Making the gig economy fairer

All workers in the sector should be paid the National Living Wage

February 03, 2017
Black cab drivers protest against Uber in central London ©DINENDRA HARIA/NEWZULU/PA Images
Black cab drivers protest against Uber in central London ©DINENDRA HARIA/NEWZULU/PA Images

By inviting Matthew Taylorformer head of the No. 10 policy unit, to lead an Independent Review of Employment Practices in the Modern Economy, the prime minister has demonstrated her commitment to striking a fairer deal for people at the bottom of Britain’s labour market who are striving for their keep.

Many of those people are working in what is called the “gig economy,” an industry largely reliant on drivers, classed by the companies with whom they work as being self-employed, who deliver people and packages at a low cost and a fast pace with the help of online technology.

For some working people, the gig economy provides the opportunity of flexible work, and a supplementary income, around which they can fit other commitments. However, for many others the gig economy represents a life of low pay, chronic insecurity and exploitation, in which all of the risks in the employment relationship are unloaded onto them by the company with whom they work, and the gains go almost exclusively to the company in question. This is why we have made a submission to Taylor’s review. The submission includes proposed solutions to these problems—such as a guaranteed National Living Wage as part of a broader national minimum standard of fair work.

The predominance of self-employment in the gig economy enables companies to avoid their obligations to pay the National Living Wage, tax and National Insurance contributions, occupational pension contributions, and holiday and sick pay. Likewise they are able immediately to dismiss working people, or enact severe reductions to their weekly hours, without there being any right of appeal against those decisions. Examples of the sulphurous effect of the gig economy on our society, in which the odds are so heavily stacked in favour of companies, include working people being bullied while at their dying child’s bedside, and having their work removed from them while caring for terminally ill relatives.

People working in the gig economy are at risk of taking home as little as £2 an hour—less than a third of the National Living Wage—because the companies with whom they work pay low piece rates which have been cut in recent years. These rates are insufficient both to cover the costs people must necessarily incur to fulfil their jobs, as well as to provide a disposable income. In addition, the methods used by companies to calculate working people’s earnings are sometimes presented in an unclear, opaque, and confusing way.

A main argument we make in our submission to Taylor’s Review is that the foundation of self-employment, upon which much of the gig economy is built, is shaky. The evidence we have received from drivers working with Uber and Hermes reveals a discrepancy between what most of us would think of as self-employment—the freedom to decide when, where, and how to work, as well as being one’s own boss—and the model that is to be found in the gig economy, in which companies control many fundamental aspects of people’s working lives.

One way of countering this problem would be for the government automatically to classify people working in the gig economy as workers—halfway between employees and self-employed, but with basic rights—and require companies to prove otherwise if they disagree with this employment status. This would effectively amount to a ban on false self-employment.

Another option is to create a new framework of protection for working people, based on the extension of rights rather than definition of status. The purpose of this policy would be to confer basic rights on working people with particular problems, and not restrict access to those rights exclusively to those who are classed as employed. This would help the government to overcome the complexities associated with plotting a boundary between employment and self-employment.

Our main recommendation to the Review, therefore, is for the new Director of Labour Market Enforcement, David Metcalf, to be given the powers he requires to enforce a national minimum standard of fair work in the gig economy, covering all working people regardless of their employment status.

The national minimum should be built upon five main pillars. The first of these is income: a guaranteed National Living Wage is essential. Also required are safety; decency; stability; and transparency in the working relationship. The Director of Labour Market Enforcement should be given the duty to intervene when companies are in breach of the national minimum, even in the absence of complaints from individual working people.

The introduction and enforcement of this national minimum standard of fair work would give Theresa May the tools she needs to craft basic humanity, decency, and fairness into the bottom of Britain’s labour market. Crucially, it would ensure that people working in the gig economy are able to gain a greater share of the growing prosperity currently being enjoyed by the companies with whom they work, thereby ensuring the modern economy works for all of us, rather than a privileged few at the top.