06 October 2016 #Employment
Long gone are the days when the postman delivered every parcel. Nowadays, we don’t bat an eyelid when the person knocking at the door is a courier in an unfamiliar uniform. But while it might not make much of a difference to customers, opening up the delivery market has an impact on workers.
Britain’s gig economy
One prominent parcel delivery company, Hermes, has been in the news recently following a report published by Frank Field, Chairman of the Commons Work and Pensions Select Committee. The report, titled Self-employment in Britain’s ‘gig economy’, focuses on Hermes’ 10,500 self-employed couriers who use their own cars to deliver online orders.
At Mr Field’s request, HMRC will now start an enquiry into business practices at Hermes.
Employee or self-employed?
The question of employment status has always been a tricky one and it can be hard to say with certainty whether someone is, or is not, an employee. To make matters more complicated, the definition of employee that HMRC works to is different from the approach that Employment Tribunals take.
Key factors that Tribunals take into account include:
In the past, HMRC have found Hermes’ definition of self-employment to be legitimate for tax purposes. However, Mr Field’s report raises issues which could lead an Employment Tribunal to conclude that their drivers are actually employees.
For example, the report suggests that drivers have little control over their start times and delivery slots. There are also allegations that couriers have been threatened with a loss of work if they take time off to attend hospital appointments or for family bereavements.
Self-employment – win/win situation?
Hermes, like many other delivery firms that use self-employed workers, is keen to extol the advantages of being self-employed. There can certainly be plus points for individuals such as flexibility, greater control over when and how they work, and the ability to work for a number of companies at the same time.
There are benefits for businesses too: no need to pay National Insurance or pension contributions, no need to pay national minimum wage, no need to manage holiday pay, sick pay or family friendly rights such as maternity or shared parental leave, not to mention the reduction in the risk of Employment Tribunal claims.
Figures show there’s no shortage of people willing to work as self-employed. In 1975 only 8.7% of the UK workforce was self-employed, today the figure stands at 16% with self-employed workers numbering around 4.61million. It’s no surprise that "gig economy" has become such as buzzword - the FT even described it as the phrase which defined 2015.
What’s the catch?
There’s a growing perception that it’s businesses, rather than the workers, reaping all the benefits from a self-employed workforce, saving up to 30% of the costs they would face if they employed their staff.
While there are certainly people who do choose to be self-employed, many workers end up accepting the arrangement grudgingly because there’s nothing else available. Tellingly, between 2009 and 2014 the average income from self-employment fell by 22%.
In the short-term, the biggest risk to businesses like Hermes who adopt a self-employed staffing model is adverse publicity.
Take workers at delivery firm Deliveroo, for example, who recently went on strike after the company tried to replace their hourly rate with a payment per delivery. When the story broke, the firm swiftly backed down and said it wouldn’t force workers to accept the new contracts.
Ongoing Tribunal litigation brought by drivers working for Uber and claiming employment status has also attracted negative press. This echoes much larger-scale litigation Uber has faced in the US where the California Labour Commissioner found an Uber driver to be an employee based on Uber’s involvement in "every aspect of the operation" from vetting drivers, to monitoring ratings, to handling payment.
With so much attention focussed on the negative aspects of this growing "gig economy", courts and Tribunals may well start to take a different view of what does and does not constitute employment. Judging by the intervention Mr Field has taken in Hermes’ activities, we could also see the Government making changes to employment legislation in response to these shifting business practices.
Against this backdrop, it’s hardly surprising that UK companies have started to move back towards contracts of employment. The reputational and financial risks of getting caught in the crossfire as this battle gathers momentum could be ruinous for UK businesses large and small.
For further information on how we can support your business with employment contracts or self-employed staffing models, please feel free to get in touch on email@example.com