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MPs slam gig economy companies in new report

Written by Eric Johansson on Tuesday, 02 May 2017. Posted in Employment law, Legal

A Work and Pensions Committee inquiry accuses gig economy businesses of “free-riding on the welfare state” while urging the government to “close the loopholes”

MPs slam gig economy companies in new report

The gig economy is often promoted as a way for self-employed people to enjoy independence and determine their own hours. However, a new report from the Work and Pensions Committee has offered a starkly different picture, calling for the government to beef up the protection for people working in the gig economy.

The inquiry heard from businesses like ride-hailing company Uber, food-delivery startup Deliveroo and retail giant Amazon that enjoy the benefits of the gig economy. The committee also interviewed the people providing services to these companies. These testimonials lead to the conclusion that classing workers as self-employed, rather than giving them the status of being an employee or worker, means they’re often left unprotected against exploitation. The practice is also leading to substantial tax losses for the public purse.

Following the inquiry, the committee urged the government to automatically designate people working in the gig economy as workers rather than self-employed contractors. In legal terms, workers and employees enjoy more benefits and protection than self-employed contractors. What’s more, the committee advised that businesses wishing “to deviate from this model would need to present the case for doing so, shifting the burden of proof of employment status onto the better resourced company.”

The report comes after Deliveroo became the latest startup to be called to face a tribunal for defining its riders as self-employed contractors. The company is scheduled to face the tribunal on May 24 and 25. Over the past year, Uber, courier company Citysprint and plumbing company Pimlico Plumbers have all faced – and lost – similar cases. The report noted that while businesses have been able to “propagate a myth of self-employment” for its workers, this “frequently fails to stand up in court”.

Commenting on the findings of the inquiry, Frank Field, chair of the Work and Pensions Committee said: "Companies in the gig economy are free-riding on the welfare state, avoiding all their responsibilities to profit from this bogus ‘self-employed’ designation while ordinary tax-payers pick up the tab.” 

He added that while self-employment can provide flexibility, it isn’t “the preserve of poorly paid, unstable contractors” and “companies get all the benefits, while workers take on all the risks and the state will be expected to pick up the tab, with little contribution from the companies involved”.

Meanwhile, an Uber spokesperson responded by saying: “The vast majority of drivers who use Uber tell us they want to remain their own boss as that’s the main reason why they signed up to us in the first place. But we know drivers want more security too, which is why we are investing in a heavily discounted illness and injury cover offer for drivers with [self-employed association] IPSE.”

And this may not be the last time the government’s attention is drawn to the gig economy. In November last year, the Department for Business, Energy and Industrial Strategy launched a formal review of the gig economy, which is being lead by Matthew Taylor, chief executive of the Royal Society of Arts. The findings were scheduled to be released this summer but this may be delayed because of the upcoming general election.

While it remains to be seen whether or not the next government will follow the guidance provided by the commission and the Taylor review, let’s keep our fingers crossed that it will find a solution that benefits both workers and startups.

About the Author

Eric Johansson

As feature writer and resident Viking, Eric ensures EB is filled with engaging and eclectic entrepreneurial stories. While one of our freshest faces, he has sharpened his editorial teeth by writing about business, entertainment and fitness.

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