The Rise of the ‘Gig Economy’: A Case Study of Uber

Image by IMS People, via Gig Economy Simplified

Gig workers are those who work small jobs, commonly referred to as ‘gigs’, instead of, or perhaps on top of, a full-time job and are paid for the amount of ‘gigs’ they undertake. Their employment status is somewhat confusing to many. Given the digital revolution, it is becoming hard to avoid articles discussing the so-called gig economy given the increasing amount of new companies operating under such a casual structure. Certain couriers, Deliveroo, Uber and AirBnB are just some examples of companies which fall under the gig economy category and there are increasing reports discussing the legal rights of those ‘employed’ by such companies. Indeed, Uber is a prime example: a recent ruling declared that its drivers cannot be classified as self-employed, as Uber wanted, and are thus entitled to the national living wage and holiday pay. Airbnb is also undergoing legal action in New York given a new law which enables the escalating of fines on homeowners who rent out their property for less than 30 days. As court cases and employment tribunals against such companies are on the rise, this blog discusses how regulatory rules are affecting these companies. It also takes account of the huge tax windfall that the UK government could gain as a result.

There currently exists a huge disequilibrium between legislation and the gig economy. It is for this reason that recent legal cases are so substantial. The employment tribunal ruling in October last year that left Uber in defeat, declared that the two drivers involved in the case were not independent contractors but workers to whom certain employment rights are due. This undermines the advertising of ‘gig economy’ work as a new type of employment and redefines this sphere of employment for similar workers. The result is an increasing need to address how companies operating under a casual structure run their businesses given that they will need to provide some employment rights to their workers. This could potentially undermine the informal business model they currently operate under and could also affect certain rules Uber apply to their workers. For example, currently, Uber drivers must provide their own vehicle, pay all fuel costs, pay their own insurance and cover all further maintenance costs for their vehicle. They must also pay a 25% service fee to Uber. This must be done whilst meeting Uber’s car and insurance requirements. If individuals are deemed as ‘workers’ or even ‘employees’, Uber may be required to be more involved in supporting the upkeep and maintenance of their workers’ equipment. Furthermore, companies offering ‘flexible labour’ could face a 10% hike in payroll costs if recent court rulings set a new precedent.

In addition, if the Uber court ruling is to set the tone for future disputes, the UK government could land a large tax windfall. If those involved in ‘gig economy’ work are deemed as workers or employees, rather than self-employed individuals, this would mean that employer national insurance contributions will grow, meaning increased revenue for the government. This is because those defined as self-employed pay less national insurance than those employed by a company. The potential windfall could be huge. As Robert Booth from The Guardian outlines, “…the exchequer is facing a £6bn shortfall in national insurance revenue by the beginning of the next decade as a result of the rapid growth of self-employment in the UK” (Booth, 2017). Such growth has, in part, been fuelled by the rise of companies such as Uber and Deliveroo, as well as certain couriers. With around 25,000-40,000 Uber drivers in the UK, new employment rights and resulting increased national insurance contributions would be welcomed by the government.

Overall, much needs to be done to close the gap between legislation and the gig economy in order to provide clarity to both workers and companies alike. We may begin to see this slowly happening over the coming years.

Booth, R. (22 February 2017) Amazon, Deliveroo and Uber “still viable” with no gig economy workers. The Guardian


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