislation, rather than rely on guidance from the Courts.
- Questions regarding employment status should be determined at an employment tribunal at a preliminary stage without the individual having to pay a fee to lodge a claim or have the claim heard. In addition, the burden of proof should be changed so that it is placed on the company to prove why the individual is not entitled to the rights claimed. In other words, the company has to prove that the individual was self-employed rather than an employee or a worker.
What do I do now?
Employment tribunal cases involving Über, CitySprint and Deliveroo have provided some key guidance to businesses who operate within the Gig economy. If you utilise freelance or self-employed resource within your business, you ought to review your arrangements to ensure that:
- The reality of the arrangement is consistent with the label given to the individual. Employment Tribunals will look at how the arrangement works in practice, not just what is stated in the contract.
- The self-employed person is not integrated into the business. In simple terms, they are not treated like employees.
- Any right of substitution is not in reality restricted. In some contracts, the right to substitute will be limited by requiring the contractor to use an existing contractor already providing services to the business. The removal of any restrictions, however, needs to be considered in the context of the business and whether that will create separate commercial risk.
In essence, employment status is under increasing scrutiny at the moment, and that might be compounded if the Taylor recommendations are ultimately implemented. If you utilise self-employed contractors, we recommend that you review your current arrangements to mitigate any risks of a self-employed contractor asserting employment or worker status. Not only could that result in financial exposure, but it could also set an unhelpful precedent within your business.
If you would like to discuss how we could assist your company in reviewing your current documents and practices in this area, please contact the Sherrards Employment Team (Mark Fellows, Joanne Perry or Priya Magar).