Due to the calling of a snap general election, the Work and Pensions Committee has curtailed its inquiry and has now published its report on the gig economy and its use of self-employment. The report is somewhat damning of companies that utilise the gig economy model. The report concludes that:
"Self-employment is neither inherently good nor bad. It can represent entrepreneurial zeal and a highly desirable culture of self-reliance. It can also be deeply negative, allowing companies to evade responsibility for their workers' wellbeing and increase their profits. It is incumbent on Government to close loopholes that incentivise this behaviour."
The main points that the report raises are:
1. Welfare safety net
Employee status and its corresponding rights help to protect (1) individuals from personal hardship and (2) the welfare state from incurring costs in relation to such individuals. On the other hand, self-employed individuals do not have such rights and therefore neither they nor the welfare state are protected. The report argues that self-employed status is being used to deprive individuals of their rights in the name of "flexibility", and in doing so companies are refusing to contribute to society by protecting those individuals and by contributing substantially less by way of National Insurance contributions (NICs). This is a vicious circle as NICs then bring in less revenue to the welfare pot but there is a larger demand for support as a result of such pseudo-self-employment.
2. NICs
Our welfare state is founded on the principle that everyone contributes. In the past, self-employed individuals received less support than employees, which is why their NICs were substantially lower. However, the reality today is that access to the services that NICs fund is substantially the same for both the employed and the self-employed. The report therefore recommends that the new government consider how it can equalise NICs to ensure that the welfare pot is sufficiently funded.
3. Low levels of retirement saving by the self-employed should be tackled
The report argues that the current framework does not do enough to encourage self-employed people to save for retirement, which, in turn, increases the likelihood that they will need to depend on the welfare state in the future. This could lead to a welfare state crisis whereby there are not enough funds to meet demand. The report suggests looking at tax reforms to encourage greater contributions to pensions by the self-employed.
4. Assumption of worker status
The report recommends that the default position should be an assumption of worker status. The onus would then be on employers to provide basic rights and benefits (for example, national minimum wage and paid holiday). If they wanted to argue that individuals were self-employed the burden of proof would rest with them rather than the individuals.
5. Encouraging real self-employment
Job centres focus on getting individuals into employment (rather than self-employment). The report suggests that whilst employment may be suitable for most individuals, more support should be available for helping people launch (or re-launch) self-employed careers. This would avoid stifling genuine entrepreneurs and viable new businesses.
It will be interesting to see how the findings of this report and the findings of the upcoming Taylor review of modern working practices compare. However there seems to be increasing pressure on government to ensure that gig economy workers are afforded at least basic rights. This, along with a growing body of case law from the employment tribunal that is critical of the gig economy model, means that employers utilising such a model should start to look at ways to address these problems before they are forced to.
To read the report in full click here.
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