UK: The Gig Economy And Employment Status

Does your business use flexible labour? If so, can it take a 10% hike in its payroll costs? If not, listen to this podcast. Jonathan Chamberlain and Jane Fielding discuss the renewed activity in the courts, regulation, and press and public focus in this area. They look at the Uber & Citysprint cases and ask what all this means for the bottom line. They suggest steps your business can take if it finds itself next in the media spotlight, the Court lists or the regulators' cross-hairs.

Jane Fielding: Welcome to our podcast on the impact of the Uber and CitySprint cases. Does this mean 10% or more on top of your labour costs?

I'm Jane Fielding and partner in the Employment, Labour and Equalities team at Gowling WLG and I am delighted to introduce my fellow partner Jonathan Chamberlain in the team, who is going to inform us about the impact of the Uber case.

Uber has been in the news recently, it's hit all of the headlines and there's been a lot of ill-informed debate and commentary about what the case actually means. So, in this podcast, Jonathan is going to dispel some myths about the decision and what it actually means for your business.

So Jonathan, where does that 10% plus figure come from?

Jonathan Chamberlain: It's the additional holiday pay that workers are entitled to, but which people who are self-employed do not get. Workers are a specific statutory concept who have, as we will explore in the course of this podcast, a basket of rights which people who are genuinely self-employed don't have. Of course, what was at issue in the Uber case was, were the drivers self-employed or were they in fact workers?

The biggest single impact to businesses' bottom lines of somebody being a worker is that holiday pay bill. It's 28 days out of 260 working days and that's where we get the 10% plus figure from.

Jane: Are there any other cash implications of having your workforce categorised as workers rather than self-employed?

Jonathan: Well there are, it's not just holiday pay. There's also the potential of auto-enrolment pension costs which workers are entitled to and of course workers are entitled to the national living wage which, if you are self-employed, obviously you don't get.

And apart from any employment tribunal cases there are also potential criminal penalties for employers who fail to pay the national living wage.

Jane: What about non-cash implications? Are there any other non-financial things that businesses should be thinking about now?

Jonathan: There is indeed a raft of those. Workers are protected by the discrimination legislation, which of course includes whistleblowing, plus and this is a point which isn't very often made but which is becoming increasingly relevant as we see the cases play out and the social pressures of which more later come to bear, workers are entitled to trade union representation and compulsory trade union recognition.

Jane: What about things like unfair dismissal redundancy rights, are these Uber workers going to get those now?

Jonathan: No they're not, because those are the rights which pertain only to employees. In fact, employees aren't entitled to much over and above what workers get. It's really only what you might call the plain vanilla statutory employment protection rights – unfair dismissal, redundancy, redundancy pay etc., plus employees get the full suite of family friendly rights. Obviously, statutory maternity leave is the most important one of those, but there's also shared parental leave and all the other rights that accrue and attract around that.

Jane: So, Uber obviously is a particular technology-driven business model, driven by an app. Why do businesses with more sort of traditional business models who have been using flexible labour for years, why do they need to worry about the Uber case?

Jonathan: I think this is a really interesting question, because actually the law as such hasn't changed.

Uber doesn't break new ground in terms of new law, but what has changed in recent months is a new focus on the world of work. The most visible manifestation of that is, I think, we have no fewer than three separate reviews going on into the world of work. There is the Taylor review, commissioned by the Prime Minister. HMRC are looking at worker status, employment status generally and that was announced by the Chancellor at the last Autumn statement and the BIS Strategy Committee, the Select Committee has launched its own review into this area.

Now why have they done that? They've done that because of the wider insecurities that people are experiencing in their working lives. The workforce of UK Plc, UK Limited has been increasingly casualised, or at least that's what it feels like. You will recall only a year ago we were talking about zero hours contracts and limiting those, well it's now gone much wider than that.

That, if you like, was the canary in the mine and all companies now should expect to take their turn in the spotlight. Uber is very visible, Deliveroo is very visible, Sports Direct is very visible. But whose turn is it going to be next? Are we going to move sectors? Are we going to be looking at care homes for example?

Any business that has a large amount of its labour hired or engaged flexibly, as we might like to call it, to use a positive term, should expect at some point in the coming months and years to come under scrutiny. That scrutiny could be through the employment tribunals, it could be through national minimum wage enforcement, it could be for an application for trade union recognition, it could be in the press anyway, but there's a lot more focus on this.

People are becoming more aware of their rights, and one of the things that I trailed earlier was some of the courier litigation at the moment is being funded by a new trade union, using crowd funding to push a claim through. They're the ones who have taken the issue of worker status to the Central Arbitration Committee as a way of short-circuiting the tribunal process and getting a determination much earlier.

Employees and their representatives, employees there's a loaded word, workers and their representatives are becoming much more creative and much more aggressive in how they're approaching this and they are backed by the public mood, there's no question of that.

Jane: So the Uber case is going to be going to appeal, we know that although we don't know exactly when yet, but what would you recommend businesses do now to be forewarned about the possible consequences for their particular organisation?

Jonathan: What comes out of the Uber case and cases like it is the disconnect between what management say is happening, perhaps what they think is happening, and what is actually happening.

The Courts and the tax authorities base their decisions on reality. We are not in a post-factual world for these purposes. They look at what is actually happening on the ground. So employers, hirers of labour, need to undertake more than a paper review. It is no good simply rubber stamping what you've got, you need to actually be talking to the managers who are operating these processes, to the workers who are operating these processes or the self-employed individuals who are operating these processes. Find out what's actually happening on the ground.

If your business can absorb easily a 10% plus cost to its labour stats, that's fine. If it can't, if you rely heavily on flexible labour, then you need a thorough investigation which looks at this both from the perspective of the employment tribunals and, indeed, the tax authority's, because confusingly, posing a real problem for business, they approach the issue in different ways and you need to take a joined up approach.

Jane: We've been talking in this podcast so far about people looking at their own businesses but presumably, if you are looking to invest in another business, this is an equally important issue to understand before you decide to invest in a company.

Jonathan: That's absolutely right, if you are running your slide rule over somebody's P&L account, then you need to be asking the question – do you understand what your true labour costs or are likely to be in the near future?

Jane: Thanks Jonathan.

So it sounds from what Jonathan has said in this podcast that there are a lot of down sides for a business and it is quite hard to see an up side. It certainly is in terms of the Uber case a worker friendly decision.

But it may be that in the medium to longer term there's a link between the extremely flexible labour market we now have in the UK and the general UK poor productivity levels. So it could be if some of these cases end up in sort of better treatment for workers in organisations that they may see an up side in the longer term in productivity.

But for now it is definitely a case of understanding what your risks are and trying to prepare for the future and what Uber and other cases will bring.

We hope you've found this podcast useful. If you have any queries on the topic of Uber or employment status more widely, please contact Jonathan Chamberlain who will be delighted to help you.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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