Matthew Taylor, who authored Tuesday's report into working practices
Matthew Taylor, who authored Tuesday's report into working practices © FT Montage

The British government tried to tackle a question on Tuesday which is troubling countries around the world: how to protect workers without stifling the way technology is changing the workplace.

A government-commissioned report, led by Matthew Taylor, who advised the former prime minister Tony Blair on policy, proposed a series of changes that could significantly change how companies in the so-called “gig economy”, such as Uber, operate in Britain.

If implemented, the plans might force them to pay tax, holiday and sick pay, while retaining some flexibility on paying the minimum wage of £7.50 an hour for 25-year-olds and over.

The UK government prides itself on the country’s open and tech-friendly economy: Uber has taken off quickly in most cities and the homegrown food delivery company Deliveroo has expanded worldwide.

But the rise of these companies has triggered protests from unions and some workers in the UK, just as it has in other countries such as the US, France, India and Australia.

Gig economy platforms connect workers without customers without taking any responsibility for them as employees. In many countries, these workers seem to fall into a legal no man’s land: not truly independent because the platforms often control and monitor them closely, but not quite employees because they use their own tools and “log on” to work when they choose.

A graphic with no description

A frustrated judge in San Francisco summed up the problem neatly in one “gig” case: “The jury in this case will be handed a square peg and asked to choose between two round holes.”

As a result, the world will watch Britain’s attempt to deal with the gig economy closely. The review’s first proposal is for the government to define clearly in primary legislation when someone is a “dependent contractor” — this the review’s suggested new name for an intermediate “third” employment status.

The third status (currently called “worker”) has long existed in UK law but has until now been fuzzily defined. Mr Taylor may have borrowed the term from Canada, which successfully introduced a “dependent contractor” status decades ago.

“The status of ‘dependent contractor’ should have a clearer definition which better reflects the reality of modern working arrangements, properly capturing those more casual employment relationships that are on the increase today,” the review says.

A graphic with no description

The proposed definition would rest on how much control and supervision the employer imposes. This would codify recent court decisions (like one last year which found Uber drivers had too little control to be classed as truly independent) and could well eventually result in many “gig” workers being classed as “dependent contractors” in the UK.

A graphic with no description

These dependent contractors would be owed rights to holiday pay and sick pay. They would also, if Mr Taylor’s recommendations were implemented fully, be treated as employees for tax purposes. That would mean gig economy companies could face a new tax bill for “national insurance contributions” — the UK’s version of social security payments — on every worker, something they have hitherto avoided.

Policymakers in the US are likely to watch this proposal particularly carefully. The US currently only has two employment statuses (employee and self-employed) but debate is raging over whether to create a third one. The most contentious question is whether minimum wage law should apply to people in this “inbetweener” category.

Gig economy companies around the world have insisted they cannot pay the minimum wage per hour without stripping workers of the right to “log on” to work whenever they want. Otherwise, they say, people could log on in the middle of the night and earn the minimum wage when there are no requests for deliveries or rides.

The UK’s review proposed a compromise: when “dependent contractors” are paid by the task rather than the hour, minimum wage rules could be applied on a “piece rate” basis. Under these rules, a gig company would have to demonstrate through its wealth of data that an average person, working at an average rate, could earn 20 per cent more than the national minimum wage in an hour.

This would apply at times of normal demand. But if that person chose to “log in” to work at a time when demand was low, they might not earn the minimum wage — although the gig company would have to use its real-time data to warn them in advance.

Uber and Deliveroo, the UK’s two biggest gig platforms, cautiously welcomed the review on Tuesday. Uber, which has 40,000 drivers in the UK, said drivers made an average of £15 an hour last year after service fees. “We would welcome greater clarity in the law over different types of employment status,” said Andrew Byrne, head of policy for Uber in the UK.

But workers unions condemned the idea, saying it would be a “step backwards”.

“I worry that many gig economy employers will be breathing a sigh of relief,” said Frances O’Grady, general secretary of the TUC, the UK’s trade union umbrella group. “Introducing a new category of ‘dependent contractor’ looks like caving in to special pleading from app-based companies, who are claiming that they cannot pay the minimum wage like any other employer.”

Employment lawyers warned the new rules would be complicated to install, let alone enforce. Theresa May, the prime minister, has lost her majority in parliament, which will make it harder for her to force through legislative changes without support from opposition parties.

Suzanne Horne, head of the international employment practice at law firm Paul Hastings, said this was the “elephant in the room”. “Can they muster sufficient support to actually make any legislative changes? If not, the review will be little more than an awareness campaign.”

Additional reporting by Aliya Ram

Get alerts on Gig economy when a new story is published

Copyright The Financial Times Limited 2019. All rights reserved.
Reuse this content (opens in new window)

Follow the topics in this article