Since the crunch of 2008 a rapidly growing group of people have emerged from the wreckage; the hard working – self-employed working in the “gig” economy – who are no longer looking to work 9-5. As many as 90% believe that over the next 10 years, they will or will want to be working much more flexibly, in what the US has termed the “gig” economy, where people take on different roles for different people at different times, in many cases concurrently. However, it’s not always as free and easy as it sounds.
The problem in the UK comes pretty quickly in deciding both for the individual and the business – is the relationship truly one of self-employment with a freelancer providing services to a client, or is it one of an employee providing services to an employer? In many cases, the distinction is misunderstood or blurred, or not addressed one way or the other. This week, US drivers for Uber may help move that debate forward.
Why is this important? Well, it affects what companies should be paying and collecting in tax, national insurance contributions and minimum wage. It also touches on what they should be observing in terms of employment law compliance and how far they can lay off risk, in terms of health and safety, and data protection.
From the individuals point of view, the issue affects the protections they have under employment legislation and how far they are free, for example to work flexibly for multiple businesses and reserve rights to themselves, such as copyright and know how. The Uber case will get into detail on what constitutes the actions and behaviour of a modern “employer” in the digital world. It will also set standards on what sits comfortably with people who want to work flexibly and be considered truly self-employed in the “new economy”.
It could even drive changes in the legislation and taxation with far reaching implications for businesses and workers. Hilary Clinton for example, has already pinned her colours to the mast in favour of drivers being employees and entitled to certain benefits. As an ex-lawyer, it will be interesting to see if the Judges agree with her analysis. As a future president, it will be interesting if she thinks it’s necessary to legislate. How will this affect us here? Well in the UK people will often first look to tax differences first and what HMRC have to say. There is some help here, in what are the key “7 badges” of self-employment, which focus on responsibility, flexibility, pricing and tools of trade. Ultimately, it only tells you what tax should be paid and by whom. See https://www.gov.uk/employment-status/selfemployed-contractor. For more info on that.
The Employment Act 2008 gives some further insights into understanding what are the rights of employees and workers. And while there is no clear definition on what constitutes self-employment by way of a set standard, it does set out what are employment rights. So in that sense it clarifies what is employment and (by extrapolating it out) what is non-employment or self-employment. But I don’t think that’s enough.
If you are the owner of a tech start up or supporting an entrepreneur as a freelance contractor, don’t you want something simpler and clearer to digest and take away any mystery? I think that the Uber case in California (O’Connor v. Uber Technologies, Inc. et al., C13-3826 EMC), which is looking at whether or not drivers qualify for statutory rights and entitlements to benefits, will be the place to look. The case will have a further hearing this week. Many of the drivers desperately want to be self-employed, but there are clearly some that want to be viewed as employees for their particular reasons, namely better workers’ benefits (eg. pension and health payments).
For critics of the company, there may be a hope that it will bring the company into line with better and fairer practices and be a “proper” employer. Whatever your angle I think it will prove to be a turning point. To stay at the cutting edge of the Gig Economy and the latest developments, follow us here on this blog and we’ll bring the latest on the O’Connor case.
If you want some more immediate gratification, join me at an event I’m hosting for fast growth companies, young directors and entrepreneurs on 16 November, in collaboration with the Institute of Directors and Kleinwort Benson, where we’ll discuss this and other key strategic issues facing emerging companies. Click here for more details. Or if you want to speak to us about any of this please call us on 0207 702 6081.
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