February 24th, 2017 / Insight posted in Blog

Gig Economy

It’s an expression you may have heard used a lot in the news and the media, but what is the so-called “gig” economy?

In the gig economy, instead of a regular wage, workers get paid for the “gigs” they do, such as a food delivery or a car journey.

The flexible nature offers benefits to employers, as they only pay when the work is available, and don’t incur staff costs when the demand is not there. But it also means that the ‘contractors’ have no protection against unfair dismissal, no right to redundancy payments, and no right to receive the national minimum wage, paid holiday or sickness pay.

In the past few months, two tribunal hearings have gone against employers looking to classify staff as independent contractors. In 2016, Uber drivers in the UK won the right to be classed as workers, rather than independent contractors, and the ruling meant drivers would be entitled to holiday pay, paid rest breaks and the national minimum wage.

However, the gig economy is not all bad in that people can benefit from flexible hours, with control over how much time they work as they manage other priorities in their lives.

Differentiating between a worker and a contractor can be confusing, so here are some tips and key things to consider.

If someone does casual or irregular work for you and most of the statements below apply to them, it is likely that they are a worker:

  • they occasionally do work for you
  • you do not have to offer them work and they do not have to accept it – they only work when they want to
  • their contract with you uses terms like ‘casual’, ‘freelance’, ‘zero hours’, ‘as required’ or something similar
  • they had to agree with your terms and conditions to get work (either verbally or in writing)
  • they are under the supervision or control of a manager or director
  • they cannot send someone else to do their work
  • you deduct tax and National Insurance contributions from their wages
  • you provide materials, tools or equipment they need to do the work

If most of the statements below apply to someone, it’s likely that they are a self-employed contractor as they:

  • put in bids or give quotes to get work
  • have specific pieces of work or projects to do but decide how to do the work
  • are not under direct supervision when working
  • can hire someone else to do the work
  • submit invoices for the work they have done
  • are responsible for paying their own NICs and tax
  • do not get holiday or sick pay when they are not working
  • are required to do unsatisfactory work again in their own time and at their own expense
  • are responsible for losses and taking profits from their work
  • can provide services to a number of different clients or customers
  • operate under a contract that uses terms like ‘self-employed’, ‘consultant’, or an ‘independent contractor’

Workers and the self-employed have different rights under employment legislation and if your contractors are being supervised, having performance type reviews or are generally treated as an employee they could be classed as a worker or even an employee and would be entitled to the same rights.

With all of the recent high-profile cases making headlines it may be a good time to review your contractor agreements and processes.