The gig economy: what it means to SMEs

We’ve been hearing a lot about changes to worker’s rights, and the so called ‘gig economy’ recently, so thought it would be a good idea to get an employment solicitor to talk us through the basics. Allison Whiston, pictured above, is Head of Employment and Commercial at Bristol law firm DAS Law, part of the DAS UK Group.   

Allison, what is meant by the term ‘gig economy’?

It’s a phrase used to describe the growing trend of companies employing temporary workers to carry out irregular, short term work. Dating back generations and still used these days, a ‘gig’ can of course refer to a one-off job for a musician, but the gig economy got its name around the time of the last financial crisis, when a trend emerged of people not in full-time work making a living by ‘gigging’, or taking on as many piecemeal jobs as possible. This way of working grew in popularity in some sectors, and with companies like Airbnb and Uber, but are now commonplace in other areas, like food delivery and retail.

Is this the same as ‘zero hour contracts’?

No, gig economy work and ‘zero-hour’ contracts are not the same thing, but they do sometimes get referred to together when discussing employment practices. This is probably because both treat workers as contractors and offer no guarantee of regular levels of pay or work patterns. But while gig economy roles seek to be self-employed and are normally paid per job, like a set rate to deliver a package, zero-hour contracts make people workers and are paid hourly, just without a set minimum of hours. And on a zero hour contract, there is an entitlement to holiday pay – but not sick pay. Essentially both are the result of companies trying to cut or limit staffing costs, but they can leave workers in an uncertain position.

Is that why they receive negative attention?

Yes, although of course not everybody agrees. Many large companies say that working in this way brings the flexibility to work as much as you like, whenever you like. The flip-side of that is that workers lack protection, fair pay, benefits like holiday or sick pay, and certainty.

How many people work in the UK’s gig economy?

It is difficult to say exactly how many people are engaged in the gig economy, but it is estimated that there are five million people in the UK working in this way. What’s more, there is substantial growth in the gig economy which suggests that this is the future for a sizeable proportion of the country’s workforce.

Why has the gig economy been in the news recently? 

An independent report called the Taylor Review was published in July 2017, which among other things called for a new category of worker called a ‘dependent contractor’ so that those in the gig economy are entitled to a decent wage and some employment benefits. Recently the government responded to the Taylor Review promising stricter enforcement of holiday and sick pay rights for people working within the gig economy.  However many people feel that to date the government hasn’t gone far enough.

As an SME business owner, how can you assess the status of somebody doing work for you? 

There are actually three options: ‘self-employed’, ‘employee, and ‘worker’. They all have different rights under employment legislation so it’s really important to be clear on this. And assessing their status isn’t just about what their agreed status is; a tribunal may decide it is something else if it looks and functions that way. It is not all based on what is written in a contract though. A tribunal will look closely at the relationship. Do they get paid holiday? Do they do their work under supervision? Do they drive one of your company vehicles? It’s essential to look really closely at exactly what they do for your business and how they do it along with how much control the business has over the work carried out and when.

How do their rights differ?

Self-employed people are distinct from the other two classifications, and should have their rights – agreed terms and conditions of work – set out in a written document. As for employees and workers, they have very different entitlements so the distinction is important, with workers having significantly less rights than employees. Although workers are entitled to things like the national minimum wage, paid annual leave, a maximum working week and the right not be discriminated against unlawfully, unlike employees, they do not have rights around unfair dismissal, redundancy, written reasons for dismissal, maternity leave, or statutory sick pay. Those are not exhaustive lists but should help make the point that there are important differences between them, and also illustrate  why using zero hour contracts appear a more attractive proposition for many businesses.

What Is The Future For Zero Hour Contracts?

Despite all the press coverage that surrounds the use of zero hour contracts, I think that they are here to stay. If used properly they can be really beneficial to both workers and businesses alike, especially in the context of seasonal work, and in industries like retail and leisure where demand fluctuates from month to month. However, I do think we will see a change in how they are set up in the future. This is being led by some larger companies in the UK, who are looking to strike a balance between a situation that offers flexibility for the company and also protection for workers.

Finally, what can SME owners do to help ensure they have zero worries?

  • You need to think about what your business needs and what you want to achieve from your workforce. If you need to be able to rely on a person to turn up when you need them, then it may make better business sense to employ them. If flexibility is critical to your business then a zero hour contract may be an option.
  • If you want a more flexible arrangement, make sure the contract is well drafted and accurately documents the reality of the situation. Remember, in the event of a case going to an employment tribunal, the contract will be the starting point in determining the person’s status, and may ultimately be the deciding factor.
  • Ensure that you review contracts and working arrangements on a regular basis, and consider what your business requirements are. There is a risk that the longer the relationship lasts, the more scope there is for it to drift from what was set out in the original contract.