Increasing numbers of employers are exploiting “sham” self-employment to keep casual workers on a leash, able to hire and fire them at will, union leaders claim.
An explosion in the gig economy has seen the numbers of people being classed as self-employed rocket – to reach an estimated 4.5 million workers, up 45% since the 2008 crash.
But employment law has failed to keep pace with the rate of change, leaving hundreds of thousands of workers without rights to such basic practices as holiday pay, sick pay or even a minimum wage, the unions say.
High profile test cases such as that involving taxi hailing company Uber has put the issue firmly in the political spotlight.
He is due to report back in the summer but said on ITV’s Peston on Sunday: “If you are subject to control – if as an individual in the relationship with the person who’s hiring you, they control your work, they control the basis upon which you work, they control the content of your work – that looks like the kind of relationship where the quid pro quo should be that you respect that person’s employment rights and entitlements.”
The TUC says there are almost more workers classed as self-employed as work in the public service.
“It’s the whole question of ‘sham’ self-employment where people are being deliberately pushed into low pay self-employment – they miss out on key rights, they get paid less, and also, therefore, it’s a way of companies of reducing their tax burden,” said a spokesman.
Insecure working, the growth of low paid self-employment, zero hours contracts in the gig economy, plus that fact that many of these workers will be claiming benefits to make ends meet, is costing the Treasury £4bn a year, the TUC says.
“The law should presume that an individual is an employee, unless the employer can demonstrate they are genuinely self-employed and running a business of their own,” said the TUC spokesman.
“Flexibility has to be a two-way thing – of course it works for some, but for lots of people, it does not exist. Being on the leash is not our idea of flexibility.”
Dan Begbie-Clench, partner at Doyle Clayton, the UK’s largest employment law firm, said companies were able to save themselves a deal of money by:
- avoiding having to pay 13.8% employer NICs
- saving on hiring costs and by not having to provide and pay for benefits such as pension and healthcare;
- self-employed have little in the way of employment law protection so there’s less risk for the company when it wants to end the relationship without a fair reason
- the company isn’t obliged to give them work at times of low demand (whereas the company would need to pay an employee at all times)
Technically, self-employed workers save through a potentially better tax regime and lower NICs – although Chancellor Philip Hammond indicated in his botched Budget announcement this is an area the government is looking to address.
Begbie-Clench highlighted, however, that this group has less protection in law, less certainty over when they will work and no cover if they are sick and unable to work or take holiday.
“If change will be made, it is likely to come through regulation,” he said. “More regulation about how taxes and social security apply; the tightening up of rules over how tax and employment laws define who is self-employed versus who is a worker or an employee; and possibly granting workers more rights than they currently have.”