Last week an employment tribunal determined that drivers of Uber - the world's largest platform for individuals to find and pay for private taxi hire - were not self-employed (as stated in their written contracts) but were instead deemed legally to be 'workers', with a right to paid holidays and the minimum wage.
The decision is significant. And not just to Uber - who in light of this will have a serious hit on their payroll and business model - but to those other businesses who employ those on the basis of being self-employed. The focus in many articles written has been about those who work in the 'gig' economy, where armies of freelance staff carry out tasks such as delivering packages or undertaking chores.. However there are risks for everyone who employs people on a self-employed basis and rely on just the written contract for this to be so, regardless of industry.
The lines between being Self-employed versus Worker versus Employee status are often blurred
There are three distinct categories of working individuals in the UK. These are the self-employed, workers and employees………..And as a small business you need to be mindful of the difference between each of these groups and ensure you are providing them with their minimum legal entitlements.
Whilst it is relatively clear cut what rights each group has, there is no 'checklist' unfortunately where you can categorically state that someone is deemed to be self-employed or not. After all, if there was, one imagines Uber's in-house legal team would have been all over it. However some of the indicators of the truly self-employed are that they have control over how and when they do their work, they're able to provide substitutions to undertake the work offered if they are not available, they aren't beholden to undertaking all work offered without recourse, they can work for other people and they can make a profit or loss on their own business, which they run. Those who are self-employed also therefore take care of their own taxes and are not subject to PAYE.
The first point to note, for those concerned that this means all freelance staff might consider themselves permanent employees, is that the tribunal deemed the drivers to be 'workers' and not 'self-employed'. And whilst this is one step closer to that of 'employee' status, it falls short of it, meaning that although these drivers now have the legal right to claim and be paid the minimum wage and paid holidays as per the Working Time Directive, they do not accrue the additional rights of 'employees' which include paid sickness, the right not to be unfairly dismissed, the right to request flexible working, to name but a few.
Uber may be frantically re-counting the impact of the additional holiday pay and increase in wages into their spreadsheets - and one suspects they have been doing this for quite some time....- however they do not (at this stage), have to contend with including sickness and notice pay in these calculations.
But what if my team want to be Self-employed?
The gig economy is triumphing at the moment and it shows no sign of slowing down any time soon. By 2020, the gig economy (or Uberisation as it’s sometimes referred to) is forecast to be worth nearly $63 billion globally, and £2 billion in the UK alone and as this trend gathers force, people who work for themselves are going to become an ever-more powerful economic and political force. Many of them by their own absolute choice.
So the simple answer is that if your team want to be self-employed and are legitimately running their own businesses, then they will be unlikely to challenge it in court and you have little to worry about. The trouble comes when one party feels the employment relationship has shifted and the other party doesn't. Something that becomes more likely the longer, and more regular, an arrangement takes place.
We would therefore advise reviewing not just your contracts on a regular basis, but also your actual working arrangements to make sure that they are supporting both parties intentions.
Now is the time to make sure everything in order and as a minimum you should conduct a review of your current staff and employees status to ensure that there are no grey areas and your workforce is correctly classified. For help on this, or other matters concerning your team, drop us a line at email@example.com.
Photo credit: Erich Ferdinand