Gig economy workers – what you need to know

As a business owner, having the right employees with the right skills can be vital. But, if you don’t have permanent staff, you might look to freelancers, or more specifically, gig economy workers to support your business. If you are, you need to understand this type of temporary worker and their changing legal rights.

Firstly, what is a gig worker?

With so many new terms and phrases banded about, you could be forgiven for not knowing what a ‘gig’ worker is.

In simple terms, a gig worker is someone who works flexibly on short-term or zero-hours contracts or provides freelance work. It stands in contrast to a full time employee both in flexibility and cost to the employer.

The term ‘gig’ itself refers to the short-term jobs the workers do. Wages are often irregular and not guaranteed. These types of jobs could be food deliveries, courier service, some taxi drivers (such as Uber), or video producers to name but a few. Having said that, gig workers enjoy flexible hours, controlling when, where and what they do for work.

Employers also benefit from this flexible working style by only paying for work when it’s needed. Therefore not incurring costs during quiet periods. The gig economy working model appears to benefit both the employer and the worker.

So are gig economy workers right for your business?

Although not a traditional choice, gig economy workers can be just as beneficial as full-time employees. It was found that a substantial 57%of SMEs believe that gig economy workers provide more flexibility for their business. Whilst a further 38%1  believe that employing this type of worker allows for better workforce management. In fact, SMEs even reported that gig workers proved to be more efficient in completing assignments. This was considered due to the tighter deadlines they had to meet.

Furthermore, in a recent survey carried out by leading insurer Zurich, business owners employing gig economy workers in the last year, confirmed the importance of flexible workers to their business. More than 70%2  agreed that gig economy workers contributed to their company’s profitability.

What are the downsides of temporary workers?

There appears to be a great number of positive benefits to hiring gig workers. However, hiring gig economy workers can pose some disadvantages. A temporary workforce often means a lack of rapport between employer and gig employee. It can also result in a lack of adequate training and supervision. A quite sizeable 40%1 of SMEs reported that they were concerned that the gig economy created a less motivated in-house workforce.

Another consideration is your legal obligation to provide these individuals with a safe working environment and employment rights. Whilst some gig economy workers may be independent, you should avoid labelling them as self-employed. If you do, you could violate their employment rights. By correctly classifying your employees, you will avoid a negative impact on your employer’s liability (EL) insurance.

Gig economy workers and their legal rights

Gig economy workers are considered the most vulnerable of workers. As such, these changes should ensure important protection for millions of people and provide the clarity needed as to what gig economy workers are actually entitled to. Currently, some gig economy workers are classed as independent contractors rather than actual ‘workers’. This means they are not protected against unfair dismissal and have no right to holiday and sick pay. They are also not entitled to national minimum wage and redundancy payments.

Additionally, it is worth knowing that recent employment tribunal cases have ruled individuals previously classified by their employers as ‘independent contractors’ as workers. One of the most high-profile was Uber drivers winning the right to be regarded as workers making them entitled to basic employment rights. However, in contrast, last November the tribunal ruled that Deliveroo riders on zero hours contracts are not workers but are self-employed. As a result they are not entitled to the employment protections given to employees and workers. The outcome is somewhat concerning as Deliveroo riders often receive less than the minimum wage for their shifts.

Government plans to improve rights for gig economy workers

Recently the government announced their plans to improve, and more strongly enforce, the rights for gig economy workers, following the Taylor Review into working practices.

The government plan to implement most of the Review’s recommendations and, in some areas, plan to improve upon them, including:

  • Enforcing holiday and sick pay entitlement
  • Allowing flexible workers to demand more stable contracts
  • Giving all workers the right to demand a payslip
  • Asking the Low Pay Commission to consider a higher minimum wage for workers on zero-hours contracts
  • Possibly repealing laws that allow agencies to employ workers on cheaper rates
  • Having the rules enforced by HMRC

There are a good number of reasons why gig economy workers could benefit your business, as well as a few negatives to consider. Whilst there is money to be saved, if you decide that gig workers are the way forward then you must ensure all your employees are protected as required by law and anticipate the government’s plans. The government requires most businesses, with a few exceptions, to have at least a £5 million EL policy. This rule is enforced by the HSE, and can fine your organisation up to £2,500 daily if you do not have the appropriate level of insurance.

1. Zywave Commercial Insurance Profile July 2017
2. zurich.co.uk/general-insurance-news/more-than-a-quarter-of-uk-smes-rely-on-gig-economy-workers