The gig economy and the changing UK labour market

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By Lee Tetley, Managing Director, Premier BusinessCare Business Insurance

Characterised by flexible hours and fast money, it’s easy to see why the “gig” economy has grown to accommodate approximately five million people in the UK. This is the labour market which has arisen out of our insatiable demand for speedy parcel deliveries, tech-friendly taxis and fanciful food from our front rooms.

But how does one legally define the employment status of these people? And does this working environment mean that many people are having to compromise on employment protection in return for flexibility?

Here’s what the current gig economy landscape looks like.

Is the gig economy really a win-win for both parties?

While the ‘be your own boss’ approach to work has clearly inspired many to ditch the traditional 9-to-5 day, many are worried that the gig economy could be opening ‘employees’ up to exploitation.

For instance, unlike permanent contracted employment, flexible working has allowed many employers to offer fewer holiday and sick pay rights to their ‘self-employed’ staff. In addition, these flexible workers have no protection against unfair dismissal, no right to national minimum wage and no right to redundancy payments. Like zero-hour contractors, these workers are only paid for the “gigs” they do and have no job security from their employer. In fact, just 8% of gig workers work 35 hours or more per week, whilst 62% rely on supplementary income to support their livelihood.

Deliveroo is an example of a business which has benefited from the flexible nature of the gig economy – needing only to incur staff costs when there is the guarantee of work. This  cost effective employment agreement contributed to the rapid global growth with sales of £128.6m in 2016 and has put some 30,000 people into their global workforce.

Though thankfully the dangerous and unfair elements of the gig arrangement have not gone unnoticed. For instance, one need only look as far as the taxi company Uber to find numerous court battles and employment tribunals surrounding pay and holiday rights. Having lost an appeal against a ruling that its drivers should be classed as employees, Uber is an example of a company who is now having to take the rights of its workers more seriously.

Faster growth than other private sector SMEs

Since 2010, there has been a 25% increase in non-employer businesses within the UK’s private sector. At Premier BusinessCare we’ve analysed these trends and found this is a greater and faster rate of employment growth than other private sector SMEs.

According to the Office of National Statistics, most of the UK’s gig workers are in London. It’s here that as much as 27% of the capital’s workforce are employed on a gig basis. (17% are self-employed and just 13% are employees).

The transportation and storage sector has seen the greatest increase in flexible workers, with non-employment businesses comprising 93% in 2017 – an 8,431% increase in just eight years.

Businesses working in the accommodation and food services sector have also seen significant changes during the same period, with non-employer businesses growing by 1,464%.

Ensuring gig work is also good work

The gig economy has grown exponentially over the past decade, yet it shows no signs of waning. According to the RSA, 18% of the UK’s workers would consider gig work – that’s roughly 7.9 million people who would be prepared to make the leap.

With such a strong potential market, it seems the gig economy could soon replace traditional nine-to-fives as the primary labour market in the UK. Businesses which utilise freelancers on a short-term basis need to clearly define what their workers’ rights are and look to support anybody working for them, whether this be through providing insurance cover for the work they undertake or even providing employment benefits.

Insurance could also prove a challenge for the sector overall as typically a self-employed business owner would purchase an insurance policy on an annual basis, which may not provide the flexibility the sector requires.

For now, there is at least one thing we do know: the gig economy is constantly evolving to suit our changing consumer needs – something few employment systems have ever managed in the past.