The recent UK Supreme Court ruling that Uber drivers are workers and not independent contractors has implications for pension provision in the gig economy sector. This article explains the UK position and Ius Laboris lawyers from other countries provide a local perspective on the issue.
The UK Supreme Court has dismissed an appeal by Uber, see here, unanimously ruling that its drivers are not independent contractors but are 'workers' for the purposes of the UK Employment Rights Act 1996 (the 'UK Employment legislation').
The judgment discusses how UK Courts should approach determining employment status. It makes clear that the question of employment status must examine both the reality of the work, and the purpose of the underlying employment rights. Although the Supreme Court's ruling was specific to Uber and its own facts, nonetheless, it has significant implications for the whole of the so-called gig-economy.
UK pensions obligations
In the UK, every employer (British or otherwise) with workers ordinarily working in the UK must enrol 'eligible jobholders' into a qualifying pension scheme. Statutory minimum contributions must be paid to a defined contribution (DC) qualifying pension scheme, and minimum benefit requirements apply in a defined benefit arrangement. This is called 'automatic enrolment', and the obligation to enrol falls squarely on the employer, although the eligible jobholder can choose to opt out of membership if they wish.
An 'eligible jobholder' is a 'worker', ordinarily working in the UK, aged between 22 and State Pension Age whose earnings are above the earnings trigger (GBP 10,000 for the 2021/22 tax year). Workers falling outside of either of these ranges do not need to be automatically enrolled into a qualifying pension scheme, but they may have the right to opt into membership if their earnings are over the qualifying earnings threshold (GBP 6,240 for the 2021/22 tax year). Where a worker earns less than the qualifying earnings threshold, they fall into the 'entitled worker' category, meaning the automatic enrolment duty does not apply and, although they have a right to join a pension scheme, no employer contributions are payable.
Pensions implications of Uber
The definition of 'worker' in the automatic enrolment legislation is almost identical to that in the UK Employment legislation. As such, the Uber judgment brings drivers potentially in scope of the automatic enrolment obligations described above, provided they meet the relevant age and earnings eligibility criteria. As the UK National Living Wage increased to GBP 8.91 an hour in April 2021, Uber drivers working in excess of 22 hours on average per week may therefore find themselves being automatically enrolled.
In a DC scheme, the statutory default minimum employer contribution is 3% of qualifying earnings (banded earnings between GBP 6,240 and GBP 50,270 for the 2021/22 tax year), on the basis that overall contributions (including tax relief) are at least 8%. In many cases, jobholders are required to pay the full 5% balance, although it is open to an employer to cover the entire 8% contribution (and more) if it chooses.
Given the large number of employers potentially affected by the Uber judgment, and the likely need to address backdated claims, the Pensions Regulator may provide more guidance on how employers should tackle misclassified workers and historic automatic enrolment liabilities.
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.