Turbulent times in the UK’s gig economy

With another shocking story coming to light of contractors being ripped off in a tax scam, and gig-economy bosses being hauled before parliament to explain themselves, many would be forgiven for thinking things are seriously wrong in the temporary working sector. While there certainly are many causes for concern, there’s no doubt that flexible working is here to stay.  Not only is it helping to drive our economy forward, but it suits the lifestyles of millions of working people across the UK.

The changing UK workplace – what’s really going on?

The rapid growth of the so-called gig economy is one of the defining features of UK employment in recent years. It’s a development which has delivered significant benefits to both businesses and workers, who often find that flexible working hours suit their lifestyle, but at the same time it has also served to drive down pay and erode many traditional employment rights.

The reasons behind the exponential growth in temporary working are complex, but in part it has been driven by large numbers of young people, many of them from overseas, coming into the labour market hungry for work and prepared to accept lower wages and less job security than would have been the case only a decade ago.

The availability of this new cohort of workers has coincided with the growth in companies running on non-traditional business models: technology-driven operators such as Uber, Amazon and Deliveroo, which typically require few qualifications other than availability and a willingness to accept low wages.

The use of non-permanent workers has also become commonplace in established sectors of the economy where permanent employment would have been the norm until just a few years ago – including construction, education and the NHS.

It’s estimated that around 5 million people, or about 15% of the UK workforce, are currently self-employed. The number of agency workers is growing fast and rapidly heading towards 1 million. There are now more than 25,000 recruitment agencies across the country.

Growing concerns over pay and conditions

The pace of change in employment patterns has put legislators on the back foot. Almost overnight, many of the traditional protections afforded to workers by employment law have disappeared, sometimes through the adept exploitation of legal loopholes. Case after case has come to light of workers being forced to work for low wages in poor conditions, often on zero-hours contracts.

There’s a clear need for legislators to understand the dynamics of the gig economy, redefine legal definitions such as ‘self-employed’, ‘worker’, ‘contractor’ and ‘employee’, and enact new legislation to cater for the new reality. At the same time, there’s always a danger that intervening in markets can have unintended consequences – for example reducing the supply of labour and thereby failing to meet demand.

Recently, bosses from Deliveroo, Uber and Hermes found themselves facing tough questioning from the House of Commons Business, energy and Industrial Strategy Committee Business Committee over their business practices and allegedly harsh treatment of their workers. Uber – which has seen its reputation plummet over recent months – is currently appealing against a landmark ruling which found that their drivers should be treated as employees, which the company says would cost it millions. Both Hermes and Uber are currently facing employment tribunal cases brought by workers who want to be classed as employees rather than self-employed.

Trades unions too are highly critical of the move away from full-time employment, and notably hostile to the rise of umbrella companies, which they see as a cynical workaround to avoid businesses actually having to employ their workers. In a 2014 report, Steve Murphy, General Secretary of UCATT, the construction workers’ union, stated: “UCATT has a long history of fighting for workers being exploited. Umbrella companies are the latest form of exploitation. We are absolutely committed to ensuring this exploitation is ended.”

Similar sentiments have been expressed by NASUWT, the teachers’ union, as well as Unite, which in August called for the NHS to stop using umbrella companies entirely. In a press announcement, Unite spokesperson Colenzo Jarrett-Thorpe said: ““Umbrella companies are simply parasites feasting off workers wages. Although they are not technically illegal they are certainly immoral.”

The unions are focussing on the wrong problem

Mr Jarrett-Thorpe’s headline-grabbing statement is both incorrect and unhelpful. The majority of umbrella companies perform a very useful and efficient service for those contractors who need them.  At ePayMe, for example, our umbrella workers’ take-home pay is dictated by HMRC guidelines and our only charge is a flat fee of a few pounds a week.

Banning the use of fully accredited and compliant payroll providers such as ourselves would be throwing the baby out with the bathwater – robbing contractors of a valuable service that enables them to focus on their work without having to worry about payments.

Not surprisingly, Julia Kermode, chief executive of the FCSA (Freelancer & Contractor Services Association) – the trade association for umbrella companies – responded swiftly to Unite’s move, saying she was disappointed by Mr Jarrett-Thorpe’s remarks and confirming that she had been talking directly to NHS Improvement about the important role of compliant umbrella firms in the supply chain.

Unite and other unions would do better to acknowledge the true nub of the problem: the proliferation of non-compliant and non-accredited operators who have piled into the temporary worker market looking for easy pickings. Rather than calling for a blanket ban on umbrella companies, they would help their members more by educating them, and the recruitment agencies they sign up with, on how to tell the difference between a reputable and compliant umbrella company and a cowboy operator.

The situation is set to remain fluid for the foreseeable future

The coming few years are certain to see further changes in the dynamics of the UK workplace and continuing efforts by Parliament and, HMRC and other bodies to adapt regulation accordingly. This year has already seen significant changes to the ‘IR35’ rules for the public sector – designed to combat tax avoidance by workers supplying their services to clients via an intermediary – and there’s widespread speculation that something similar is in store for the private sector. Then there’s the Criminal Finances Act 2017, which creates the new offence of corporate failure to prevent the facilitation of tax evasion. May next year will see the introduction of the General Data Protection Regulation (GDPR), which will affect the way personal data is processed and stored.

For anyone working in the temporary employment sector, it will become ever more important only to deal with properly accredited and complaint companies. Failing to do so could lead to any number of unpleasant repercussions.

About ePayMe

ePayMe is a fully-compliant outsourced payroll provider, offering a variety of services including umbrella and limited company options. We are an associate member of the FSCA – the industry trade association – and approved by HMRC.
Find out how we can help your agency by calling 01252 863700 or visiting www.epayme.co.uk